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Investing.com -- Bernstein said it sees minimal risk to global airline profitability, supported by strong traffic trends, a tight delivery pipeline from aircraft manufacturers, and sustained demand in the engine aftermarket.
Both original equipment (OE) production and aftermarket services are set for growth. Airline traffic remains solid globally, particularly in Asia-Pacific ex-China, with available seat kilometer (ASK) growth of 5-6% this year expected to absorb most aircraft deliveries through 2026.
Operating profits were better year-on-year for most North American and Asian carriers in Q4 and Q1, according to Bernstein, adding that while European low-cost carriers were weaker in Q1, there is no reason for concern, especially with heavy maintenance backlogs at MRO shops.
The analyst sees strong demand outpacing supply at Airbus and Boeing (NYSE:BA), constrained by production challenges including supply chain issues and prior shutdowns on models such as the 737 MAX and 787.
Boeing is seen to have more near-term upside due to its recovery trajectory, while Airbus faces pressure to meet second-half 2025 delivery targets for the A320 and A350.
In the engine aftermarket, high utilization rates for CFM56 and V2500 engines are driving demand for life extensions and spares.
Despite over 600 A320 family aircraft with grounded Pratt & Whitney GTF engines, Bernstein expects capacity constraints to ease as more repair shops come online.
The firm also flagged that large Airbus orders, particularly from China, could be announced at the upcoming Air Show, while the focus for Boeing will be on its progress in production recovery.
Overall, Bernstein remains constructive on the commercial aerospace cycle, citing robust fundamentals across OE, aftermarket, and airline profitability.