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Stock Analyst Update

Expect Boeing to Steal the Show in Paris

The wide-moat company will reveal details on its new midsize airplane and formally launch the 737 MAX-10 at next week's Paris Air Show.

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We’re attending the Paris Air Show next week. Between Airbus and  Boeing , we expect the latter to generate the headlines, revealing details on its new midsize airplane, or NMA, and formally launching the 737 MAX-10. The NMA will fill the gap between the 737-9/10 MAX and 787-8, and we think creating a reasonable business case remains a key challenge for Boeing, given a limited market for the plane. In addition, aircraft operating costs need to match narrow bodies, a tough task for Boeing’s engineers. We believe an informal NMA launch at the show could weigh on Boeing shares. In contrast to Boeing, we’d be surprised to see any significant new Airbus product announcements.

We’d be surprised if sales at Paris come in higher than the 742 commercial aircraft orders and commitments (Boeing and Airbus combined for 286 firm orders) at the Farnborough Air Show last year, and we think wide-body orders will be particularly slow. However, the MAX-10, which represents Boeing’s gambit to compete with the dominant Airbus A321neo, may stimulate orders. Rumors point to Lion Air (an Indonesian carrier with over 200 737 orders on the books) as the MAX-10 launch customer.

Turning to lower-end narrow bodies and to regional jets, we still think the Bombardier C Series needs more orders. Just one year ago, the program seemed to be enjoying significant momentum following Delta and Air Canada orders. However, the aircraft has failed to garner significant orders since, and we see open production slots emerging as early as 2020. Given the thinning backlogs Embraer faces for its regional aircraft, additional E-jet orders would be a welcome development at the show.

Finally, we’re also expecting aircraft manufacturers to expound on opportunities they see in the aftermarket. Facing an order slowdown, Boeing, Embraer, and Airbus have begun more aggressively pursuing opportunities in the services realm, but the path to capturing significant growth remains challenging in our view.

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Chris Higgins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.