Global Aerospace & Defense: Top 12 Takes from The Farnborough Air Show

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Global Aerospace & Defense: Top 12 Takes from The Farnborough Air Show

s is no surprise, but channel checks emphasized 3

interesting points: (1) targets of 3-10x growth in production by program are likely to

prove low because these forecasts do not incorporate international demand, so as

'framework agreements' are definitized, the supply chain is already being asked to

ramp even higher to satisfy allies' needs, (2) solutions for scalable hypersonic

missile production are being requested, and (3) supplying into emerging affordable

mass designs may be a bigger opportunity than initially thought. We continue to

believe that Missile Defense/Munitions Replenishment are themes that will exceed

expectations for years to come.

8) Positive secondary market trends supportive of aircraft lessors. In particular:

(1) a continued, favorable supply/demand mismatch in the secondary market

driving lease rates higher across a wide range of aircraft types, (2) among

narrowbodies, notable strength in the A321neo and 737MAX, (3) among

widebodies, even greater strength in the A330neo and 787 families of aircraft, (4) a

belief among lessors that existing production outlooks across the OEMs are

unlikely to be a meaningful headwind to secondary market trends until the end of

the decade, and (5) the view that a lack of customer support will dissuade airframe

OEMs from pursuing new clean sheet designs this decade. In totality, these

channel checks were not only positive for AER, but also much of our aerospace

coverage.

9) Are 737 -7 and -10 certifications imminent? Suppliers to whom we spoke

expressed a tremendous amount of confidence in rate increases at BA in the

short/medium-term. Suppliers also felt that events supportive of BA’s case for