It has been a tough 5 years for Boeing and its investors, with a series of scandals and accidents making America's prime aircraft company look questionable. Across the pond, however, Boeing's biggest rival, Airbus, has had a field day in airliner sales and reputational gains. Yet, while Boeing stock has sunk to under half of its peak price in 2019, Airbus's pricing has not reflected its success as dramatically. So which one is the right pick for investors seeking a potential power play in aviation stocks as the two industry leaders navigate the post-pandemic airline industry? The answer is deeper than which company makes and sells the most planes.
Airbus and Boeing are both famous for their civil aviation segments, with Boeing having a longer legacy of delivering airliners, while Airbus' first plane hit the market roughly 50 years ago. For the average person, his or her interaction with these two companies tends to be limited to travel, but both companies serve a deeper purpose to the global economy -- defense.
NYSE: BA
Key Data Points
The defense disparity
This is the first major difference between the two as Boeing derives 39% of its revenue from defense contracts, compared to 32% from airliners. Airbus, on the other hand, has been growing its defense revenues, representing 18% of the company's total revenue in 2023. Furthermore, Boeing's defense projects are deeply diversified, with everything from supporting the current F-18 fleet for the U.S. Navy to providing the crew module for the upcoming Artemis program. The company is also one of two remaining competitors alongside Lockheed Martin to develop America's Next Generation Air Dominance Fighter. While the program has yet to kick off, it essentially has a blank check as the U.S. seeks to replace the already superior F-22 platform.
Meanwhile, Airbus' approach to taking advantage of NATO defense spending has flown more under the radar. Its two major aviation programs are the A400M cargo plane and the Eurofighter Typhoon fighter jet. Both programs have resulted in reasonable and well-rounded aircraft that currently support various European air forces.
However, even within Europe, Airbus must compete with American defense giants like Boeing and Lockheed Martin, while the reverse does not apply to the North American defense market. For example, the current upgrades to Lockheed Martin's F-16 platform have outcompeted the Eurofighter in the wider European market, though this is partly due to the member states of Airbus (France, Germany, the United Kingdom, and Spain) disagreeing on who can purchase the aircraft.
This aspect of Airbus' structure has complicated its defense section's trajectory, but it's a major part of the reason Airbus is stealing the airliner spotlight from Boeing.
Image source: Getty Images.
Which has the manufacturing edge?
As a multinational consortium, Airbus can leverage varying regional factors to both improve the quality of its manufacturing and lower costs. The company operates over 20 different manufacturing sites globally and then transports the components via its BelugaXL aircraft to five different final assembly lines depending on the market the final aircraft will enter.
This has allowed the company to divide its supply chains across all of its major civil product lines like the A320neo, the A330neo, and the A350, all of which have their subvariants. This compartmentalization of component souring has allowed Airbus to keep tight control over quality issues as they arise, as each aircraft's components can be traced back to the source. Airbus can thus hold its suppliers far more accountable than Boeing which sources and assembles material very differently.
Boeing's traditional approach to aircraft manufacturing, focusing on two sites, both in the United States, has not panned out as well. With several quality control issues found in the Federal Aviation Administration's most recent audit and the 737 MAX production line failing 33 out of 89 criteria, the situation appears grim in the media. Since the audit, the CEO of Boeing has announced his resignation at the end of 2024 and the company has hired a retired U.S. Navy admiral to advise on quality control improvements.
OTC: EADSY
Key Data Points
The verdict
Amid the media and the memes, the answer for which stock to buy comes down to personal preference as much as it does company performance. While Boeing's airline segment has floundered lately, being consistently beaten out by Airbus in deliveries and reputation over the last five years; it's still America's third-largest defense contractor by dollars from the U.S. government. Thus, Airbus represents a purer investment into the airline industry, with more reliance on the global economy's demand for air travel. More specifically, Airbus' mid-range models in the A320 family will rely on developing countries increasing the demand for regional airlines to keep sales and deliveries high. While this is likely, it is subject to more risks than Boeing's relationship with the American military-industrial complex.
For now, both companies' stocks are a buy due to healthy financials and the steady demand for their products, but they face fundamentally different challenges to overcome in the next half of the decade. For the investor leaning towards Boeing, the current price drop could represent an attractive discount to enter the stock at, relying on the company to truly turn its image around. Alternatively, Airbus represents a stable, long-term investment that will grow alongside the global economy. It's also important to remember, while competitors on paper, these two companies are ultimately on the same side, supporting NATO and the Western economic alliances of the EU, UK, and US.
