Airbus and Boeing expect turbulence in 2017

Airbusand Boeingare bracing themselves for a challenging 2017 after struggling to reach sales targets in the past year.

Later this month the two companies will reveal the final tally for last year’s orders and deliveries, but both look set to fall short of their goal of achieving a book to bill of about one — essentially replacing almost every aircraft delivery with a new order. This would be the first time since 2009 that either aircraft maker has fallen below the threshold of one, according to aerospace analyst Rob Stallard of Vertical Research Partners.

“Airline demand indicators are easing,” he said in a recent note to clients. “We could be near or past the peak in this upcycle.”

Neither company is including the recent multibillion-dollar orders from IranAir as firm sales, although contracts were signed in mid-December.

By December 20, Boeing had 470 orders net of cancellations, against expected deliveries of about 750 aircraft. That compares with 868 net orders in 2015 and 762 deliveries. Airbus had net orders of 410 at the end of November, against 1,185 in 2015, with an order for five more A320 single-aisle aircraft announced last month. It had delivered 577 aircraft by the end of November, against a goal of 670 and 635 in 2015.

On a brighter note, a late December push will bring Airbus very close to its 2016 target of delivering 50 of its newest twin aisle, the A350 mid-range jet.

Having delivered 34 by the end of November, the company is expected to have delivered 48-49 of the passenger jets by December 31, according to Sandy Morris, aerospace analyst at Jefferies, the investment bank. The impact of missing the A350 delivery target will be minimal, he said.

“You can say they missed the delivery target or you can look at it and say the A350 has gone into service with six or seven airlines and it seems to be performing absolutely fine,” he said. “That is the most important thing.”

Deliveries of the A350 were held up earlier this year because of difficulties with French cabin supplier Zodiac. However, one big Airbus supplier said the problems with lavatory doors and passenger seats appeared to have been overcome by early December and management at the aircraft maker’s Toulouse headquarters were “sounding pretty bullish”.

The group is also struggling to catch up on deliveries of its new A320neo aircraft, after difficulties with engine supplier Pratt & Whitney, and has had to step up deliveries of its existing generation A320 to compensate.

While deliveries are expected to accelerate in 2017, the industry is preparing for a slowdown in orders as airlines adjust to rising oil prices and a deceleration of passenger traffic growth. Iata, the airline industry lobby group, is forecasting traffic in 2017 to slow from this year’s 5.9 to 5.1 per cent, while capacity is still showing signs of growing more quickly at 5.6 per cent. However, that is still a slowdown on 2016’s 6.2 per cent expansion.

The rate of deferrals and cancellations also appears to be picking up. United Continental announced last month that it would defer 61 Boeing 737 deliveries from 2017-2018 while Southwest has also pushed back delivery of more than 60 737 single-aisle jets.

If enough airlines follow suit, it could have an impact on longer-term profit expectations for Boeing and Airbus.