Paris airshow set for new jet orders despite conflict, tariff gloom

The Paris Airshow is set to proceed with major aircraft order announcements from manufacturers like Airbus and Boeing, despite ongoing challenges including U.S. tariffs, geopolitical conflicts, and fragile supply chains; Airbus is expected to secure key Saudi orders and faces competition from Embraer, while Boeing anticipates finalizing a fleet deal with Royal Air Maroc. Civil and defense firms, including Lockheed Martin and Raytheon, are navigating the repercussions of trade uncertainties and escalating military spending, particularly in Europe, which is driving demand for drones and next-generation fighter jets, potentially reshaping the global defense landscape.

Analysis

The Paris Airshow is anticipated to feature significant aircraft order announcements, with Airbus poised for key Saudi deals and facing competition from Embraer for a potential 100-jet AirAsia order, while Boeing is expected to secure a fleet agreement with Royal Air Maroc, albeit with a quieter overall presence due to prior major orders. This commercial activity unfolds against a backdrop of considerable headwinds for the nearly $1 trillion global aviation and defence industries, including U.S. tariffs that industry sources anticipate may persist at 10%, escalating geopolitical conflicts, and pervasively fragile supply chains. Airbus' planemaking CEO, Christian Scherer, highlighted this "uncertainty," particularly for tier-2 and tier-3 suppliers still recovering from post-COVID disruptions. The war in Ukraine and Middle East tensions are directly impacting operations through airspace disruptions, rerouted traffic, and increased insurance costs. Concurrently, these geopolitical shifts are fueling a substantial increase in European defence spending, with nations like Germany, Poland, and Britain augmenting budgets for air defence, drones—including low-cost, expendable models proven effective in Ukraine—and next-generation fighter jets. This trend, as noted by Byron Callan of Capital Alpha Partners, could reshape the global defence landscape, potentially favoring European manufacturers as AI-powered systems gain traction and political alliances evolve. Environmental concerns, though typically prominent, appear relatively muted this year, with manufacturers emphasizing the immediate emissions benefits of current-generation aircraft, which burn at least 15% less fuel, despite ongoing delivery delays caused by supply chain issues.

Key Decisions for Investors

• Monitor closely the magnitude of commercial aircraft orders secured by Airbus (competing with Embraer) and Boeing at the Paris Airshow, but weigh these against ongoing supply chain vulnerabilities and geopolitical tensions that could affect production schedules and profitability.
• Assess opportunities within the defense sector, particularly for companies involved in drone technology, AI-powered systems, and air defense, which are benefiting from significantly increased European military budgets and a strategic shift towards enhancing regional industrial capacity.
• Scrutinize companies' exposure and mitigation strategies related to enduring U.S. tariffs and persistent supply chain fragility, as these factors are critical determinants of operational resilience and financial performance in the current aerospace and defense climate.
• While near-term environmental initiatives appear less emphasized at this event, maintain a long-term view on industry commitments to sustainable aviation fuels and next-generation aircraft, as these will be crucial despite current development and delivery challenges.