Skip to Content
Stock Strategist Industry Reports

Don’t Panic Over Weaker Jet Orders

Even with faltering demand for large wide-body jets, we still see investment opportunity in firms exposed to the strength of the narrow-body market.

Mentioned: , , , ,

Aerospace data firm Ascend recently hosted an update on the aerospace market. The company was sanguine on current market dynamics but warned that indicators are flashing orange. Our nuanced view posits that larger wide-body jets remain the biggest concern for  Boeing (BA) and  Airbus (AIR), but narrow bodies look more secure. Regional jet growth looks underwhelming, but  Embraer (ERJ) still enjoys a commanding position. We point to Airbus,  Safran (SAF), and  United Technologies (UTX) as the three names that will benefit most from the narrow-body upcycle.

This year will see flat to declining commercial jet backlogs for the first time since 2009. But we don’t see order weakness as a reason to panic, particularly in narrow bodies. According to Ascend, narrow-body backlogs cover planned production rate increases to about 60 aircraft per month through the end of this decade, giving us comfort that rates will move up. Backlogs represent 9.5 years of production, and this cushion combined with hundreds of Airbus A320 and Boeing 737 operators provides manufacturers with potent risk-management levers. We note that manufacturers put these levers to good use in 2009-11, moving delivery rates up in the face of weak demand. In addition, Ascend displayed data showing a healthy narrow-body lease market, with used values still slightly above fundamental values.

Chris Higgins does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.