Podcast: Have Airbus And Boeing Turned The Corner On Production?

December delivery figures suggest the airplane manufacturers’ supply chain, quality and labor problems may be easing. Listen to our team break down the numbers.

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Rush transcript

Joe Anselmo:   Welcome to this week's edition of the Check 6 podcast. I'm Joe Anselmo, Aviation Week's Editorial Director and Editor-in-Chief of Aviation Week magazine.

The numbers are in, both Airbus and Boeing have reported their delivery numbers for 2022, a year when a sharp rebound in demand collided with the supply chain crisis. So how did the companies do relative to expectations, and what did their performances suggest for the year ahead? We're going to kick this off with our numbers guy. Dan Williams is Aviation Week's Manager of Fleet, Flight and Forecast Data and advises companies in the industry. Joining Dan is Jens Flottau, Aviation Week's Executive Editor for Commercial Aviation. And Senior Editor Guy Norris rounds out the group. He's followed Boeing for many decades.

Dan, let's start out with you. What are the numbers?

Dan Williams:  Well, the numbers are a positive compared to the year prior, which is great. Like you said, Airbus and Boeing have reported. Airbus Have reported 661 deliveries for 2022, which is up about 50 on the year prior. Now, it comes as no surprise that obviously narrowbodies win there with 569. And again, it comes as no surprise that 264 of those are A321s. It's a significant chunk of aircraft. It is the way forward. Our 10-year forecast does actually forecast that over the course of the next 10 years, about a quarter of all new-build deliveries will be A321s. And when you look at the numbers comparing Airbus and Boeing together, that figure is about a quarter.

Boeing, a step forward. They delivered 480 aircraft, which is up from 340 the year prior. Obviously they had the restarting of the deliveries of the 787, which was a huge boost because they went from ... They more than doubled the number of 787 deliveries in '22 compared to '21. But then they had a few quarters to deliver those in. And then the MAX. Our colleague, Sean Broderick, writes on the MAX quite a lot, which keeps us out of trouble. They did well with those comparatively, which is a good step in the right direction.

And then when we look at the other companies that haven't yet reported. ATR were looking at delivering a similar number to last year. They stayed pretty flat, they're just under about 30. Embraer, just north of 50, which is a slight uptick compared to 2022. And then Comac, the other one, they're looking about 35-ish deliveries, which is up from just over 20 the year before. They're really the big boys left in the industry.

So, it's positive news, which is good. Now it isn't the numbers that were reported or expected if we go back earlier in the year, which I guess will be a good time to kick it over to Jens to discuss those numbers.

Joe Anselmo:  You read my mind there, Dan. Jens Flottau, I mean, as Dan said, Airbus out-delivered Boeing for the fourth year in a row. Their deliveries were up from 2021. So why are people disappointed?

Jens Flottau:  Well, because the expectations were much higher. Initially the expectation was around 720 aircraft. Then Airbus tuned down to around 700, and now 661. That's obviously significantly less than they wanted to do, particularly if you look at that track record of delivering in the past years. They were pretty much on target, with some exceptions, but generally they were pretty good at meeting their targets. They didn't this time. The main reason obviously being all the supply chain issues we've been discussing for months.

I just point to kind of the trends there. Back in the fall, Airbus CEO Guillaume Faury said that he thinks that supply chain performance is at its low point now, and that was in October, November. He said this week that it's at its very low point now, now being January, I guess December. So, contrary to your expectations, it hasn't become better, it's gotten worse. And now again, something significant has happened which might well affect supply chain performance, which is the sudden opening of China. Contrary to what you might expect, people are now expecting supply chain almost to become even worse before it gets better because of the sudden shift in China and what that might mean for the workforce and for delivery streams and so on.

So, it's not looking good for the next few months. They seem to hope that by the middle of the year things will improve. And of course that will then have an effect on '23 delivery targets, which they're not disclosing yet.

Joe Anselmo: Jens, I mean, you can't deliver airplanes if you don't have engines. And it was pretty clear by the middle of last year that we had a crisis in the supply chain. And Airbus in Boeing, but Airbus in particular, weren't getting the engines they needed for airplanes. But Airbus still stuck to some pretty high delivery targets which we were skeptical about. Were they really that disconnected or was there a strategy behind this?

Jens Flottau:  I don't think they were disconnected, I think they knew what was going on. The caveat is that it's not only about engines. And actually the engine situation seems to have improved somewhat, it's broader than that. But I guess it's strategy as well. If you keep the targets high, you also keep up the pressure on the supply chain. And if suppliers think that you still want to go for 700 then they'll probably try even harder.

