Investor Essentials Daily

Boeing’s recent failures could  propel this name’s prospects

May 23, 2024

In January 2024, Alaska Airlines Flight 1282 experienced a failure causing a panel to detach from the aircraft, leading to an emergency landing. This incident led to a criminal investigation into Boeing and a compensation payment of $160 million to Alaska Airlines.

In May 2024, a FedEx Boeing 767 had a landing gear malfunction in Istanbul, leading to another investigation, further damaging Boeing’s public image.

These issues may push airlines towards third-party maintenance providers like FTAI Aviation (FTAI), which is poised to benefit from increased demand for both engine and airframe maintenance services.

FTAI’s expansion into broader MRO services could capture more of the aftermarket spending, potentially increasing its market share while Boeing faces ongoing challenges.

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In January 2024, Alaska Airlines Flight 1282 experienced an in-flight failure that caused a door-sized panel to blow off the side of the Boeing 737 MAX 9 aircraft shortly after takeoff. The plane made an emergency landing in Portland.

This incident prompted the U.S. Department of Justice to open a criminal investigation into Boeing (BA). Boeing later paid Alaska Airlines $160 million in compensation for lost revenue and other costs related to the failure.

In May 2024, a FedEx Airlines Boeing 767 cargo plane landing in Istanbul was forced to land without deploying its front landing gear. An investigation was launched but the cause had not been determined.

These high-profile incidents continue to damage public perception of Boeing aircraft.

Boeing’s reputation issues may cause some airlines to be more cautious about relying solely on Boeing’s own maintenance support.

This could drive increased demand for third-party MRO providers like FTAI Aviation (FTAI).

FTAI is already a leading independent provider of CFM56 engine MRO services. It has fixed-rate contracts and programs to minimize customers’ costs.

FTAI also has long-standing relationships with engine original equipment manufacturers (OEMs) like CFM International and Pratt & Whitney, allowing it to provide services across the entire fleet of an engine model.

With its global network of MRO facilities and aviation maintenance experts, FTAI is equipped to take on additional engine overhaul and repair work.

Boeing’s issues could also drive new opportunities in airframe MRO.

While primarily focused on engines currently, FTAI has explored expanding into base maintenance for narrowbody and widebody aircraft.

Leveraging its relationships and reputation, FTAI can pursue third-party airframe MRO contracts. Airframe MRO typically provides higher margins compared to engine services alone.

With the in-service fleet of Boeing aircraft continuing to grow older, demand for both engine and airframe maintenance is expected to remain high.

FTAI’s expansion into airframe services could allow it to gain an even larger share of this lucrative aftermarket spending.

While posing near-term challenges for Boeing, its safety issues may end up creating a significant growth opportunity for FTAI to further establish itself as a leading independent MRO provider across engines and aircraft.

Best regards,

Joel Litman & Rob Spivey

Chief Investment Strategist &
Director of Research
at Valens Research

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