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Was The Disappointing Paris Air Show A Harbinger Of Another Durable Goods Disaster And More Economic Weakness?

Tyler Durden's picture





 

Remember when car sales where supposed to boost industrial production when all they did was boost GM's dealer channel stuffing to a new all time record? Today, courtesy of Stone McCarthy we transpose the observation about what is really happening in the car space (i.e., not adding to GDP) to airplane orders as an indication of how airlines view the future of the global economic "recovery." Boeing, which recently completed its stint at the seminal Paris air show, reported just 48 orders in June. This is the worst air show showing for the bellweather airplane maker in the last 6 years with the exception of 2009 when the global economy was in freefall. Bottom line: upcoming durable goods reports will likely be weaker than expected due to a drop in Boeing bookings, and while this is a volatile series, it ultimately is money that enters, or not as the case may be, the US economy. More importantly, if the Paris Air Show is any indication, one can write off the thesis of increased infrastructure CapEx spending in H2. So much for the hockeystick economic growth in the second half of 2011.

Charting Boeing orders vs. Air Shows:

More from SMRA:

On June 20-26, the Paris Air Show, held every two years, took place. The potential for a significant number of aircraft orders is always present in the aftermath of an air show. So how did Boeing fare at the Paris Air Show? Comme ci, comme ca.

For the month of June, Boeing reported unit orders of 48 aircraft versus 27 units in May, which is a mediocre result in our opinion. Although aircraft orders should help provide a positive boost to June durable goods orders (our forecast is +0.7%), this year's boost won't be quite the knockout punch we were hoping for.

If we discount the previous Paris Air Show held in June 2009 due to the recession impact (just 20 orders for Boeing in June 2009), orders were considerably higher in past years: June 2007 = 132 orders, June 2005 = 162 orders, June 2003 = 73 orders, and June 2001 = 11 (recession impact again for 2001).

So much for infrastructure capex spending and business optimism about the future.

 


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Mon, 07/18/2011 - 10:04 | Link to Comment oogs66
oogs66's picture

must have been the weather, or japan, can't be anything like weak demand

Mon, 07/18/2011 - 10:12 | Link to Comment idea_hamster
idea_hamster's picture

So much for the hockeystick economic growth in the second half of 2011.

Oh, but we are going to get "hockeystick growth" in 2H11 -- just that it will be the Marty McSorely version, and we'll feel it much like Donald Brashear did....

http://www.youtube.com/watch?v=RXQUYzraYLo

Mon, 07/18/2011 - 10:28 | Link to Comment trav7777
trav7777's picture

everybody already ordered a 787, which was supposed to be out by now, but the executive-enriching "globally sourced" idiocy of Boeing has prevented that.

There is a glut of planes.  Too many models, and a lot of competition, exist in every size class.

Wed, 07/20/2011 - 13:26 | Link to Comment BinAround
BinAround's picture

Within 2 days of Tylers doomy observation, we see a very large order for Boeing/Airbus in the news.  600 jets is large.

Tyler does great editing, but perspective and balance could be something to work on.

Mon, 07/18/2011 - 10:06 | Link to Comment francis_sawyer
francis_sawyer's picture

Phil LeBeau to give you the "Lazlo Biriyni" spin on it in 5...4...3...2...

Mon, 07/18/2011 - 10:09 | Link to Comment francis_sawyer
francis_sawyer's picture

immediately followed by LIESman telling you how the 'Fed' will len a helping hand in all of it...

... followed by Santelli telling you how much you just really got dinked for...

---

& the chorus girls say "if you stare at my tits long enough, they'll actually start looking big & juicy"...

 

Mon, 07/18/2011 - 10:11 | Link to Comment Master Chef
Master Chef's picture

They need a "cash for clunkers" program.

Or a good auction... Boeing, Boeing, Gone.

Mon, 07/18/2011 - 10:08 | Link to Comment kito
kito's picture

http://www.google.com/finance?client=ob&q=NYSE:BAC

its all ok because our banks are doing well.

 

Mon, 07/18/2011 - 10:10 | Link to Comment Iam_Silverman
Iam_Silverman's picture

It is interesting to see the results from the air show, but they seem to be only reporting sales from one vendor.  Were orders weak across the board?  It is also important to note that the lack of deliveries in the Dreamliner model may have an impact on orders - who wants to buy a product that has yet to be delivered anywhere near its scheduled date?

