Two large May orders push YTD book to bill at Airbus and Boeing towards 1x
Combining the stats for Airbus (200 orders to 234 deliveries = 0.85x) and
Boeing (296 orders to 301 deliveries = 0.98x), aircraft book to bill or gross
orders to deliveries reached 0.93x for the first five months of the year, as
shown in Exhibit 1.
Prior to the 208 combined orders booked in May (125 Boeing, 83 Airbus),
aircraft book to bill had had its weakest start to a year since 2010 (0.7x book to
bill over Jan - April). More than three-quarters of May's order intake is
attributable to two large orders: (i) at Boeing, an order from VietJet Air for 100
737 MAX aircraft, signed during President Obama's visit to Vietnam; and, (ii) at
Airbus an order for 60 A320neo family aircraft (45 A320s, 15 A321s) for an
undisclosed customer, although we note that this matches an order placed by
China's Spring Airlines in December 2015 which itself also formed part of the
130 aircraft deal agreed between Airbus and China last October
While there are some orders still yet to enter the backlog, from China where
it’s hard to be precise on exactly how many, and from Iran where an Airbus
order for 118 aircraft is still awaiting certain approvals which are expected to
be gained by year end, we think book to bill looks set to slow further this year
after 1.48x last (1.87x at Airbus; 1.15x at Boeing) as shown in Exhibit 2.
As detailed in our note from 13 April entitled Cycle Update – A Fine Balance,
while we see a deceleration in book-to-bill as natural at this point in the cycle,
after a period of sustained strength, and while we don’t expect it to have
negative implications for Airbus’ medium-term production plans, we find it
hard to ignore the fact that the multiple on which Airbus shares trade has
remained somewhat correlated with book-to-bill trends despite the record
backlog of aircraft orders (9.1 years cover vs 2015 deliveries). By way of a
reminder, order cover in narrowbody (10.1 years) remains well ahead of
widebody (6.3 years) supporting our preference for Safran over Rolls-Royce
in engine propulsion.