Boeing's woes give rival Airbus a bigger edge

The US plane maker's valuation dropped compared to its European competitor this week and it delivered fewer aircraft last month

A Boeing 737 MAX-9 under construction at the company's production facility in Renton, Washington. Reuters

Boeing's growing list of woes is helping its European rival Airbus have a bigger edge in the plane makers' duopoly of the skies, with the attention now more on quality.

The US plane maker may be forced to accept a lower market share in terms of volume than previously, as there is now a clear focus on quality, according to Cirium Ascend Consultancy.

“While Boeing may have focused on defending market share in the past, it’s current focus is clearly on quality and not quantity,” Chris Wills, head of consultancy operations at Cirium Ascend Consultancy, said.

“We might see Boeing accept lower market shares for the time being in terms of volume than we have in the last two decades.”

In February, Airbus delivered 49 commercial planes to 28 customers, according to its latest report. In contrast, Boeing handed over 27 aircraft last month to 22 customers.

In the first two months of 2024, the US company has delivered 54 planes, while Airbus has widened its lead over its rival, delivering 79 planes so far this year.

The tides have turned against Boeing in the last few years amid a barrage of negative developments including two fatal crashes of its 737 Max model and a long grounding of its aircraft.

A series of incidents involving Boeing jets this year, including the in-flight blowout of a 737 Max 9 door plug of an Alaska Airlines plane, have continued to plague the company. This has forced airlines to re-examine their fleet expansion plans amid slower production rates and delayed deliveries.

Boeing's share price has plummeted 29 per cent this year, dragging its market valuation down to $112.4 billion and marking its lag behind Airbus by the most ever.

The Arlington, Virginia-based company is valued about $24 billion lower than its Toulouse-based competitor, as of market close on Tuesday.

Boeing's plans to acquire its supplier (and former subsidiary) Spirit AeroSystems could enhance quality, enabling a faster pathway to the higher production rates needed to boost profit and cash flow, according to a research note by Bloomberg Intelligence.

“A Boeing purchase of Spirit Aerosystems is likely the safest and fastest way to stabilise production for its two most important airplanes, the 737 and 787, and boost build rates, which will improve cash flow and profit,” George Ferguson and Melissa Balzano, Bloomberg Intelligence's aerospace industry analysts, said in the report last week.

The US Federal Aviation Authority (FAA) has imposed curbs on Boeing 737 Max production rate after the 737 Max incident when a door plug blew off at 16,000 feet above the ground on January 5. This has led to probes into the Boeing's safety and quality standards in its production process.

“At the core of Boeing's turnaround is increasing build rates to reduce overhead costs and improve economies of scale,” Mr Ferguson and Ms Balzano said.

“Recent challenges in the manufacturing process are preventing these increases and heightening the risk of a prolonged market share below Airbus.”

Boeing's latest manufacturing problems likely stem in large part from high employee turnover in the wake of the Max groundings, the pandemic and the difficulty in replacing skilled workers, Mr Ferguson said in a separate report.

Frustrated customers

A slower production rate and delivery delays at Boeing have frustrated airline chief executives who are eager to ramp up capacity to meet a post-Covid boom in travel demand.

Dallas-based Southwest, the biggest customer for the smaller Boeing Max 7, said in a regulatory filing on Tuesday that Boeing has advised it to expect 46 of the 737 Max 8 aircraft deliveries in 2024, a reduction from the previously expected 79 Max aircraft deliveries.

“As a result of Boeing's continued challenges, the company expects the delivery schedule to be fluid and, therefore, plans to reduce capacity and re-optimise schedules, primarily for the back half of 2024,” Southwest said.

This will likely result in a full-year capacity cut by one full point, it said.

As a result, the airline is also re-evaluating all prior full-year 2024 guidance, including the expectation for capital spending, it said.

Last week, Etihad Airways' chief executive said jet delivery delays by Boeing are hampering the airline's network growth plans.

The airline took delivery of three new Boeing 787-9 Dreamliners in February, eight months later than the scheduled handover date in June 2023, which has affected route network plans, Antonoaldo Neves told The National.

If delays continue at Boeing, it could lose further market share to Airbus, analysts previously told The National.

Airbus could secure more orders from airlines re-evaluating their fleet strategies, particularly for narrow-body aircraft where the A320 family competes directly with the 737 Max, they said.