Boeing Achieves Remarkable Order Numbers and Unprecedented Deliveries amidst Crisis

Boeing is entering 2024 amidst another safety and reliability crisis, but it reported record orders for the end of 2023 on Tuesday. The American plane maker had its best year since the grounding of the 737 Max in 2019, with record new plane orders in December and one of its best sales years ever.

Since 2018, Boeing has experienced its highest number of planes delivered to customers, significantly impacting its bottom line. Unfortunately, the company's positive news is being clouded by a recent safety issue involving the Alaska Air 737 Max. This latest incident has led to the grounding of its 737 Max 9 jets and the cancellation of flights for its airline customers. As a result, Boeing will be convening an all-hands meeting to address its safety problems, rather than its strong sales and deliveries.

Despite a successful sales year, Boeing still lagged far behind rival Airbus in both orders and deliveries. In 2021, Boeing reported 1,456 gross orders, making it one of its best years ever. However, after adjusting for canceled orders, the annual total was 1,314 commercial aircraft, making it the company's third best year and its best total since 2014. Moreover, Boeing was able to reinstate over 200 orders previously classified as unlikely to be completed, bringing its total net orders to 1,576 jets.

In December, the company achieved a record-breaking 369 total net orders, indicating a strong recovery for its airline customers from the pandemic. The year also saw a 10% increase in jet deliveries, reaching 528, surpassing the combined deliveries of 2020 and 2021.

Trailing Airbus

However, the unfortunate reality for Boeing is that the previously tight competition with Airbus, the other major global commercial jet manufacturer, has transformed into a one-sided outcome. Boeing currently lags significantly behind its European counterpart in terms of both orders and deliveries, and there is no indication of being able to narrow the gap in the near future.

Airbus has not yet reported the full-year orders and deliveries, but its totals for the first 11 months of the year far exceed Boeing's, with 1,395 net orders compared to Boeing's annual total of 1,314, with one month of orders still to report at Airbus. Its 11-month delivery total reached 623, which is 18% ahead of Boeing's total.

One of the issues contributing to Boeing's lower numbers compared to Airbus is the difficulty in securing orders and deliveries of passenger jets to China amid US-Chinese trade tensions. Boeing did secure orders for 18 of its 737 Max jets to China in 2023, but this marked its first orders of passenger jets since 2017 and was only a fraction of China's orders from Airbus. As recently as 2015, Boeing had booked 210 passenger jet orders from Chinese customers.

Airbus leads the single aisle passenger jet market, the best-selling segment of commercial aircraft sales, while Boeing excels in widebody jets for international routes and freighter aircraft.

The positive news for Boeing is that once airline customers choose an aircraft type in a market segment, they are unlikely to switch to a different version. Operating two types of aircraft in the same segment can significantly increase costs for spare parts and pilot training, as pilots cannot move between aircraft types without new certification, resulting in significant training costs.

Boeing and Airbus, as the only two major global aviation companies, have no need to worry about going out of business despite their mistakes, as neither company can meet the demand for commercial aircraft. Both companies have a backlog of orders stretching back years.

The latest orders and delivery numbers show that Boeing's backlog of orders has now increased to 5,626 jets, up from 5,324 a year ago.