Well, clearly it hasn't worked out here. It’s kind of an open question whether performance would've been different if the targets were lower, but I guess that's speculation.

Joe Anselmo:  Guy Norris, let's talk about Boeing.  We've obviously talked a lot over the recent years about the MAX crisis, the 787 crisis. But if you look at these numbers, particularly the end of the year for Boeing, there seem to be some signs that maybe they're starting to turn the corner, no?

Guy Norris:   Yeah. Well, obviously that's the major sort of headline news, is the fact that to deliver 53 MAXs or 53 737s in December alone would be seen as, yeah, that's a definite sign of turning the corner. But I think it's worth remembering that traditionally always we've seen the year-end figure, particularly the last month of the year, is when you get everything done. Particularly at Boeing, they really back load that delivery profile. And this year's been, or 2022, was no exception.

So, in other words, yes, it was definitely a positive sign, but is it actually an indication of having turned the corner? We don't know yet. And I think really what we're going to have to do is probably revisit this in a couple of months. Key to it really, the actual long-term trajectory, we'll be seeing how they do in the first quarter. I think first and second quarter delivery targets.

 And just to put this in perspective, Dan mentioned those big numbers, which of course fell short of initial Boeing predictions. They wanted to deliver, say, 500 737s initially. And then they wound that back as the reality of the supply chain issues began to really hit home. And the fuselage issue that they had with Spirit. Having dialed that back, they have produced 387 aircraft this year, the 737s, of which 374 were MAXs.

So that is a really good recovery. Of course that doesn't include aircraft from the undelivered inventory, they've still got about 80 of those in the backlog to get out of the door, which is great. I mean, that's a number that's significantly down on last year of course. But what we're really now looking for is will they deliver the 425 to 450 737s that they've really said could be possible for this year, for 2023.

The big money earner on the profile though really is not just the 737, the numbers are great on 73s, but the money is going to come from the widebodies. And the other big key thing we need to look out for is the delivery profile on the 78s out of Charleston, and the refurbished aircraft coming out of Everett still. Those are going to be pivotal to whether Boeing completes this sort of turnaround in terms of getting cash in through the door and airplanes out of the hangar. So those two elements, production stability and cash in, are actually crucial to their long-term recovery. So far indications are pretty good in that respect, but we don't know yet.

Joe Anselmo: Jens, you've just written your latest Airline Intel column for Aviation Week. And you write that the issues affecting Airbus and Boeing are similar but different. Could you explain that for our listeners what you mean?

Jens Flottau:  Yeah, similar in that they both face the same supply chain issues and deal with the same suppliers in many cases. Different in that obviously Airbus doesn't have the backlog of stored 787s and 737s that Boeing needs to get rid of.

But I'd like to echo what Guy said on the Boeing side. If you look at the deliveries, A320neo new family deliveries for December, 76 aircraft. That's even higher than the 2025 target that Airbus has put out there. But when you compare that to the average for the year, which is 43, then you see how exceptional December was and that you really shouldn't expect that to continue. In fact, if you look back at prior years, deliveries have fallen way off in January and are then slowly recovering through the year.

One factor I'd like to point out, which is really important too, is the ratio of 320neo versus 321neo deliveries. If you look at 2022, Airbus delivered more 321neos than 320neos, 18 more. And that's significant obviously. On the revenue side, it's great for market share because of the way the market's developing. It's also important for production because the 321neos are far more complex to build than the 320neos. 320neos are pretty easy to do, as Airbus puts it. 321neos can be extremely complex because of the long-range cabins, the cabling, everything. So as that share increases, production gets a lot harder. That all needs to be taken into account when you look at performance '23, '24, and the long-term rate 75 target.

Dan Williams: Just to jump in, there's two points I want to raise to Jens. Yes, when you average out the build rate of rate 43, when you look at it that way, Airbus missed their numbers, their revised numbers, by one month, A320 family deliveries. So, in the grand scheme of things, yes, they missed the target, that's a fact, but they were one month shy. And going back to conversations we've had earlier in the year with engines, supply issues. We know there was a stage that they were over two months behind, but that is slowly being rectified. And is that one month behind, now the engines is the number that they missed.

