Summary

• Aerospace supply chain stocks profit from both Boeing and Airbus, offering portfolio diversification.
• Massive Boeing and Airbus order backlogs create years of predictable revenue for suppliers.
• Aviation's recovery fuels production increases, boosting the entire aerospace supply chain.
• Investing in suppliers offers exposure to high-margin aftermarket services and high barriers to entry.

A Savvy Investor's Guide to the Boeing and Airbus Dogfight

Every few months, it seems, the news trumpets another colossal aircraft order. One minute, Boeing is celebrating a multi-billion-pound deal with a flag-carrying airline. The next, Airbus has swooped in and nabbed an even bigger contract. It’s presented as a titanic struggle, a two-horse race for the skies. And like any good race, most people feel compelled to pick a side. But what if I told you the smartest money isn't on either horse, but on the company that sells the horseshoes?

To me, the endless Boeing versus Airbus rivalry is a fantastic bit of theatre. It’s great for headlines, but it distracts from the real, and perhaps more interesting, investment story. The truth is, these two giants, for all their public spats, are utterly dependent on the very same network of highly specialised companies. And that, for a shrewd investor, is where things get interesting.

The Real Winners Aren't in the Cockpit

Think about it. Building a modern commercial jet is a ridiculously complex affair. We’re talking about millions of individual parts, from the enormous engines slung under the wings to the little screen you watch terrible films on. These components don’t just appear out of thin air at Boeing’s Seattle factory or Airbus’s facility in Toulouse. They are sourced from a global web of suppliers who have spent decades, and fortunes, perfecting their craft.

Once a company like General Electric gets its engine certified for a new plane, or Raytheon gets its landing gear approved, do you really think an aircraft manufacturer is going to risk switching? Of course not. The costs and regulatory hoops are prohibitive. Airlines want proven, reliable parts, not experimental widgets. This creates a powerful moat around these suppliers. They become less like vendors and more like indispensable partners, profiting no matter whose logo is painted on the tail fin.

A Backlog That Beggars Belief

The sheer scale of the order books is what truly cements this opportunity. Right now, Boeing and Airbus are sitting on combined backlogs of more than eleven thousand aircraft. Let me put that another way. At current production rates, they have enough confirmed work to keep their factories, and by extension their suppliers, humming for the better part of a decade. Can you name another industry with that kind of built-in, predictable demand? I’ll wait.

This predictable pipeline of work is the central pillar of the investment case, a dynamic we explore in our Supplying The Skies: The Boeing & Airbus Effect basket. Every single one of those thousands of planes needs engines, flight controls, cabin interiors, and countless other systems. This translates into a steady, long-term stream of revenue for the companies that make them, insulating them from the drama of who won the latest sales campaign in Dubai or Singapore.

A Word on the Inevitable Turbulence

Now, let’s not get carried away. This isn't a risk-free punt. The aerospace industry is notoriously cyclical. An economic downturn can see airlines slam the brakes on new orders faster than you can say "recession". We saw just how quickly things can turn sour during the pandemic. Furthermore, the supply chain itself can be a source of headaches. A problem at one critical supplier can cause production nightmares for everyone, a vulnerability that has been laid bare in recent years.

Still, I think the fundamental logic holds. As global travel continues its recovery, airlines need new, more fuel-efficient planes. The pressure on both Boeing and Airbus to ramp up production is immense. This gives key suppliers significant leverage. They are not just taking orders, they are essential cogs in a machine that is desperate to get moving faster. For investors, looking past the headline rivalry to the companies that make it all possible could be a far more pragmatic way to play the long game in aviation.

Deep Dive

Market & Opportunity

• The aerospace supply chain is vast, with a single commercial aircraft containing approximately 2.3 million parts sourced from hundreds of suppliers.
• According to Nemo's research, massive order backlogs provide significant revenue visibility. Boeing has a backlog of over 4,200 aircraft and Airbus has over 7,000, representing years of predictable production.
• This demand translates to a need for at least 22,000 new engines, creating a substantial market for key suppliers like General Electric.
• Suppliers also benefit from a long-term aftermarket, as aircraft require maintenance, repairs, and component replacements for 20 to 30 years after delivery.

Key Companies

• The Boeing Company (BA): An American aerospace manufacturer that relies on a global network of suppliers for critical systems like engines and avionics for its commercial aircraft programmes.
• General Electric (GE): A primary engine supplier to both major manufacturers, providing the LEAP engine for the Boeing 737 MAX and engines for the Airbus A320neo family through a joint venture.
• Raytheon Technologies Corporation (RTX): A crucial supplier providing flight control systems, cabin interiors, and landing gear through its Collins Aerospace division, and engines through its Pratt & Whitney division.

Primary Risk Factors

• The aerospace industry is cyclical, and demand for new aircraft may decrease during economic downturns, potentially leading to order cancellations.
• Production can be disrupted by problems at a single major supplier, creating bottlenecks that affect the entire industry.
• New environmental regulations could require suppliers to undertake costly component redesigns to remain compliant. All investments carry risk and you may lose money.

Growth Catalysts

• Multi-year order backlogs at Boeing and Airbus create predictable, long-term demand for component suppliers.
• The ongoing recovery in global air travel is driving demand for new aircraft and compelling manufacturers to increase production rates.
• Airlines are replacing older, less fuel-efficient aircraft, creating an additional layer of demand on top of normal growth.
• Nemo's analysis suggests that pressure on manufacturers to clear backlogs gives essential suppliers significant leverage in contract negotiations.