MAX KINGSLEY-JONES / PARIS & GUY NORRIS / LOS ANGELES
Manufacturer is confident of maintaining output top spot over Boeing and dismisses accusations of overproduction
Airbus chief executive Noel Forgeard sent out a warning last week that the European manufacturer does not intend last year's first-ever victory over rival Boeing in both output and orders to be a flash in the pan. He has also dismissed suggestions that the European manufacturer has irresponsibly overproduced in its efforts to gain market share and the coveted number one status in airliner production.
The good news is that despite enduring what Forgeard described last week at the annual Airbus press conference in Paris as an "annus horribilis" in 2003, the two giants secured more net orders (ie, discounting cancellations) than the year before. Their combined net tally of 493 orders was 20% higher than for the preceding 12 months thanks to a much lower number of cancellations (31 against 142 in 2002). In gross terms, the two companies took 520 orders, compared with 550 a year earlier.
This came despite the industry being battered by the Iraq war, the SARS virus and the ongoing threat of terrorism. Airbus is the clear winner for the third year running in gross order terms, with 284 sales valued at around $33 billion, against Boeing's 240, worth an estimated $17 billion. However, by recording far fewer cancellations, Boeing reduced its rival's victory margin in net order terms to just 15 units.
In value terms, Airbus has a clear advantage in gross and net orders - largely thanks to the number of contracts for high value A330/A340s and A380s against a relatively poor year for Boeing's 747 and 777.
Airbus's output victory was achieved by producing just two more aircraft than it did in 2002 - 305 aircraft - representing the second successive year that its deliveries have been around the 300 mark. "We exceeded our set objective of 300 deliveries," says Forgeard, adding that these included 40 aircraft for Asian carriers that were involved in "unpredictable new delivery planning" because of the impact of the SARS virus.
With Boeing's annual deliveries falling by a quarter to 281 units, overall output for the two manufacturers declined by 14% to 586 aircraft, worth an estimated $44 billion. This is 30-35% down on the two peaks of the last production cycle - 910 deliveries in 1999 and 850 in 2001.
Airbus says its 2003 turnover was €19.3 billion ($24.3 billion) - a €200 million decline on the year before, despite more of the high-value A340-500/600s being delivered last year. Airbus chief financial officer Andreas Sperl attributes this to the falling value of the dollar against the euro. He warns that, assuming a similar mix of aircraft types, further declines in turnover are likely if the dollar continues to weaken.
Boeing says it isn't "losing any sleep" over the historic victory by Airbus in deliveries last year as it "knows why it's happeningÉwe have cut back on production to suit demand while Airbus has chosen a different path. Airbus's obvious desire for market share has led them to this level of production, and they didn't take the same responsible step."
Some observers have questioned why more than 230 A320 family aircraft were delivered last year when the idle fleet of the narrowbody is hovering just below 100 units. Forgeard dismisses the accusation that it is overproducing: "We never build a whitetail. Should we refuse an order that we receive? Or try to influence an airline to believe that we are over-feeding them?"
Boeing says, ominously, that the industry "will see what will come out over the next few years. We'd rather be a healthy number two than an unhealthy number one, doggedly chasing market share at any cost. If they want to say they're the leader then we'd obviously disagree with that - particularly since their future is based on aircraft that we don't see that much of a demand for."
Despite the warnings, a repeat of Airbus's output victory already looks certain for this year, with Forgeard saying that the company has "a strong will to stay where we are". It expects to produce around 300 aircraft again in 2004, against Boeing's forecast of 275-290.
The US manufacturer says this figure is firming up quickly as "we're already sold out at the lower end of that range".
Boeing expects to give its first serious guidance on delivery estimates for 2005 when its next earnings report is issued on 29 January. The signs are that output will climb back into the low 300s.
Airbus chief commercial officer John Leahy says he expects the company to achieve a similar order intake this year to that in 2003, and he expects that 2005 "will be up in orders and deliveries: the big question is by how much?".
With net orders still falling short of total deliveries, both manufacturers saw a further erosion of their backlogs, with their combined tally falling by around 100 units to 2,560 aircraft.
The one piece of good news for Boeing from the raw 2003 figures is that it has arrested the slide of backlog share thanks to its reduction in output and success in net orders. Having declined from a majority share four years ago, it has now stabilised at 43%.
Again the large number of high value types in Airbus's backlog means it has an even more healthy share of the market in dollar terms, which at $140 billion represents a 60% share of the estimated $233 billion total.
Source: Flight International