And then the second point is, the A321 is a very, very interesting one. It is more difficult to build and also, it is where Airbus wants to go. But, in order to do that, they need to pivot more to the 321, they're converting the old A380 line to 321s in the coming few years. But also, they need to wind down, or potentially, this is my opinion, the A320 family. Because what they will do is, they would rather sell somebody an A321 and then they give them the opportunity to potentially stretch the A220 to the so-called 500, which would compete directly with the A320. So that would free up more A321 slots because you could build those A220s in Mobile or in Canada.

So that's where Airbus wants to pivot to and shift to, but they can't do it while they've still got quite a big A320 backlog. They need to slowly wind that down. And we are seeing this pivotal moment where the shift of more A321s are being built and delivered than 320s and 319s combined.

Guy Norris:  Can I just jump in here on the comments that both Dan and Jens have made there about the engine side of things? There are strong indications certainly from Boeing as well that there is stability now coming through, certainly from GE and CFM, which provides the bulk of their power plants on widebodies, on and on the MAX of course, which it's exclusive to. And it's now becoming more of a focus on problems from the supply chain in terms of systems and just basics.

For example, this is purely anecdotal. I was doing a story a couple of weeks ago, talking to Sierra Space about them building the Dream Chaser space plane. And they were saying their production is being hampered by the fact they can't get hold of regular wiring, just reasonably, ordinary wiring. He said that just shows you how deep the problems got in some areas. I think that's beginning to see the bigger picture impact on supply chains from that, whereas the engine manufacturers seem to be really getting stable now.

And then just the second point was on the trends, looking ahead, obviously December, as you've said, is an abstract month. It doesn't really represent the reality. But if you look at the fourth quarter performance, that's a longer-term trend. And it's interesting to note that in the fourth quarter Boeing managed to deliver 110 737s. That's just shy of a third of their entire year's worth of 737 production. Similarly, with the 78, two thirds of their entire year's production, obviously they didn't really restart until quite late in the year, but 22 of the 31 aircraft that they delivered were just delivered in the fourth quarter, just for that year.

So the trend line is there if you want to go back historically. It's all to play for really in '23, I think certainly from Boeing's perspective.

Joe Anselmo: We're running short on time, but I wanted to come back to Dan. Dan, Guy had talked about, at least in Boeing's case, widebodies are the profit engine there. They represent a bigger share of profits. If you would've gone back a year, we hadn't written an obituary for widebodies, but the market was certainly in a coma and it's just shocking to me how strongly it's rebounded. What's your forecast for 2023 in terms of wide-body demand?

Dan Williams:  Well, it's interesting because there's still many factors that are at play. China has just recently opened. Now along with that is going to come some hurdles that are going to need to be overcome. However, longer term is going to help the wide-body market in general. There's an enormous amount of A330s for example in China, which is going to help Rolls-Royce as well. It comes along with it.

With Boeing have still about 100 787s that are built, they're not finished because they've got to go into rework but they are built. And plus, they're building the 787 at rate, let's call it 1.5, let's say two if they're lucky. So, they have the opportunity and capability of delivering quite a number of aircraft this year.

So, the widebody is alive. I'm not going to say it's going to be brilliant, but we have seen the shift more towards the narrow ... Now narrowbody is king. The A321 is king, and the A350 and the 787 are good. The 777X, still a big aircraft, it's very innovative. And when that comes to market, it's not an of, it'll be a when, then that will be a game changer for certain routes.

Guy Norris:  Just to jump in very quickly though, I know we're running out a time. On the back of what Dan was saying there. I mean, Boeing had a pretty stellar year when you think about it from an orders perspective. Widebodies, 213 orders for widebodies, including 114 787s. And don't forget, the freighter market still is hugely busy, 78 orders they had, including 45 for the good old 767, which just keeps on going, and the current freighter.

I think from a long-term perspective, and the launch of the 777-8 freighter with more than 50 orders, including some conversions I think, is really a brilliant bellwether for the widebody market. And to me, that signals it's definitely coming back.

Joe Anselmo: Okay. Well, Dan, Jens Flottau, Guy Norris, thank you so much for your insights. I'm sure we'll be back in the coming weeks to update our listeners on how things are going as we get into 2023. But for now that is a wrap for this week's Check 6 podcast. A special thanks to our producer in London, Guy Ferneyhough.

One final note, with all of the turmoil in the supply chain that we just talked about, you don't want to miss Aviation Week's A&D SupplyChain conference. The two-day event begins on January 31st at the Beverly Wilshire Hotel in Beverly Hills, California. For details on the agenda and how to attend, please go to adsupplychain.aviationweek.com. That's adsupplychain.aviationweek.com. Thank you for your time and have a wonderful week.