Airbus: Navigating Turbulence to Secure Long-Term Dominance

The aerospace industry is in a race against time as airlines worldwide demand aircraft to meet surging passenger demand, yet manufacturers grapple with supply chain chaos. Airbus (EPA:AIR) faces a critical juncture in 2025: can it deliver 820 aircraft while navigating engine shortages, trade wars, and a backlog that stretches to 2040? This article argues that despite near-term misses, Airbus's strategic moves and long-term demand tailwinds justify a bullish stance.

The Storm Ahead: Engine Shortages and Production Bottlenecks

Airbus's 2025 target of 820 deliveries hinges on resolving its most pressing issue: CFM Leap-1A engine shortages. These engines, critical for the A320neo series, have left 43 aircraft undelivered and 70 more in production without engines. By late May, Airbus had delivered just 243 aircraft—35% below the pace needed to hit its annual goal.

The Spirit AeroSystems acquisition, finalized in Q3 2025, aims to stabilize fuselage supplies for the A350 and A220 programs. However, integrating Boeing-linked IT systems poses risks. If successful, production rates for the A350 could rise to 10/month by 2026—a key lever for margin expansion.

Trade Tensions: A Double-Edged Sword

U.S.-EU tariff disputes have added $1 billion in annual costs for Airbus. The 10% duty on EU-manufactured goods and Section 232 tariffs on aluminum/steel have forced creative workarounds, like rerouting aircraft to avoid duties. Yet Airbus has excluded tariff impacts from its forecasts, relying on customer cost-sharing agreements.

Boeing faces similar headwinds—its 737 MAX backlog is shorter, but U.S.-China tensions have slashed its China market share to 10%. Airbus, by contrast, holds 55% of China's narrowbody order backlog, a strategic advantage as Asia-Pacific demand soars.

Asia-Pacific: The Engine of Long-Term Growth

Airbus's dominance in Asia-Pacific is undeniable. With $1 trillion in airline revenue projected by 2025, carriers like China Eastern and Singapore Airlines are upgrading fleets at breakneck speed. Airbus's 8,726 order backlog—enough for 14 years of production—includes 40% from Asia, versus Boeing's 25%.

The A320neo's fuel efficiency and A350's range make them ideal for Asia's dense routes. Even if 2025 deliveries fall to 780, demand from airlines like VietJet and AirAsia ensures steady order inflows.

The Bullish Case: Risks vs. Reward

Near-term risks are clear:
- Engine shortages could delay deliveries until Q4 2025.
- Spirit's IT integration may cause hiccups.
- EU-U.S. tariffs could escalate, raising costs.

But the long-term picture is robust:
- Avolon's forecast of narrowbody deliveries stretching to the 2040s means Airbus's backlog is a moat.
- Boeing's reliance on a shorter backlog and less diversified supply chain leaves it vulnerable.
- Earnings resilience: Even with 2025 misses, Airbus's 2026–2030 targets assume steady growth, supported by $7 billion in annual operating profits.

Investment Thesis: Buy the Dip

Airbus shares have fallen 18% since mid-2023, trading at 10x 2025 EBIT estimates—a discount to Boeing's 12x. This undervaluation presents an opportunity:

• Hold for long-term growth: The Asia-Pacific demand tailwind and backlog strength justify a multiyear bullish stance.
• Buy on Q2 weakness: If June–August deliveries stay below 65/month, shares could dip further—creating a buying opportunity.

Conclusion: Airbus's Horizon is Blue

Airbus is not just surviving—it's positioning to dominate. Its strategic moves (Spirit acquisition, engine ramp-up, Asia focus) and the $1 trillion airline revenue wave outweigh near-term turbulence. Investors who look past 2025's delivery hiccups will reap rewards as Airbus solidifies its lead in the skies.

Recommendation: Hold Airbus (EPA:AIR) with a 12–24-month horizon, targeting a rebound to €200/share by 2026. Monitor Q2 production data closely—success here could ignite a rally.

Data as of June 19, 2025. Past performance is not indicative of future results. Consult a financial advisor before making investment decisions.