Airbus or Boeing? Which share is better?
The aviation business is highly competitive. However, two companies in particular are fighting for market leadership. We are talking about Boeing and Airbus, both of which are considered financially strong and are currently competing, particularly in potential takeovers.
The situation at Airbus seems to be tense, as only a short time after the Qatari sheikdom ordered 24 A 380 long-haul jets, the company announces that up to 3,720 jobs will be cut. The French company sees the trigger for this job reduction in the weak demand for the A 380 premium jet and in the delays of the A 400 M military transporter. However, such problems are considered normal in the industry, even if the main business around the civil aircraft sector is flourishing. Both companies are already reporting full capacity utilization for the next five to six years and can increase their operating profits more strongly than expected.
Boeing the high-flyer of 2017
Both companies delivered a strong performance in 2017, but Boeing was particularly convincing. With a 90 % increase in market value, Boeing was the top of the Dow Jones Index and was again ranked among the top five Dow Jones shares in 2018. But Airbus is also performing strongly and, despite the negative headlines since September 2017, has been flying high.
The special feature of the two companies is also reflected in the current cash reserves, as high expenses are incurred in particular for model maintenance of already established machines and for the development of new ones. Years before delivery of the new models, billions have to be invested and it is only years after the first delivery that it becomes clear whether market developments have been correctly analysed.
The fight for the middle distance pilots
The high capital requirement is also one of the reasons why smaller providers in particular are quickly sliding into the red. The Canadian manufacturer Bombardier, for example, almost went bankrupt in 2017 and was saved solely by an investment by Airbus. The investment was made in the Bombardier subsidiary, which is developing the current medium-haul C-series jet. The special feature of this investment is that Airbus does not have to invest capital, but brings in its own marketing, sales, customer service and purchasing capabilities. The more efficient engines in particular are an advantage and the possible abandonment of the outdated A 319neo opens up new growth opportunities in Asia.
Boeing is currently seeking to acquire the Brazilian Embraer in order to continue competing with Airbus' portfolio. The current portfolio of the medium-haul manufacturer would well enrich that of Boeing. There is also special competition in the medium long-haul segment, which amounts to up to 4,500 miles. With the A 321neo, Airbus has introduced a new model that will be up to 27% cheaper than the Boeing equivalent. The first models are to be delivered by the end of this year. Boeing has no new model in development. However, the company plans to develop a domestic jet for China, so that further market shares can be tapped there.
Which share is the better one?
Boeing stands out above all because of Dennis Muilenberg, who is taking a tough austerity course towards suppliers. This approach increased the company's profitability and brought cash flows to record levels. However, the company is aggressive, especially towards smaller suppliers, but suppliers are also suffering from a tense relationship. Due to the positive development, however, the company is regarded as the favourite on the stock markets. Airbus, on the other hand, also performed strongly. With an operating return of 11 %, this is very close to the return of the major competitor. However, it is above all the political influence under which Airbus stands that has led to lower growth on the stock markets. When the companies are compared with each other, Airbus convinces with the low entry price.