Airbus Year-End Order Rush Masks Woes Selling Biggest Jets

(Bloomberg) -- Airbus SE completed the year doing what it does best: selling its bread-and-butter narrow-body aircraft.

The European manufacturer late Thursday firmed up its biggest-ever order from Indigo Partners for 430 A320 aircraft -- a contract that was previously announced -- while also unveiling a new deal for 50 re-engined versions of the same jet. All told, the flurry of activity during the past two weeks has totaled 705 single-aisle plane orders with a sticker price of $81.5 billion, pushing its full-year tally ahead of the figure at rival Boeing Co.

Airbus Year-End Order Rush Masks Woes Selling Biggest Jets

The A320’s success, coming in the final days of retiring sales chief John Leahy’s two-decade tenure, provides some respite for Airbus following a tumultuous few weeks after the planemaker unveiled a top management shakeup. The orders for smaller jets also expose the flank that’s opened up at the other end of the manufacturer’s product line-up: wide-body and ultra large jumbos that are becoming increasingly hard to sell.

The final burst of deals pushed Airbus’s net new orders for the year to just beyond 1,000 planes, including 48 wide-bodies. The company was expecting the total to lag behind the 700 or so aircraft it planned to deliver in 2017. At Boeing, net orders for single- and twin-aisle models amounted to 844 planes as of Dec. 19, and the U.S. company hasn’t announced any sales contracts since then.

As if to hammer home the weakness of wide-body demand, Airbus also confirmed late Thursday that an event scheduled for this week to mark the delivery to Qatar Airways Ltd. of its first A350-1000 twin-aisle plane will be delayed until early in the new year as the aircraft undergoes final preparations. The move is the latest in a series of setbacks for the biggest A350 version after United Airlines and Cathay Pacific Airways Ltd. switched to the smaller -900 model, and adds a blemish to Airbus’s push to bring that jet to market.

Airbus shares fell 0.3 percent to 83.69 euros as of 3:39 p.m in Paris trading. The stock has gained 33 percent this year to value the manufacturer at 64.8 billion euros ($77.7 billion). Boeing’s shares have surged 91 percent in 2017 to a market value of $176.7 billion.

Difficult Customer

The delay is also further evidence of Qatar Airway’s fickleness as a customer after past postponements and outright refusals by the airline to take deliveries of both narrow and wide-body jets, including a move earlier this year to scrap orders for four A350s. The carrier’s order backlog has come into focus amid the Saudi Arabia-led isolation of its home country that has forced the airline to scrap and divert routes.

At the same time, a much-needed follow-on order for Airbus A380s from Emirates, the biggest customer for that aircraft, remains elusive, despite signals by the manufacturer just a few weeks ago that a deal could materialize before year-end. Toulouse, France-based Airbus, which was widely expected to sign the A380 contract at the Dubai Air Show in November, needs the order to bulk up its backlog for the double-decker aircraft and keep the loss-making program alive.

Gaining clarity on the future of the A380 will be at the top of the to-do list for outgoing Chief Executive Officer Tom Enders, who revealed plans in December to step down in 2019, and his second in command Fabrice Bregier, who will be replaced in February by Guillaume Faury, CEO of the helicopters business.

Emirates Demands

Expressing disappointment that a deal with Emirates failed to materialize at the Dubai event, Bregier said in November he was confident Airbus could secure an order before the end of the year. The executive has since said that should an order come, Airbus would be willing to commit to keeping the program going for another decade. Emirates President Tim Clark has said talks derailed in part because of the airline’s concerns about the future of the model.

While Chicago-based Boeing Co. has had similar difficulties winning orders for its biggest wide-body jets, it has managed to sell the smallest version, the 787, and has committed to accelerating production rates for the aircraft.

The lull in orders for twin-aisle planes could ease with the growth of long-haul, low-cost operators including Norwegian Air Shuttle ASA and Singapore Airline Ltd.’s Scoot unit, both of which are still in the first stages of expansion, Jefferies International Ltd. analyst Sandy Morris said by phone.

“You can be slightly curmudgeonly and say that the orders were almost all single aisle, but you have to believe that, if low-cost has the same effect on long-haul, the orders for wide-bodies could follow,” he said.

©2017 Bloomberg L.P.