Saying that a robust commercial market will continue to mitigate the effects of a “persistently tough” defense environment, analysts at Moody’s Investors Service project that large commercial airplane deliveries will rise 3% to 5% to offset a similar decline in defense spending.
Falling fuel prices, steadily growing airline traffic and the improving health of the economy all support demand for commercial planes. Airline profitability is projected to continue growing at a compound annual growth rate of around 6%, adding to the airlines’ demand for replacement planes and expansion into emerging markets.
Moody’s notes that both Boeing Co. (NYSE: BA) and Airbus are currently carrying order books with record numbers of orders, and that both are pacing their production ramp to maintain measured delivery growth. The analysts calculate a compound annual growth rate in orders of around 4% through 2017.
Boeing’s backlog, according to Moody’s, is 5,552, with 4,033 of those orders for the company’s best selling 737. The Airbus order backlog totals 5,907 planes, with 4,748 orders for the planes in the company’s A320 family, the Airbus competitor to Boeing’s 737 family of planes.
Moody’s also forecasts total production for both companies out through 2019. The analysts forecast 2014 deliveries for Boeing at 730, compared with an estimate of 715 to 725 from Boeing. Airbus deliveries are forecast by Moody’s at 632 for this year, compared with Airbus’s own estimate that its deliveries will be right around last year’s total of 626. Total production from the two companies rises from 1,365 deliveries in 2014 to 1,689 deliveries in 2019.
Boeing is scheduled to discuss its production and delivery plans for next year on January 8 at its investors day meeting. Airbus is expected to reveal its plans the following week.
Both Boeing and Airbus have an A2 rating with a Stable outlook from Moody’s.