Boeing to lead large aircraft deliveries through 2015: Moody's

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Increased capacity and sustained earnings growth will see Boeing continue to widen its lead in large commercial aircraft deliveries over Airbus through 2015, says Moody’s Investors Service in a research report.

After being edged out by Airbus for most of the past decade, Boeing finally recaptured its lead in large commercial aircraft deliveries last year, says Moody’s.

"Ramped-up production, particularly of the 787 Dreamliner, will drive stronger revenue and earnings growth at Boeing in the next couple of years, and just announced higher 737 narrowbody production rates later in the decade will further bolster its lead," says senior vice-resident of Moody’s, Russell Solomon. "Unless Airbus also invests in additional capacity soon, the US airframer will widen its lead significantly, from a forecast 35-50 airplane differential per year for 2013 to a 120-140 differential, or about $20 -$25 billion of incremental sales, by 2014-15."

Solomon believes the expected formal launch of the 777X programme at the Dubai air show in mid-November could enable Boeing to “recapture the lead” in net orders from Airbus, even though it is “stuck at a nearly 250-plane deficit position”.

Additionally, Boeing's year-round production cycle will help the manufacturer manage its order backlog better than Airbus – “a key advantage given the lengthy wait times for delivery of new aircraft.”

Airbus's backlog is already “considerably larger” than Boeing's, and at current production rates, he estimates it would take about nine years to fully satisfy the order book even if the European manufacturer did not win a single new order.

Solomon expects Airbus to “sharply increase production” of its A350 widebody programme after it transitions the aircraft from development to production late next year. He also believes that Airbus might again consider increasing its narrowbody production rates in light of Boeing's recently announced plans to boost production of its 737 line.

Airbus has been able to to achieve this positioning due to its “first-to-market advantage”, which allowed the European manufacturer to build a "substantial" order book for next-generation narrowbody aircraft. This, combined with aggressive discounting on new equipment sale prices, he says, has allowed Airbus to continue to “score big wins” as it books orders from what were formerly all-Boeing carriers, most recently from VivaAerobus and Japan Airlines.

But he stresses steeper discounting sparked by the Airbus-Boeing rivalry could ultimately undermine the huge profits these manufacturers have enjoyed on their "mature programmes", particularly involving narrowbody units.

Further, there is risk of broader contagion to the newer widebodies, he says.

“And since they [newer widebodies] will account for a much greater share of near- to intermediate-term market growth, this could call into question the two dominant airframers' ability to recoup the heavy development costs on their 787 and A350 programmes,” he adds.