GE Aerospace Soars as Boeing Struggles: A Monopoly in the Making?
The aerospace industry is experiencing a dramatic shift, with GE Aerospace emerging as a dominant force amidst Boeing’s ongoing manufacturing woes. According to Chris Smith, portfolio manager of the Antero Peak Group at Artisan Partners, GE is poised to become a monopoly in the narrow-body aircraft engine market, with its new Leap engine set to power a staggering 80% of all aircraft within the next decade. This comes as Boeing grapples with production delays stemming from the 737 Max 9 door-plug blowout in January, forcing airlines to maintain older aircraft and creating a surge in demand for GE’s products.
Key Takeaways:
- GE’s Leap engine is set to dominate the narrow-body aircraft engine market, potentially reaching a market share of over 80% within the next decade.
- Boeing’s production delays due to the 737 Max 9 door-plug blowout are creating a surge in demand for GE’s engines.
- GE Aerospace is a beneficiary of the growing trend of reshoring manufacturing, as companies bring production back to the United States.
- Aerospace and defense stocks have performed exceptionally well in 2024, fueled by global geopolitical tensions.
- TransDigm, an aircraft components manufacturer, is also benefiting from the growing aerospace market.
A Monopoly in the Making?
Smith’s confidence in GE Aerospace stems from the company’s dominant position in the narrow-body aircraft engine market. The Leap engine, a powerful and fuel-efficient engine, is already powering a wide range of aircraft, including Boeing’s 737 MAX and Airbus’s A320neo. Its success is attributed to its improved fuel efficiency and cost savings, making it a coveted choice for airlines seeking to reduce expenses.
"GE has really effectively become a monopoly with their new Leap engine, which will be on all new narrow-body planes," Smith stated. The sheer volume of new aircraft orders for the Leap engine, combined with the inherent challenges facing Boeing, sets the stage for GE Aerospace to solidify its market dominance.
Boeing’s Stumbling Block
Boeing’s struggles in 2024 have further amplified GE Aerospace’s position. The 737 Max 9 door-plug blowout, a significant production setback, has led to major delivery delays and forced airlines to rely on older aircraft for travel. This unexpected demand for older aircraft models has created a backlog for service and repairs, directly benefiting TransDigm, a leading manufacturer of aircraft components.
With Boeing facing heightened scrutiny and grappling with significant financial losses, the door opens wider for GE Aerospace to capture a greater share of the market. Smith highlights this point, stating, "Delivery delays following Boeing’s 737 Max 9 door-plug blowout in January are forcing airlines to service older aircrafts and are fueling pent-up demand for GE’s products."
The recent drop in Boeing’s share price, down by 34% in 2024, highlights the company’s struggle to regain its footing. Meanwhile, GE Aerospace, with its strong market position and impressive growth, continues to seize the opportunity and lead the way in the narrow-body aircraft engine market.
A Tailwind of Reshoring
In addition to market dominance, GE Aerospace is also riding the wave of reshoring, the movement towards returning manufacturing to the United States. After decades of heavy outsourcing, companies are now increasingly bringing production back home, driven by factors like supply chain security, geopolitical tensions, and a desire to support local economies.
Smith sees this trend as another significant growth catalyst for GE Aerospace. He believes that GE is well-positioned to benefit from this, stating, "You’re seeing manufacturing construction accelerate meaningfully as you have this de-globalization and supply chains coming closer to home."
The Aerospace and Defense Boom
The aerospace and defense industry has witnessed major gains in 2024, with global geopolitical tensions fueling increased demand for advanced technologies and military equipment. This sentiment is reflected in the performance of the iShares U.S. Aerospace & Defense ETF (ITA), which has surged nearly 16% in 2024, hitting new highs.
GE Aerospace, with its dominant market position and strategic focus on reshoring, is poised to capitalize on this growth trend. The company’s stock has soared by 70% in 2024, underscoring investor confidence in its future performance.
The Takeaway: A Shift in the Aerospace Landscape
The aerospace industry is undergoing a paradigm shift, with GE Aerospace emerging as a dominant player. The company’s strategic investments in its Leap engine, coupled with Boeing’s ongoing production woes, have laid the foundation for a potential monopoly in the narrow-body aircraft engine market. Moreover, the reshoring trend and the booming aerospace and defense industry provide further tailwinds for GE Aerospace. While Boeing faces numerous challenges, GE Aerospace is positioned for continued growth and success in the years to come.
