Through the first 29 weeks of this year (ended July 20), the Association of American Railroads reported North American rail volume up 2.3%. United Airlines CEO Scott Kirby reports passenger demand is picking up: “The world is less uncertain today than it was during the first six months of 2025 and that gives us confidence.”[1] Delta also predicted a stronger second half after reporting a $2.4 billion profit for the first half of 2025 (United reported $1.4 billion).
Aero OEMs continue to face supply chain component disruptions, leading to shortages in engines, airframe structures, cabin systems, and skilled labor. In June, Boeing and Airbus delivered more aircraft than in the previous month: Airbus delivered 63, up from 51 in May. Boeing delivered 60, exceeding the 45 delivered in May (Boeing finally reached its FAA-approved production rate of 38 737 MAX aircraft in May). Boeing’s current backlog equates to approximately 11.6 years of output, Airbus’s 10.7 years. Airbus remains in a stronger position in terms of production and deliveries, but continues to struggle to meet delivery targets. Airbus recently added an A320neo final assembly plant in Mobile, Alabama, which is expected to be operational sometime in the third quarter of this year. As of June 30, Airbus has delivered 306 commercial aircraft, and Boeing, 280. Delayed new equipment deliveries continue to force air carriers to keep their fleets in service longer. Nearly 90 to 95% of expiring aircraft leases are being renewed, up from a 30% to 40% renewal rate just a few years ago.[2] In an April meeting with President Trump, Larry Culp, CEO of GE Aerospace, advocated: “We support promoting free and fair trade, including the duty-free environment that has long fueled the US aerospace sector, leading to more than 1.8 million US jobs and a $75 billion annual trade surplus.” In May, the US-UK trade agreement followed, eliminating tariffs on the aerospace sector. It’s a strong framework for future trade agreements. Then on July 27th, after negotiations in Scotland, the U.S. and EU announced a preliminary 15% baseline tariff on most goods and a zero tariff agreement on aircraft and parts.
Lessor-owned railcar fleets are operating at utilization levels in the high nineties. With attrition exceeding new builds, the national fleet is shrinking. Railcars in storage are at the low end of their most recent range, approximately 295,000, below 19% of the total fleet. Expected new railcar deliveries for the year start at 35,000 units. Lower industry new builds and active scraping have increased the average railcar fleet age to 20.3 years. Lease rate renewals remain strong.[3] The new tax bill’s bonus depreciation will lower the after-tax cost of new equipment. Still, it’s the direction of interest rates, and the impact of steel and component pricing that will influence near-term railcar demand. A transcontinental railroad? The merger announced between the Union Pacific and Norfolk Southern is expected to improve rail service by reducing interchange delays. It will face Surface Transportation Board review and a public comment period. If approved, it is expected to close in early 2027.
The U.S. economy grew at a seasonally and inflation-adjusted 3.0% annual rate in the second quarter. Prices (excluding food and energy) rose an annualized 2.5%. Weak manufacturing and housing investment are expected to slow the 2nd half. Interest rate reductions remain a possibility if progress towards the Fed’s 2% inflation target is made, and the labor market weakens. With the tax bill behind us, clarity on tariffs emerging, deregulation ahead, and bonus depreciation (100% for property acquired after January 19, 2025), secondary market Aero and Rail activity will increase. The investment outlook is improving. It’s time to adapt. Make the most of current Aero and Rail opportunities. Call RESIDCO.
Glenn Davis 312-635-3161
[1] The Wall Street Journal, July 17, 2025.
[2] GE Aerospace, CFO Rahul Ghai, July 17, 2025, Earnings Call.
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