Boeing Co (NYSE:BA) and Airbus SE (OTCMKTS:EADSY) are two of the biggest airplane manufacturers in the world. But that didn’t prevent them from taking nosedives when the commercial aviation industry was decimated in the first quarter of 2020.
The economic shock forced major carriers to scale back airplane orders over the next five years to remain in business. Since then both stocks have shown signs of life, so which is better: should you invest in Boeing stock vs Airbus?
Many analysts believe the airline market will remain stalled through 2023 at a minimum. And these plane suppliers may not feel that demand bump until 2025. The few tailwinds the industry got in 2020 quickly evaporated as infections and hospitalizations repeated in waves.
For investors who focus on value, these stocks could be bargains. Of course, the skies aren’t exactly clear ahead. What are their flight plans? We examine which airplane manufacturer can fly higher for its investors.
Is Boeing Stock A Buy?
Boeing stock crashed a year earlier than the rest of the airline industry. That’s because its 737 MAX airplane was involved in a series of crashes itself. That led to investigations into its automatic piloting system and possible aviation code violations.
Then the pandemic hit, and Boeing’s stock price plummeted. Airports around the world were shut down by global quarantine orders, and airlines slashed orders scheduled for the next five years in response.
However, Boeing stock started climbing back up by year end. It recovered much of the value it lost before; about two thirds of its pre-pandemic pricing approaching $350 per share. Some bullish investors see it as a bargain under $250 because of the company’s lucrative government contracts.
Commercial airplanes only represent one revenue source, albeit an important one. Its defense, space, and security units still supply global customers. This includes orders of satellites, weapons, and military aircraft, like the U.S. Army’s Apache helicopters.
Should a war break out before the economy recovers, Boeing could profiteer.
Airbus Hurt By International Travel Restrictions
Like Boeing, Airbus serves the commercial airline industry, along with defense and space, including helicopters.
It also has a plethora of subsidiaries and joint ventures. Unlike Boeing, Airbus didn’t spend 2020 embroiled in controversy over its products.
Still, the Airbus share price couldn’t avoid following the same flight path as Boeing’s. It crashed from the $40 range to a 52-week low of $12.80.
While it was a slow to recover, it returned to the $25-30 range by year end. This puts it at about three quarters of the way to its pre-pandemic trading price level.
The company’s A320 NEO competes with Boeing’s 737 Max for narrow-body domestic flights. These are expected to return to pre-COVID norms before international flights. This is because each country is dealing with travel restrictions placed on those traveling from other countries.
Investors who believe in the airline industry’s recovery and growth over the next five years may like Airbus over Boeing. It’s a simple matter of Boeing’s reputation being tarnished by the 737 Max scandal. However, there is good reason to have trepidation about investing in any airline-related stock in the near future.
Boeing Stock Faces Headwinds
We still don’t know when the economy will return to normal. Although a vaccine is rolling out, each state has its own travel restrictions. This puts a lot of travelers off, and total traveler throughput remained under one million throughout December. Comparable numbers for 2019 were about two million, according to the TSA.
This puts a bottleneck on travel and has bearish analysts wondering if it will be another year or more before travel returns to normal.
On top of this, the lack of international travel hinders Boeing’s ability to showcase its latest 777x aircraft’s reliability. This puts the company’s reputation in a stalemate status, despite partnering with airlines like Southwest (LUV) to showcase its airplane in a better light.
Boeing needs to spend a lot of money on marketing over the next few years to return public confidence in its products. In the meantime, it gives an open lane to competitor Airbus to take over the market by increasing its sales revenue in a much smaller market than either is used to competing in.
Dangers Of Investing in Airbus
Like Boeing, Airbus is dependent on an economic recovery to succeed. And that’s unlikely to happen until late in 2021.
The time between the November election and end of year showed a lot of uncertainty. Two vaccines were announced and authorized for emergency use by January.
Still, infection numbers continue to rise across the United States. That has winter travelers worried, and Christmas, like Thanksgiving, is likely to be a virtual affair for many enjoyed over Zoom (ZM).
And just because Airbus hasn’t had any major accidents doesn’t mean it’s immune to such calamities. With air travel so limited, any issues will be accentuated and likely highlighted in the news for a long time. Any airline or manufacturers involved can expect to have their brands deservedly dragged through the mud.
There’s also the worry of Brexit and other issues facing the E.U. that could cause problems for the manufacturer. Should Europe enact excessively stringent regulations, it could provide an advantage to the U.S.-based rival.
Airbus Vs Boeing Stock: The Bottom Line
Airbus and Boeing are two of the biggest airplane manufacturers in the world. Each company’s market capitalization followed a similar flight path in 2020, and they’re likely to continue somewhat mirroring each other. But that’s not necessarily guaranteed – Boeing has a scandal to recover from, and differences in regulation could separate them.
Each has revenue sources coming from military and space uses. This provides much-needed income while the airline industry struggles. There’s no telling how long it will take for commercial airlines to return to former flight volume levels. Government travel restrictions will likely extend into the second quarter of 2021 at least.
If you’re bullish on the airline industry’s recovery, this could be as good a time as any to take a leap of faith.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.