26 September 2009

Quiet Cuts Indicate Prudence at Boeing and Airbus

Latest viewing of the production numbers for both Boeing show that both AirFramers are taking a prudent look at their production schedules.

While Airbus announced a production cut rate from 36-34 aircraft it is still maintaining that the new China facility will ramp up to 4 aircraft per month. Not much in the big picture of things when there are thousands of aircraft on back order.

However as can be seen orders can and do have a habit of evaporating. If we look at the current production environment, it is interesting to look at what is actually rolling off the line.

For the Seattle based (but Chicago HQ'd Boeing its product line is down to just 2 families. It has 767s in essentially trickle mode to support the supposed tanker contract to come, 787s are still a long way off from production mode, 747s are waiting the delivery of the first round of 747-8/9s so that leaves the 777 and 737 stalwarts. For Airbus - A380s have never ramped up, and don't look like doing so any time soon. It is essentially a hand built aircraft with the possibility of the Toulouse line sending a few straight to the desert. 330/340 line is just ticking along benefiting from the failure to deliver the 787 but the 340 is unlikely to make old bones and will quietly sunset despite the recent delivery of the 1000th in the line joint twin/four line. Airbus is being very careful with its narrow body line. Despite the disruptions last year - strike at Boeing and industrial action of the Power8 union opposition - we are seeing continued restraint.

No one wants to take any large quantities of aircraft. Indeed Ryanair who has been taking them at quite a lick (6 in the space of 4 weeks earlier this year) August saw them taking none. A large number of them are heading out on lease and to be parked by the time the end of October comes around.

So no one is being bullish till late 2010 more likely 2011. Actually Boeing's troubles with the 787 could not have occurred at a better time. That said - the production ramp for the new mid size twin will be slow. When the market picks up in 2011 - Boeing will not be able to meet the demand. Airbus on the other hand will be able to with A330s becoming the flavor of the month. With EK indicating a big interest in a large order as their new "off peak" craft - others better start polishing their cheque books.

The cyclical nature seems to be working again but just look at that back log. Makes you wonder.

Cheers

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