A Trade Deal Lifeline for Aerospace
The newly struck U.S.–EU trade framework, announced July 27 in Scotland, imposes a 15% general tariff on EU goods but importantly excludes aerospace products, including aircraft, components, and engines. This exemption provides urgent clarity and relief to aerospace manufacturers like Airbus (AIR.PA)—helping avert supply chain disruption and delivery delays.
2. Airbus at a Glance
- Ticker: EURONEXT Paris: AIR.PA
- Price (July 31 Close): €138.20 (up ~3% since deal announcement)
- Market Cap: ~€75 billion
- 2025 Q1 Revenue: €13.54 B (+6% YoY)
- EBITDA: €624 M (+8% YoY)
- Net Income: €420 M estimated for Q2 quarter
- Free Cash Flow: Positive; burn slower than expected
- Dividend Yield: ~1.5%
- P/E: ~17x forward
- Key Drivers: Strong backlog, aircraft ramp-up (A320neo/A350), resilience in defense budgeting
3. Market Reaction & Macro Context
Following the accord:
- Stoxx 600 Aerospace & Defense Index rose ~1.9%, led by Airbus and Safran.
- Aerospace received a net positive from the broader deal, offsetting impacts on autos and pharmaceuticals. Morningstar+15Reuters+15The Wall Street Journal+15
- By contrast, sectors still subject to the 15% tariff (autos, pharma, semis) remain under pressure. Yahoo Finance+15thetimes.co.uk+15Reuters+15
4. Impact Analysis: Why Airbus Benefits
- Zero-Tariff Exemption: Critical materials and final jets are exempt, preserving pricing structure and minimizing cost pass-through to customers. ReutersBusiness InsiderReuters
- Delivery Predictability Restored: Airlines had postponed delivery plans over tariff uncertainty—many are now rescheduling.
- Capex Visibility Returns: Defense and aircraft orders remain steady; Airbus reaffirmed stable full-year guidance. bloomberg.com+5Business Insider+5Investing.com+5
- Global Growth Outlook Intact: Airbus raised 20-year demand forecast to ~43,420 jets—slightly revised upward despite macro risk. Reuters+1en.wikipedia.org+1
5. Technical & Valuation Snapshot
- Support Levels: €135–136
- Resistance: €142, next resistance at €150 (52-week high)
- Relative Strength Index (RSI): ~55 (Neutral)
- Valuation: 17x forward earnings; strong free cash flow (FCF) and modest dividend (~1.5%) keep investor confidence steady.
6. Risks & Near-Term Catalysts
Risks:
- If tariff rules exclude certain aerospace inputs or components.
- Slower-than-expected recovery in airline traffic or new aircraft financing volatility.
- Potential escalation in non-aerospace tariffs affecting broader EU-GDP (~–0.3% growth). New York Post
Catalysts:
- Confirmation of zero-tariff exemption for aircraft deliveries in formal legislation by Aug 1. skift.com
- Upcoming Q3 orderbook updates or production ramp confirmations.
- Renewed Airbus-Boeing WTO truce talks could improve sentiment for aerospace valuations. Reuters
7. Scenario Outlook: 3 Paths Forward
| Scenario | Price Target | Trigger Conditions |
|---|---|---|
| Bull (~25%) | €150–155 | Firm tariff relief, traffic momentum, strong deliveries |
| Base (~55%) | €140–145 | Delivery stability, moderate macro gains |
| Bear (~20%) | €125–130 | OTA delays, airline demand softness, carrier order pull-back |
8. Bottom Line: A Trade Spike That Airbus Avoided
Airbus emerges as a standout winner in recent trade negotiations. Its tariff exemption and robust demand indicators deliver an earnings buffer—and possibly positive differentiation—compared to slow-moving sectors still facing tariff drags. Execution on deliveries and order momentum will dictate next-phase valuation re-rating.