Mon, 07/18/2011 - 11:15 | Link to Comment karzai_luver
karzai_luver's picture

DEAthliner

 

FTFY!!!!

 

Mon, 07/18/2011 - 10:12 | Link to Comment Atomizer
Atomizer's picture

Won't be long before TSA goes on strike.

Mon, 07/18/2011 - 10:15 | Link to Comment francis_sawyer
francis_sawyer's picture

OT... But (in the "it was bound to happen sooner or later" category)... I just got a BLUE STAR AIRLINES ad pop-up...

Bud Fox & Goron Gekko must have something up their sleeve!

Mon, 07/18/2011 - 10:16 | Link to Comment francis_sawyer
francis_sawyer's picture

Goin' to Pluto bitchez!

Mon, 07/18/2011 - 10:17 | Link to Comment Conrad Murray
Conrad Murray's picture

Airbus.

Mon, 07/18/2011 - 10:31 | Link to Comment trav7777
trav7777's picture

what is, "sucks"?  Aviation for 400, Alex

Mon, 07/18/2011 - 10:20 | Link to Comment mess nonster
mess nonster's picture

The ownership and financing of aircraft is one of the most tortuous and convoluted chains of interlocking shell companies, financing, and leasing outfits that can possibly imagined, rivalled only by Rupert Murdoch's "oragnization" and  CIA- sponsored Islamic terrorist-slash- drug smuggling networks. Perhaps a drop in orders is representative of something akin to recent SHIBOR credit seize-ups? 

Mon, 07/18/2011 - 10:38 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Aircraft Boneyards http://en.wikipedia.org/wiki/Aircraft_boneyard

FTW!

India's aviation industry is flying on fumes and bail-outs.

Bailing out an airline sounds extremely oxymoronish, does it not?

ORI

http://aadivaahan.wordpress.com/2011/07/16/66th-anniversary-of-trinity-and-thoughts/

Mon, 07/18/2011 - 10:43 | Link to Comment drswhaley
drswhaley's picture

There is little risk to Egan in his call here.  He is using timing of his Barron's article, appearance on CNBC, and word of the downgrade, to bolster his firm's standing.  He is an alternative credit rating agency not paid by the issuer.  He sees the issuer conflicted rating agency crisis as a way to capitalize on his business model.  It is known that competition is needed.  Best of luck to him. 

Mon, 07/18/2011 - 11:11 | Link to Comment litoralkey
litoralkey's picture

EDIT: The information in this original post is in disagreement over total sales/options compared to every other media outlet I've read.

http://www.usinenouvelle.com/article/record-de-frequentation-et-de-comma...

http://www.usinenouvelle.com/article/bourget-2011-l-heure-du-bilan.N154504

 

I did my graduate MBA thesis on the airline industry in 1999-2001.  It helped that my good friend was the market segment junior analyst for the aircraft manufacturing industry at JPMorgan at the time.

The lack of orders at the Paris Airshow is not really a indicator of the airline industry as a whole, and hasn't been since the first Gulf War back in 1991.

Most of the carriers in the emerging (growth) markets are bypassing the airshows system and working directly with Airbus/Boeing/Bombadier/Embraer and shell corporations and leaseback holding groups.

Look at the new model options at Paris airshow this year... very little innovation as the innovations of the last decade are still being delivered on long term contracts.  New seat configurations and incremental improvements in materials and components isn't going to close sales/leases.

Selling McDonald's HappyMeals to Africans is one thing, selling 747s to African kleptocracies is another story.

General Electric Commercial Aviation Services (GECAS) and International Lease Finance Corporation (ILFC) and Bank of China Aircraft leasing units do not send purchasing people to Paris to be sold a bill of goods, they send them to go enjoy French cuisine, wine, women and comped recreational services.  Boeing/Airbus etc send their people to the leasing corps at the beck and call of the leasing corp's executives.

Mon, 07/18/2011 - 11:05 | Link to Comment litoralkey
litoralkey's picture

EDIT: Dupe

Do NOT follow this link or you will be banned from the site!