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October 2023

Aircraft demand soaring, but Airbus yet to fly past pre-pandemic high

In 2020, shares in Airbus SE fell by almost two-thirds1 when global travel activity stalled during COVID-19 lockdowns. Owning shares in the French manufacturer of planes and helicopters looked like a terrible idea at the time.

Beneath this gloom was an investment opportunity. In late 2021, PM Capital bought shares in Airbus, believing it had fallen too far. We saw a quality, undervalued company caught in the fog of market fear. 

In the short term, we thought Airbus would make a full recovery after COVID-19 as cities reopened and travel demand rebounded. As more people flew again, airlines would need to increase their capacity by ordering more planes.

Longer term, we liked Airbus’ position in a structurally attractive market. Airbus leads the world’s largest duopoly (aircraft manufacturing) and continues to increase its share as airlines order more Airbus planes than Boeing planes.

The world will need 40,850 new passenger and freighter aircraft deliveries over the next 20 years, Airbus estimates.2 Most of these will be single-aisle airplanes, a market Airbus dominates. 

Almost half of this aircraft demand will come from Asia.3 As incomes in the region rise, middle-class consumers will want to travel overseas. Airlines will have to order many more planes, potentially creating decades of growth for Airbus.

Airbus is also growing through innovation. Its next-generation aircraft are more fuel-efficient due to lightweight materials and electric-hybrid power. For airlines, that means lower costs, scope to fly extra routes and higher plane demand.

Yet for all these strengths, Airbus traded on a valuation of 12 times normalised earning when PM Capital bought its shares in 2021. That’s low for a company of Airbus’ quality – and another example of the market over-reacting to bad news.

In the past two years4, Airbus shares have rallied as it reports strong demand for aircraft.5 But its share price is still below the pre-pandemic high. It won’t all be clear skies for Airbus, but its valuation can climb higher this decade. 

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Notes and references

1Peak to trough
2Airbus, (2023). “Global Market Forecast 2023-2042.
3Ibid. China will need 9,440 new plans and the Asia Pacific (excluding China) will need 9,480.
42022 and 2023 year-to-date
5Airbus (2023), “Airbus reports Half-Year (H1) 2023 Results”. 


This insight is issued by PM Capital Limited ABN 69 083 644 731 AFSL 230222 as responsible entity for the PM Capital Global Companies Fund (ARSN 092 434 618), the PM Capital Australian Companies Fund (ARSN 092 434 467) and the Enhanced Yield Fund (ARSN 099 581 558), the "Funds". It contains summary information only to provide an insight into how we make our investment decisions. This information does not constitute advice or a recommendation, and is subject to change without notice. It does not take into account the objectives, financial situation or needs of any investor which should be considered before investing. Investors should consider the Target Market Determinations and the current Product Disclosure Statement (which are available from us), and obtain their own financial advice, prior to making an investment. The PDS explains how the Funds' Net Asset Value are calculated. Past performance is not a reliable guide to future performance and the capital and income of any investment may go down as well as up.