Summary
So, Boeing will survive the economic downturn, says ceo Carson? It will. And how, when you look just one factor alone -- the eight-year 787 backlog (even assuming more cancellations than markets indicate likely). But there's more...
Analysis
Boeing will survive. In fact, the US OEM will come out of this downturn in better backlog, industrial, operational and more positive all-round shape than any previous recession, with two new aircraft models due to fly in the next five months (Boeing 787 and 747-8, first débuts since 1994) and a renewed appetite for those healthier financial days before the sub-prime snowball started rolling.
And it will take its national and international supply chains with it, from Spirit AeroSystems and Goodrich in the US to Kawasaki and Mitsubishi in Japan -- plus many stops in-between.
Evidence of this optimism can be seen in the confidence of a revamped 737-800 from late-2010. While the tea-leaf-reading instant aerospace 'experts' from IATA right on down to the ethereal Land of Blog are convinced Boeing will need to cut 737 output (many think it already has -- no, that was a strike, guys), the manufacturer instead has just this week released details of enhancements to the narrowbody breadwinner line which suggest an entirely different mindset at the OEM.
Boeing could formally drop the 737-600 and -700 from its rota without anyone really noticing: it has delivered only 15 -700s since the strike ended four months ago while the last -600 went to Canada's WestJet back in September 2006. But the vastly more popular -800s and -900s are good to go when global economies recover (hence the announced -800 enhancements), so maybe better sift those tea-leaves again, eh?
Airbus will cut narrowbody output to 32/month from October this year, (it claims the cut will be to 34/month, but Airbus lives in a different world, one in which a year, unbelievably, does not contain 12 months...). This reduction is due to a combination of the recession and a far more fragile orderbook than Boeing's and will mean a further deteriorating financial position beyond the already subterranean level as lower output will not be matched by a reduction in labor and direct costs.
Whole lot of Airbus deferrals and cancellations out there: Skybus, jetBlue, US Airways, United, Volaris, ILFC, Qantas, Thai International, Singapore Airways, Air France, Lufthansa, Kingfisher, China Southern, Emirates and Etihad plus about a dozen other operators are currently impacting the Airbus delivery schedule for 2009 and 2010 -- easily amounting to more than 200 aircraft cancelled or deferred in total.
Airbus had 120 order cancellations in 2008. Boeing had six.
Boeing is of course not a one-trick pony. It's entire defense and space activities alone will spread the downturn risk over the next 18 months (defense spending is on a recession-bridging longer cycle while space revenue is practically impervious due to strong underlying demand). Airbus, in sharp contrast, has the A400M, which probably now won't enter service before there's a new president in the White House yet will still bleed money from EADS every day between now and then -- unless of course the haplessly mismanaged program is cancelled outright.
The outlooks for Boeing and for Airbus are therefore vastly different. When the recession brakes are off, only the former will accelerate away from the current economic mess.
