Military
Analysts Expect Few New Boeing, Airbus Orders at UK Air Show
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The Farnborough Airshow officially opens Monday, July 11, and the buzz centers less on new commercial aircraft orders than on the first appearance of the F-35 Joint Strike Fighter jet at the Royal International Air Tattoo (RIAT). In military parlance, a tattoo is an event consisting of music and displays and exercises of military personnel and equipment.
The RIAT is being held this year coincidentally with the Farnborough show, and the first U.K. demonstrations of the F-35 are expected to overshadow new orders on either Boeing Co. (NYSE: BA) or Airbus.
Years-long commercial aircraft backlogs at both Boeing and Airbus are the primary reason for the expectations for low numbers of new orders. More likely analysts expect to hear from the two plane makers that low orders and huge backlogs mean only that potential impacts from deferrals and cancellations will have little effect on the manufacturers’ plans to raise production.
Leeham News has a full round-up of comments from analysts, but this one from JPMorgan sets the tone:
We expect a subdued [Farnborough Air Show], with relatively low orders, discussion on recent softer news flow (air traffic, airlines, growing macro/political risks), and a big focus on short-term execution challenges. … Large jet OEMs and suppliers have their hands full with multiple late-stage development programmes (A330neo, 737 MAX, 787-10) and programmes in the early phase of a major production ramp (A320neo, A350). Whilst these products should be drivers of long-term growth and profits, staying on schedule and on cost is always a concern. Airbus seems to be facing the greatest short-term challenges (A320neo, A350, A400M).
Recent news is that Boeing is talking to potential customers for a new “middle-of-the-market” (MOM) aircraft to fill the hole left with the end of production for the company’s 757. Analysts at Buckingham Research wonder about the business case for such a plane:
[A] 200-270 seat airplane with a $65-$75M sales price and 2025 [entry into service]. [Boeing] sees a demand for 3000-5000 aircraft – we believe the installed base of 757/767s that a MOM airplane replaces is 1700 airplanes. The issue with a MOM airplane is the business case. We think that a MOM airplane unit cost could be comparable to a widebody, but that [Boeing] needs to sell it at narrowbody prices (a 737 is about $55-$65M).
In an interview earlier this week with the Financial Times, Boeing CEO Dennis Muilenburg said that the question of whether the company would launch its first new aircraft program since the 787 was a matter of when, not if. That won’t happen next week, but there could be some more hints about when it will happen, and that will have fill the editorial space usually filled by huge numbers of new orders.
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