Analyst: China’s woes could affect Airbus, Boeing backlog

The economic slowdown in China could indirectly affect orders and deliveries of Airbus and Boeing jetliners, an analyst wrote Thursday in notes to investors.

RBC Capital Markets analyst Robert Stallard wrote in separate notes about the commercial airplane makers that China’s slumping economy could spill over to emerging market countries “that benefited in recent years from the China boom.”

He also noted that a stronger U.S. dollar against the value of emerging market currencies would weigh on Boeing.

“We think the double whammy of negative economic developments and (currency market) pressures increases the chance that Boeing will see an increase in deferrals and cancellations from EM (emerging market) airlines,” Stallard wrote.

Stallard wrote an identical passage in his report on Airbus.

Deferrals and cancellations for both manufacturers “calls into question … plans for further rate increases,” Stallard said in both notes.

Wichita-based Spirit AeroSystems is a major supplier to Boeing, manufacturing major components of all Boeing jetliners, including 70 percent of the Boeing 737. Spirit also manufactures parts of the Airbus A380, A320 and A350 XWB.

According to Airbus’ website, the European planemaker has a backlog of 6,400 airplanes. In July, Boeing reported a backlog of nearly 5,700 airplanes.

Airbus has reportedly considered increasing production rates on some of its models, while Boeing has said it plans to increase monthly production of 737s beginning this year.

Between Airbus and Boeing, Stallard wrote, Airbus has more airplane backlog with airlines in emerging markets than does Boeing: 36 percent of backlog at Airbus, compared with 17 percent of Boeing backlog.

“This excludes additional exposure via leasing companies, or in the orders from undisclosed customers,” Stallard wrote.

The countries and continents he identified as emerging markets in both reports included Africa, Indonesia, Malaysia and Turkey.

“Although the impact of the China slowdown on broader EM economies is being seen already, it normally takes time for this to flow through to airlines,” Stallard wrote.

He estimates any impact to Airbus or Boeing from airplane order deferrals would take at least 12 months, though the effect of cancellations could be felt sooner.

This story was originally published September 3, 2015 at 5:02 PM with the headline "Analyst: China’s woes could affect Airbus, Boeing backlog."