With rising affluence levels helping to power traveller appetite the world over, the long-term picture for civil aircraft demand remains as perky as ever. While galloping passenger numbers are helping to power profitability across the airline industry, carriers are also benefitting from collapsing fuel costs, a situation that is giving aeroplane orders a further shot in the arm.
The fruits of these phenomena were highlighted again by planebuilding giant Airbus just this week. The French company advised that Indian budget airline IndiGo had agreed to purchase 250 of its A320neo aircraft, the single largest order by number of aircraft ever received by the manufacturer. The deal is worth approximately $26.5bn — Airbus’ second biggest order by value — and is part of the steady fleet-building trend currently being witnessed across emerging markets.
Engine orders rolling higher
Such news is great news for the likes of Rolls-Royce (LSE: RR), of course, a top-tier engine and parts supplier for Airbus and its US rival Boeing. The company’s Trent engine is widely considered the benchmark in the business of power unit design, helping Rolls-Royce to ink huge deals with Ethiopian Airlines and Saudi Arabian Airlines for unit and service sales since June alone.
And these deals follow Rolls-Royce’s mammoth $9.2bn contract with Emirates back in April to supply Trent 900 engines — as well as TotalCare maintenance packages — to 50 Airbus A380 aircraft from 2016. These deals helped Double R’s Civil Aerospace order book march 5% higher during January-June, to £66.4bn.
Massive investment boosting the high flyers
But Rolls-Royce is not the only London-listed benefitting from blasting aircraft demand. Fellow flying specialist Senior (LSE: SNR) generates around 40% of total revenues from the commercial aerospace segment, and is a critical parts supplier to all of the world’s major engine builders, including Rolls-Royce.
And plans to open new facilities from Thailand to South Carolina, USA in the coming months underline Senior’s strength in the civil market, not to mention positive outlook for the industry. And it is certainly not alone in this regard, with Meggitt (LSE: MGGT) also putting its money where its mouth is in recent weeks — the company agreed to buy Cobham’s (LSE: COB) advanced composites operations for $200m earlier in August.
Meggitt describes the new unit as “global leaders in the design, development and production of highly engineered aerospace composite engine components,” as well as radomes and a variety of other complex secondary structures. The Dorset business saw total sales at its Civil Aerospace arm tick 5% higher during the first half, and its latest acquisition is expected to keep custom from key manufacturers ticking comfortably higher in the years ahead.
