Stock Spotlight on Airbus

FILMED IN MARCH 2026

Andy Headley from Veritas explains why Airbus is such a compelling stock with its high demand products, good growth and strong cash generation.

Transcript

I'm Andy Headley, I'm a professional stock picker, and this is why we've invested in Airbus for the Alliance Witan portfolio.

Airbus manufactures airframes for commercial aircraft, helicopters and military equipment. The largest part of the business is its commercial airframes business, where it makes everything from the smallest A220 up to the wide body A350 and everything in between. Its most popular product is the A320, which is the workhorse of commercial airlines. It also makes helicopters and very successfully, is the largest helicopter producer in the world. And finally, it is the largest EU defence contractor, making things like jet fighters and military cargo planes.

For the commercial airframe business it's a massive opportunity. There are only two airframe manufacturers, Boeing and Airbus, and many airlines require their airframes. What we see is that both Boeing and Airbus have an order book, which will last them for around ten years of production. That's the demand that we're seeing from commercial airlines for these new, more fuel-efficient aircraft.

Within helicopters the order book is slightly shorter, but still very large demand. What we're seeing in defence is now a large pickup in demand, particularly with the EU, where we're seeing that the EU governments are all coming together to increase their military spending. As the largest EU defence contractor, that's really positive for Airbus and we're seeing their order book increased significantly as a consequence of that.

Airbus has very strong growth behind it as we see the number of people wanting to travel on aircraft increases every year, something between 4 and 5%, which is a great tailwind for a company like Airbus. At the same time, they are by far and away the best producer of narrow-body aircraft. The A320 is perceived by most people in the industry to be much better than the Boeing 737. So this is a company that has very strong demand growth. The question for them is really can they produce the planes that are demanded. And so this is a question of operational execution in terms of production.

Now we think that over the next 3 or 4 years we will see very robust revenue growth and at the same time margins will expand. So we'll see even faster profit growth. So we see Airbus as a global duopoly with the best product, good growth, high cash generation and a very compelling valuation.