It has been a long haul, but it looks like we have landed back at where we started.
Before the pandemic, shares in Airbus — a member of the Paris bourse’s CAC 40, the Dax 40 in Frankfurt and Deutsche Börse’s Euro Stoxx 50 — were changing hands at just shy of €140 each. Before this Christmas just gone, Airbus stock passed that all-time high of early 2020 and started 2024 above €140.
Symmetrically, the company is expected to report revenues for 2023 in excess of €64 billion. That would be a little over the record €64 billion it reported for the Covid-undisturbed year of 2019.
Airbus is the European champion of the global aerospace industry, valued at €111 billion on the stock market. A nexus of the industrial and political interests of France and Germany, it has a strong, embedded presence in Spain and Britain, too.
In the UK, it directly employs more than 10,000 people, manufacturing wings for commercial jetliners and military transporter aircraft, developing future aerospace technologies and leaning in on this country’s space research capabilities. Rolls-Royce and GKN Aerospace are dependent on Airbus’s wellbeing.
Britain used to have a tangible 20 per cent ownership stake in EADS, Airbus’s forerunner company. That was held by BAE Systems, but was relinquished when BAE chose to pivot towards the United States and concentrate on defence. BAE and Airbus remained close collaborators on the Typhoon jet fighter, but not on the stealth combat jets of the future, such as Britain’s Tempest programme, a victim of post-Brexit tensions.
In commercial aircraft, Airbus has always had one arch-rival: Boeing. Their duopoly, in recent history a neck-and-neck tussle in annual deliveries, has become lopsided as the American group’s single most important aircraft, the Boeing 737 Max short-haul competitor to the Airbus A320-A321 family of jets, has been dogged by fatal crashes and safety and production problems. The deliveries outcome for 2023 will end up something like Airbus 721, Boeing 449.
Commercial aircraft account for about 70 per cent of the business of Airbus, the rest split between helicopters, space and defence. As such, the investment case for Airbus hangs on whether it can not only deliver the aircraft that have been ordered but also continue to win new orders.
The consensus of analysts’ opinion reckons that Airbus will deliver more than 800 aircraft this year, rising to over 950 in 2025 and reaching nearly 1,100 in 2026. Over the same period, analysts generally reckon Airbus’s annual revenues will increase by at least 40 per cent to top €90 billion.
Underpinning this theory is a backlog of pent-up demand, not only from delayed deliveries during the pandemic but because airlines need to ditch their dirty, expensive gas-guzzlers and invest in cleaner, more efficient jets.
Yet, if we know anything about the aerospace and aviation industry, it is that anything can and does happen. Experienced airline bosses always joke that a year without some form of crisis somewhere simply doesn’t happen. Few foresaw the impact of a global pandemic; Airbus made a substantial bet on the A380, a double-decker, four-engined superjumbo, which it no longer makes; who knew that in the past Airbus had developed markets and customers through bribery and corruption? There is not a significant aircraft-type that has not had a production schedule diverted and delayed by manufacturing or operational or engine issues. Fatal collisions, like that at Haneda airport in Japan, always raise questions.
And all that is before considering the extraordinary challenges the industry faces from decarbonisation and the future profile of international travel.
All these known unknowns are outweighed, according to analysts at Bank of America, for instance, by the dominant position of Airbus. It reckons Airbus is on a trajectory to become a €200-plus share stock. Holders of Airbus shares will be more than satisfied by a 23 per cent appreciation in the shares over the past 12 months, putting the stock on a multiple of 20 times this year’s projected earnings. Continuing to hold would seem sensible, so long as you are prepared to buckle up for the ride.
Advice: Hold
Why: Strong market position and pent-up demand.
JD Wetherspoon
It’s already been a landmark month for Tim Martin (Dominic Walsh writes). The chairman and founder of JD Wetherspoon has launched a January sale at more than 800 of his company’s pubs and was knighted in the new year honours for his “services to hospitality and culture”.
Ever since he founded the business in 1979, he has followed the simple formula of selling food and drink as cheaply as possible with the aim of luring as many customers as possible into his pubs. The prices on offer over the next fortnight include a pint of Bud Light or Doom Bar at £1.99, a bottle of non-alcoholic Beck’s Blue at £1.49 and Lavazza coffee or tea at £1.29.
With inflation pushing up the price of a pint in the past couple of years, Martin must have wondered whether the foundations on which he had built one of Britain’s biggest pub chains were at risk. But even for the king of discounting, those January sale prices fall into the cheap-as-chips category, especially as the offer also includes food. A small breakfast will cost £1.99 and a burger and chips with an alcoholic drink will cost £6.46.
Inevitably, there has been no shortage of carping at the appointment of Sir Timothy Randall Martin as a knight of the realm, with many claiming it was a reward for his support for Brexit. Yet Martin has done more than almost all his rivals to shelter his customers from the cost of living crisis and for that alone he deserves the gong. He has also rescued numerous historic buildings from the at-risk register, another worthy chapter in the Wetherspoon story.
At the age of 68, Martin shows no sign of hanging up his boots, not least because he already does what he would do if he retired: visit pubs. But if he were to decide that, with a knighthood and £250 million of shares tucked away in his back pocket, the time had finally come, then he’d be leaving on a high, especially given the 13 per cent jump in like-for-like sales recorded by the Hospitality Business Tracker for the top operators over the week leading up to Christmas.
Advice Buy
Why Wetherspoons has proved its resilience even amid a wider economic malaise, though if Martin were to retire the share price would undoubtedly suffer.