Boeing Beats Airbus in Air-Show Orders for First Time Since 2012

(Bloomberg) -
Boeing Paris air show, 737
A Boeing 737 Max takes part in a flying display at the Paris Air Show on Tuesday. (Reuters/Pascal Rossignol)

Boeing secured twice as much in order value at the Paris Air Show than rival Airbus as demand for the Max 10, the biggest version of its 737 workhorse, pushed the U.S. planemaker to its first win at the aviation industry’s annual showcase in five years.

Boeing won orders and expressions of interest for about 370 planes worth as much as $52 billion in the three days through Wednesday, compared with Airbus’s tally of 229 airliners valued at about $25 billion. Airbus dismissed the setback, saying it’s focusing on meeting delivery targets to make up for production snags rather than seeking new purchasers.

The haul of about $77 billion in deals easily surpassed the $50 billion signed at last year’s show in Farnborough, England, which was the lowest figure since 2010. Asian purchasers were particularly active as they girded for an accelerating travel boom. That’s in contrast to the relatively restrained buying from crowded markets in the U.S. and Europe. The bulk of agreements came from leasing companies, which have more leeway to delay deliveries.

“It seems lessors feel stronger about the need for more aircraft” than airlines do, George Ferguson, an analyst at Bloomberg Intelligence, said in a report. “Lessor orders could be of lower quality than airlines as they’re removed from current financial fundamentals, and could be a sign of intense competition.”

The biggest buyer at the Paris expo was GE Capital Aviation Services, which ordered 100 Airbus planes valued at $10.8 billion and converted 20 Boeing production slots from earlier purchases to the planned 737 Max 10. The model, rolled out to combat Airbus’s hot-selling A321neo, secured 336 commitments, including customers shifting to it from the 737’s other Max versions.

Even with the boost from the Max 10, order flow isn’t expected to surpass deliveries this year, Boeing Chief Executive Officer Dennis Muilenburg said. That’s because demand jumped in past years as high fuel prices encouraged airlines to scramble for more efficient planes.

That order flurry caused Airbus’s backlog to more than double in two years to surpass 6,700 airliners. The company is now focusing on speeding up deliveries following delays on the A320neo series and wide-body A350, Chief Operating Officer Fabrice Bregier told investors at a conference on Wednesday. Toulouse, France-based Airbus still plans to hand over about 30 more planes to customers this year than in 2016, which means the company will need to accelerate work in the second half, he said.

One of the largest airline customers at the Paris show was India’s SpiceJet Ltd., with a deal for 40 Boeing planes, including 20 conversions, reflecting industry interest from Asia. The carrier was joined in orders at Boeing by Chinese operator Okay Airways Co. Ltd., Japan Investment Adviser Co. and BOC Aviation Ltd. The leasing arm of China Development Bank signed agreements to buy airliners from both Airbus and Boeing.

Avolon, the world’s third-largest lessor, ordered $8.4 billion of Boeing models at the Paris event. The unit of Beijing-based Bohai Capital Holding Co. decided to lock in deliveries of as many as 125 of upgraded narrow-body jets from the U.S. company because the slots are “very valuable real estate,” Avolon Chief Executive Officer Domhnal Slattery said.

The Max series is oversold through 2020, and capacity is finite for the model favored by budget carriers, Slattery said in an interview. He projects the middle class in Asia will swell by more than 1 billion individuals in the coming years.

“We have never seen a demographic shift like that ever in the world, in terms of the scale but also the purchasing power,” Slattery said. “These people are going to get on planes” and “there’s no going back.”

The Max 10 will be 5.5 feet (1.68 meters) longer than the $119.2 million Max 9, currently the biggest member of the re-engined 737 aircraft family, which was launched in 2011. It will be the first new model from Chicago-based Boeing since the twin-aisle 777X series, now dubbed the 777-8 and 777-9, was unveiled at the Dubai Air Show in 2013.

With numerous conversions among the Max 10 orders, “that wouldn’t qualify as a launch as far as we’re concerned,” said Airbus sales chief John Leahy, who was presiding over his last Paris air show and earlier quipped that the plane’s biggest competitor is the sister Max 9. “Let’s talk about the actual incremental orders they’ve got, and I think our numbers are looking pretty good.”