Stranger Things

In this period of uncertainty, some of the issues that were considered out-of-bounds six months ago have become casualties of this now full-fledged trade war between the United States and other countries, including allies such as the European Union.

The below charts are not suggesting imminent orders at risk for the Boeing company – they simply highlight a selected level of exposure in countries currently engaged in trade or political disputes with the United States.  While we view the potential impact of the current spat as unlikely to significantly affect Boeing, perhaps with the exception of Russia and more limited when it comes to Turkey and the People’s Republic of China,  the volumes, while not very large, are still are substantial,  especially in the case of the 777.

Note that these numbers do not include the Farnborough LOI for 29 777F and order for 5 747-8F from Volga-Dnepr Group and CargoLogicHolding.  The numbers below are for orders and deliveries as of 1 July 2018.

Few Options

One important consideration – at this stage, there is not much of an aircraft  alternative for the countries listed below. What concerns us mostly is the ability to finance such purchases outright due to the resulting economic uncertainty in Turkey and Russia in particular.  As we have indicated in previous notes, the strong dollar and capital outflows are more a risk to these backlogs than political bickering between alpha leaders.

Our next note will focus on Airbus, ATR and Bombardier, although the level of exposure there is different.

Figure A:  737MAX current exposed backlog (Airlines)

Figure B:  Chinese Lessors Backlog Weight

Figure C:  MAX Exposure and Losses (Airlines and Lessors)

Figure D:  777 Family exposed backlog and losses

Figure D:  787 Family exposed backlog

Figure E: Total Boeing Family Exposed Backlog (Units) & List Values ($B)

Figure F: Selected Airlines OEM Backlog

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