What's going on?
The Paris Air Show, a major event for the aerospace industry, kicked off on Monday. France’s own aircraft manufacturer Airbus took flight, but US rival Boeing was stuck on the tarmac.
What does this mean?
Airbus is bouncing back from the failure of its flagship A380 program with a new long-range jet – a fuel-efficient upgrade of an old US favorite – as well as a juicy 100-plane order from an American firm.
Boeing, however, remains ruffled by its flagship plane’s involvement in two fatal crashes. The disasters have resulted in canceled orders and the prolonged grounding of all 737 MAX models. With 4,500 unfulfilled 737 MAX orders, Boeing’s under increasing cabin pressure to get the planes back in the skies before Airbus swoops in.
Why should I care?
For markets: Seatbelt sign illuminated.
Air cargo shipments fell 5% in April, continuing their slump this year – and potentially resulting in lower demand for cargo planes. Prior to Monday, both Boeing and Airbus had had more cancelations than orders so far in 2019 (tweet this). Analysts are expecting fewer Air Show orders than last year, although beating these modest expectations could be good for the aerospace giants’ stocks. The show’s an opportunity for investors to get a sense of how aircraft customers feel about the wings on offer, and to place their bets on how high (or low) planemakers’ shares will fly.
The bigger picture: Low prices, low profit.
Data on Monday showed that European wages increased at their fastest rate in a decade in the first quarter; vacationers may therefore have more to spend as summer approaches. On the other hand, air passenger traffic in March grew at its slowest rate in nine years – meaning competition among airlines is fierce. Air Show customer Lufthansa warned on Monday that it would make even less profit this year than previously thought, following in the slipstream of rival Ryanair. German Lufthansa’s shares descended 11% – as did those of other European airlines likely to be impacted.