Airbus Is Moving From Controlling Half Of The Airplane Manufacturing Market To Becoming The Dominant Actor, Amidst Boeing's Ongoing String Of Scandals And Structural Problems

One of the underappreciated marvels of the modern world is the omnipresence of air travel. Every day, there are more than 100,000 commercial flights taking place. This is not only important for passenger transport for both business and tourism, but also to carry quickly essential medicine, small packages, etc.

Air Travel: A Booming Industry with New Challenges

The world of air travel is constantly buzzing with activity, with over 100,000 commercial flights taking place each day. This vast network of air transport plays a crucial role in both passenger movement for business and leisure, as well as the swift delivery of essential goods, including medical supplies and small packages.

The air travel industry has largely recovered from the downturn caused by the COVID-19 pandemic, gradually returning to pre-2019 levels. During this period, which saw a steady rise in air travel for decades, the industry has continued to expand.

According to Airbus, the Covid period also saw the construction of 42 new airports and 43 new runways, with 7,250 new routes being opened since 2019. This highlights the sustained growth of the air travel industry as a whole.

When it comes to airplane manufacturing, the industry is essentially a duopoly, with the domination of 2 giants: Boeing and Airbus (AIR.PA +0.44%). For a long time, these 2 companies have largely controlled the production of commercial airplanes, especially following a series of mergers and acquisitions in the 1990s. During this period, Boeing absorbed its competitor McDonnell Douglas, while Airbus became the leading pan-European aerospace consortium. Meanwhile, competitors such as BAE Systems, Convair, Fokker, and Lockheed Martin withdrew from the market.

From 2007-2016, the 2 companies shared the market rather equally, with Airbus receiving orders for 9,985 aircraft and Boeing receiving orders for 8,978 aircraft. Among smaller companies are Canadian Bombardier (BDRAF +0.48%), which is more heavily involved in business jets (138 deliveries in 2023), and Brazilian Embraer, which produces both business jets and short- to medium-range airliners. Also worth mentioning are the Irkut Corporation (Russia) and Comac (China), which are currently mostly focused on their respective domestic markets.

Airbus OverviewAirbus is a European multinational aerospace corporation that designs, manufactures, and sells civil and military aircraft, as well as space and defense systems. The company is headquartered in Leiden, Netherlands, and has a global presence with production and assembly facilities in several countries.

Airbus is divided into 3 major segments:

Commercial Aircraft: This segment is responsible for the design, production, and sale of a wide range of commercial passenger and cargo aircraft, including the A220, A320 family, A330, A350 XWB, and A380.

Helicopters: This segment занимается проектированием, производством и продажей вертолетов как для гражданского, так и для военного применения. Продукция включает в себя легкие однодвигательные вертолеты H125 и H130, средние двухдвигательные вертолеты H145 и H175, а также тяжелые трехдвигательные вертолеты H215 и H225.

Defense & Space: This segment covers a broad spectrum of activities, including the design, production, and sale of military aircraft, such as the Eurofighter Typhoon and A400M transport plane, as well as satellite manufacturing, space exploration, and cyber defense solutions.

FinancialsIn H1 2024, Airbus registered a €1.4B in EBIT (Earnings Before Interest and Taxes) and EPS (Earnings Per Share) of €1.38. This was generated by 323 aircraft delivered by Airbus, 124 helicopters delivered (split 49/51% between civilian and military orders), and €4.9B in defense & Space-related revenues.

Overall, the company expects for 2024 to deliver €3.5B in free cash flow, with 770 commercial aircraft delivered. With €31.9B in gross cash on the balance sheet (versus €13.9B in gross debt), a profitable business, and a massive backlog, the company appears very solid financially.

Boeing's Troubles & GrowthThis duopoly situation felt like it could go on forever, but then Boeing started to flounder. Two fatal crashes in 2018 and 2019 put into question some of the design choices of the company, with decisions to cut corners for small savings. More recently, panel breaking mid-flight, landing gear breaking, and other similar issues have increased the perception of recently built Boeing planes being subpar.

Meanwhile, the aerospace division of Boeing seems to suffer from similar reliability/safety issues, with a capsule to the ISS ultimately decided to be unsafe by NASA. The stranded astronauts will finally be rescued by a SpaceX capsule instead.

(We discussed in more detail the events related to Boeing