Airbus: Navigating Supply Chain Challenges Amidst Strong Demand

1. Introduction: Market Dynamics and Performance

In May 2024, Airbus demonstrated strong market demand with significant orders and deliveries, despite ongoing supply chain challenges. The company booked 27 orders valued at $2.7 billion and delivered 53 airplanes worth $3.4 billion. However, delivery numbers indicate supply chain strains, with a 16% year-over-year decrease in units delivered. This report evaluates Airbus’s orders, deliveries, and supply chain health, comparing its performance with Boeing and providing insights into the aerospace market dynamics.

2. Order and Delivery Analysis

2.1. Orders Overview

In May 2024, Airbus secured 27 orders, comprising a mix of widebody and single-aisle jets:

• 20 A330-900 aircraft from an undisclosed customer.
• 7 A321neo airplanes from Nordic Aviation Capital.

Several changes and mutations occurred in the order book:

• Air China converted five A321neo orders to A319neo.
• JetSMART took delivery slots for two A320neo from BOC Aviation.
• Saudia was identified as the customer for 93 A321neo and 12 A320neo airplanes.
• ICBC Leasing was identified as the customer for one A320neo.
• Nordic Aviation Capital canceled five A220-100s and seven A220-300s.

Overall, the net orders for the month were 20 units valued at $2.7 billion, highlighting a strong demand environment despite cancellations.

2.2. Deliveries Overview

Airbus delivered 53 airplanes in May, categorized as follows:

• 6 A220 aircraft.
• 41 A320neo family aircraft, including 19 A320neo and 22 A321neo.
• 2 A330-900neo aircraft.
• 4 A350 aircraft (three A350-900 and one A350-1000).

Compared to the same month last year, deliveries decreased by 10 units or 16%, primarily affecting the A320neo and A330neo families. The year-to-date deliveries stood at 256 airplanes valued at $16.2 billion, indicating modest growth from 244 deliveries valued at $15.3 billion the previous year.

3. Market Comparison: Airbus vs. Boeing

While both Airbus and Boeing face high demand in the commercial airplane market, Boeing’s struggles with finalizing orders have given Airbus an edge. Airbus’s net orders of 237 airplanes valued at $23.1 billion significantly outperform Boeing’s 103 net orders valued at $10 billion.

Despite Boeing’s challenges, Airbus’s delivery figures reveal that supply chain issues are a common industry problem, affecting both major players. The book-to-bill ratio for Airbus was 0.5x in units and 0.8x in value, with a year-to-date ratio of 1x in units and 1.5x in value, underscoring the continued supply chain constraints.

4. Supply Chain Challenges

Airbus’s delivery numbers suggest ongoing supply chain difficulties, with a significant year-over-year decrease in deliveries. The company had previously scaled back its ambitious production ramp-up due to these challenges. While improvements have been noted, a full recovery in the aerospace supply chain appears to be several years away.

5. Conclusion: Investment Considerations

Despite supply chain challenges, Airbus remains a strong contender in the aerospace market, benefiting from robust demand and a well-regarded product portfolio. The company’s strategic positioning and ability to secure significant orders provide a positive outlook, although delivery challenges persist.

Investment Strategy:

• Buy: Investors should consider taking positions in Airbus, given its strong market demand and strategic order book, while monitoring supply chain developments.
• Monitor: Keep an eye on delivery numbers and supply chain recovery progress to manage potential risks effectively.

In conclusion, Airbus’s performance in May 2024 highlights the company’s resilience amidst supply chain challenges, making it an appealing investment opportunity in the aerospace sector.