Airbus concern over exchange rates growing, Boeing orders still slipping – Suppliers Share Wrap

Airbus is increasingly concerned about the strength of the euro compared to the US dollar, and the impact that it will have on its business.

Airbus COO, Fabrice Bregier, expressed worry yesterday that the exchange rate difficulty could force it to appeal to monetary authorities to ensure exchange rate stability.

Late in Sep-2009, Louis Gallois, the CEO of Airbus parent, EADS, stated that exchange rates were “close to the limit” for the company. In 2007, EADS estimated that for every ten cents the euro climbed against the US dollar, the company could lost almost EUR1 billion from its bottom line.

More B787 orders cancelled

Meanwhile, Boeing has its own concerns, in the form of a contracting order book. The manufacturer updated its orders and deliveries website this week, revealing that it had lost another ten orders for the B787, taking total cancellations for the type to 83 this year. Ten more B737 were cancelled, but it gained 11 more B737 orders from unidentified customers.

Boeing did not identify the customers that cancelled the orders, but so far this year 17 separate airlines and leasing companies have dropped their orders.

With the B737 running at list prices of USD51.5-87.0 million, compared to the B787's list price of USD150.0-205.5 million, the manufacturer needs to book around three narrowbody orders for every B787 order lost to maintain the value of its order backlog.

The manufacturer has booked 180 gross orders for the year, notably better than Airbus. However, with the ongoing B787 delays, it has also suffered from more cancellations than its European rival. In addition to the 83 B787s dropped by airlines, 16 B737s, six B767, five B777s and a single B747 have been cancelled, leaving the company with just 70 net orders. The latest delay to the B747-8, which will see the company’s results suffer to the tune of USD1 billion in 3Q2009, only adds to the concern.

New ordering is not expected to recover significantly in 2010, with airlines still suffering through the twin problems of excess capacity and weak yields. Production cuts for next year from both Airbus and Boeing have been modest, with their massive order backlogs providing a significant cushion.

Boeing shares traded up 1.0% on Thursday, while EADS was up 1.1%.

Selected Aviation suppliers’ daily share price movements (% change): 08-Oct-09