In our recent article on the American aero major Boeing (BA, Financial), we discussed how the aircraft deliveries are in tune with the company’s long-term growth strategy. But analysis of deliveries paints an incomplete picture if we don’t talk about orders. Last year was a phenomenal year for the Chicago-based jet maker as it received gross orders for 1,550 jets, even higher than 2013’s gross orders for 1,529 jets. And now as we are already two months down in the new year, it seems the order momentum is continuing.
A better look at the orders
Boeing seems to be having a gala time as orders are pouring in for its jets. It’s just been two months and the company has already bagged a total of 77 orders. A huge chunk of the orders, 64.9% to be exact, came for the aero major’s re-engineered fuel-efficient 737 MAX aircraft, and the remaining came for other offerings such as the next generation 737, "Queen of the Skies" 747, 787 Dreamliner, and Boeing’s much popular 777 aircraft. The following chart summarizes Boeing’s orders in January and February 2015.
Source: Boeing (Orders and Deliveries - user defined report)
What do the numbers say?
While several analysts may point out that orders for 77 jets is nothing compared to last year’s gross orders, the point to remember is, it’s just two months and another 10 months are yet to come. Secondly, conventionally the first two months of the year see orders moving in slow compared with the rest of the year. As the year progresses, orders start pouring in large numbers. So, keeping these two points in mind, Boeing’s performance year to date is definitely encouraging. Even after adjusting for cancellations, Boeing received net orders for 74 jets. In comparison to this, arch rival Airbus (EADSY, Financial) could bag net orders for only 28 aircraft –Â less than half of what Boeing’s recorded.
Next, turning to the order composition, there’s no surprise that the 737 MAX received the bulk of the orders. What deserves special mention is the order for three 747s. This definitely adds to the company’s confidence in the model. With the advent of new generation twin engine fuel-efficient jets that are also capable of flying long distances, the demand for jumbo jets is vanishing. On the back of the fading demand, Boeing is finding it difficult to keep the production line up and running through the end of this decade. On that note, the order for the three 747s is definitely a point of relief. Not included in the above numbers is the order for two or three more 747s from the house of the president of the United States. Pentagon has chosen 747-8 as the next presidential aircraft and the confirmation for the order is expected any time now.
Parting thoughts
On the back of an improving economy, Boeing expects the demand for air travel to go up substantially in years to come. This is further being aided by the lower fuel prices that’s resulting in greater disposable income in the hands of the consumer, resulting in greater demand for air travel. The aero major expects to book even better deliveries during 2015. While the start may seem relatively slow, it’s definitely encouraging. Let’s keep a close watch on Boeing’s future order wins and see how the year unfolds.
