Background
Every year in early January, the Supply Chain Matters blog highlights the full year operational and sales performance from the two most dominant global commercial aircraft manufacturers, that being Airbus and Boeing.
Needless to state, a lot of global supply chain activity stems from the supply and services networks of both of these global producers. On the demand side, the 2020 COVID-19 coronavirus pandemic itself has taken an extraordinary toll on international travel demand levels, forcing many aircraft among commercial airlines fleets to be grounded during the year. On the supply network side, the pandemic resulted in significant manufacturing disruptions and subsequent workforce reductions. Some suppliers remain financially challenged, and many in the industry are looking forward to assessing when the overall industry can transition to some sense of a “new normal.”
As was noted in our commentary on operational performance in 2019 this time last year, Boeing was especially challenged by the ongoing global groundings of both previously operational as well as produced 737 MAX aircraft that occurred in March 2019. Then COVID arrived, and the financial and operational challenges mounted. Once again: “in a New York minute, everything can change.”
Overall operational performance among these two traditional rivals now represents a significant contrast, almost stark in nature. Airbus retained its number one position, but that was not an industry surprise.
Airbus’s Operational Performance
Europe based Airbus reported a total of 566 commercial aircraft delivered during 2020. Nearly 79 percent of these deliveries stemmed from the single-aisle A320 aircraft family, with the majority being the new engine option (neo) variants.
While overall aircraft deliveries were 34 percent below levels of 2019, it was indeed a remarkable performance given the circumstance and challenges. The quarterly distribution of deliveries indeed reflects resiliency. While Q2 deliveries were 74 aircraft, deliveries in Q3 and Q4 grew to 145 and 225, respectively. In its press release, Airbus described an innovate e-delivery program that represented 25 percent of 2020 deliveries. The program allowed airline customers to take delivery without having to travel to Airbus facilities. Airbus CEO Guillaume Faury indicated that customers and suppliers pulled together in the face of adversity to deliver overall results.
In the area of New Orders, the EU plane maker recorded a total of 383 aircraft orders, nearly 300 of which were for the A320 family. The extended range A321 version has reportedly outsold a variant of the Boeing 737 MAX. The relative new mid-range A220 aircraft garnered 64 new orders in 2020, quite a significant achievement.
At year-end, Airbus had a reported order backlog of 7,184 aircraft orders, compared to 7482 in the year-earlier period.
Commenting on the coming year, CEO Faury indicated cautious optimism but warned of continued challenges in the short term.
Boeing Operational Performance
U.S. based Boeing delivered a total of 157 aircraft in 2020, a 60 percent decline from 2019 levels and the company’s lowest level in 43 years. A total of 38 commercial aircraft were delivered in December.
Of the total 2020 deliveries, 43 were of the 737 model aircraft variants and 53 of the 787 family variants. There were no deliveries of 787 aircraft during the months of November and December because of a Boeing imposed shipping suspension due to noted quality issues with both the aircraft’s rear stabilizer as well as with the rear fuselage. According to reporting from The Wall Street Journal, the Boeing may have to book an additional charge of $3 billion against long-term profits in order to meet compensation claims from affected 787 airline customers.
Gross orders for the year amounted to 184 aircraft, including a December order by European low-cost airline Ryanair Holdings for an additional 75 of the 737 MAX aircraft. Industry watchers believe that order included very attractive discounts. The plane manufacturer incurred upwards of 600 cancelled 737 MAX orders during the year. The 737 MAX was cleared for U.S. operational service in November but still awaits operational clearance from other global regulators.
According to reporting by Flight Global, the plane maker additionally categorized an additional 555 backlog orders into an accounting category that implies such orders are not likely to close due to factors including the financial condition of specific customers. On its web site, Boeing states the category of year-to-date net orders as a negative 1,026 aircraft.
In its reporting, Flight Global cited data originating from Cirium fleets, which tracks aircraft that have completed first flight but have not been delivered to a customer. The reported number for Boeing was noted as a total of 470 undelivered aircraft, 401 consisting of 737 MAX and 65 of undelivered 787 aircraft.
Boeing’s reported total order backlog at the close of 2020 was reported as 4997 aircraft compared to 5406 aircraft reported at the end of 2019.
Added Thoughts and Reader Takeaways
Without question, the COVID-19 pandemic in 2020 provided a profound impact on the global commercial aircraft industry and its associated supply networks and ecosystems. The impacts to companies and employees were profound.
In our industry commentary at the start of 2020, we noted an industry that manifests ten- and twenty-year market demand forecasting was facing highly uncertain global economic waters in 2020. Highly challenged Boeing, dealing with its own internal corporate crisis was an open question.
At the close of 2020, the 10–20-year demand horizon was reduced to weeks, months or quarters of viable industry demand. The demand levels of new commercial aircraft remains uncertain, at-best. It will likely not be until effective vaccines have been administered to global populations that industry confidence will return.
Unquestionably, Airbus has performed well during this unprecedented industry disruption, and should be commended. The European producer is in a position to continue to surpass its rival in many dimensions.
Boeing, on the other hand, faces considerable ongoing challenges, some related to industry market forces, some related to its own ongoing corporate crisis. In a prior blog, we highlighted a recent criminal investigation settlement. Upwards of $23 billion in added charges have now been associated to the 737 MAX grounding and a lot of work remains in returning this aircraft to the skies and assuring airline flyers that the aircraft is the safest in the skies. Ongoing manufacturing quality shortfalls with the 787 family need to be completely identified and resolved. Successful consolidation of all 787 production to Boeing’s South Carolina production complex needs to be completed while the company’s Seattle based manufacturing complex has growing idle capacity without prospects for a new family of commercial aircraft. Its overall supply network has become fragile.
Some industry watchers predict that both members of the “duopoly” will come to an armistice in the coming year, for the sake of both companies. There are threats of new competition, especially from China. Airbus is already actively supporting engineering efforts for aircraft powered by non-fossil fuels or alternative energy sources.
This industry, and its associated product demand and supply networks will surely top the list of our industry specific 2021 predictions. The stakes are quite high and significant in scope and impact. The industry and its players needs to get back to engineering innovation and aircraft safety heritage. Yet, the jury is still out as to whether any of this can occur in the coming year.
Bob Ferrari
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