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In a note assessing plane demand, Jefferies analyst told investors that medium and long-term production rates are “supported by 10-year backlogs.”
The demand outlook is supported by industry backlogs that stand at 12,663 aircraft as of January, according to the analysts. In addition, they stated there were a further 470 jets added to the backlog through the February Air India order.
“Backlogs span >10 yrs at current production rates and support the planned production rate ramps of the OEMs,” wrote the analysts, who believe the situation is positive for both Boeing (NYSE:BA) and Airbus (OTC:EADSY).
Furthermore, Jefferies believes deliveries are set to ramp alongside the supply chain improvement.
“The gating factor for the ramp in deliveries to meet robust demand is primarily the supply chain,” said the analysts. “We forecast industry deliveries ramp at a 15% CAGR through 2025 to 5% above the 2018 peak, w/ the fleet set to expand at a 2.7% CAGR as retirements normalize in the ~3% of the fleet range.”
They concluded: “We est estimate narrowbody production rates higher are 126 per month in 2025 based on 45/mo on the MAX (vs. stated target of 50/mo) and 62/mo on the A320neo (on 11.5 mo yr). This drives a 55% Airbus share lead. Widebody deliveries are expected to grow at a 21% CAGR from 129 in 2022 to 230 in 2025 with 7-year backlogs. Widebody rates are 19/mo cumulatively in 2025 with our production rates of 6/mo on 787, 7/mo on A350, 3/mo on 777, and 3/mo on A330neo. This drives a 59% BA share in terms of 2025 widebody deliveries.”
