Boeing has just delivered four commercial aircraft in May, down from only six in April and suffered 18 cancellations but its stock is up roughly 40 percent.
That number according to Reuters is 87 percent lower than at the same time last year. However, on the upside, Boeing did secure nine new orders for widebody aircraft. The company’s backlog fell to 4,744 planes, which is the lowest since 2013.
However, leading New York analysts Bernstein in its latest report “Boeing, Airbus: The rally – Reality or insanity? Top ten things to consider when looking for a next level of upside” see plenty of upside but some challenges as Boeing’s stock rebounds.
It says that while airlines have essentially zero appetites for taking deliveries of aircraft this year the problem is that the number of planned deliveries is huge.
“Still, we see any airplane set for delivery within the next 12 to 18 months as difficult to avoid, unless an airline is truly in financial distress. But, most airlines actually are in financial distress, so the discussions get complicated,” Bernstein says.
“In each downturn, we have witnessed, the OEMs knew they needed to work with airlines that are on the brink of bankruptcy and often allow cancellations. But, for airlines that have solid balance sheets (e.g. Ryanair, Wizz) or are receiving government support (e.g. Qatar, Air France), we expect Boeing and Airbus to be much tougher in their negotiations.”
However, both Boeing and Airbus are being supported.
It adds that “Airbus CEO, Guillaume Faury, said that the company would sue airlines that would not take contracted deliveries.”
And the war of words has already started with the Kuwaiti leasing company, ALAFCO, recently announcing that it would sue Boeing to get its money back on 737MAX orders while Qatar Airways CEO, Akbar al Baker, said that Boeing and Airbus should not make them take any deliveries until 2022 or else it would stop doing business with them.
“While we have not seen public comments like this before, it underscores the position that Airbus and Boeing find themselves in. Airlines are obligated to take deliveries. But, the reality is that Airbus and Boeing need to work with each airline,” says Bernstein.
Bernstein says “Boeing and Airbus will need to work with any airline that it expects to be in existence after the pandemic, as these are long term relationships. Similarly, the airlines will ultimately depend on Boeing and Airbus for their fleets – there are zero credible alternatives.”
Bernstein adds that it still expects fleet renewal to happen and has heard positive
messages this week. “Nearly every airline has stressed its intent to retire older aircraft through this downturn and emerge with a modern fleet. We heard that again from American Airlines at our Strategic Decisions Conference. On the Boeing side, Ryanair CEO, Michael O’Leary, spoke positively about Boeing and the 737MAX and their desire to
take even more airplanes. On the Airbus side, last week, Wizz, IndiGo, and GoAir described their desire to replace A320ceos with A320neo family airplanes in order to come out of the pandemic with the most competitive fleets in their regions,” it reports.
