On February 12, 2026, the U.S. Environmental Protection Agency (“EPA”) finalized the single largest deregulatory action in U.S. history, rescinding the 2009 Obama-era ‘Endangerment Finding’ and eliminating Federal greenhouse gas emission (‘GHG’) standards for motor vehicles and engines.[1] Using models utilized by previous administrations, the EPA determined that even if the U.S. were to eliminate all GHG emissions, there would be no material impact on climate change. The change clearly favors the use of fossil fuels (e.g., coal-fired power plants) and eliminates the need to incur high regulatory compliance costs. On February 20th, the Supreme Court ruled (6-3) that the Administration’s ‘Liberation Day’ tariffs were not allowed under the 1970 International Emergency Economic Powers Act.[2]
Aero OEM supply chain bottlenecks continue. Engine shortages caused by persistent Pratt & Whitney reliability issues continue to plague the PW1000G Geared Turbofan (GTF) used on Airbus A320 family airframes. At the end of 2025, about a third of the global A321 fleet was grounded. At the recent Singapore Air Show, Jeffrey Lam, COO of ST Engineering (the world’s largest airframe MRO service provider), said: “Lead times for components and material orders stretch over a year. Even trying to place early orders cannot address the problem, as the shortage is worldwide.” Gael Meheust, President & CEO of CFM International, added: “Supply chain issues are being compounded by incredible demand from airlines and lessors.” Airbus CEO Guillaume Faury at Airbus’ February 10th Q4 and full year earnings call: “We know Pratt is facing a number of challenges, but we are not happy. We’ll continue to work to enforce our contractual rights.” A single upgraded PW1000G engine is worth upwards of $22 million. As Spirit’s bankruptcy demonstrates, an airframe’s engines may be worth more than the airframe, and leasing the engines may bring in more than leasing the aircraft. Even older engines, when retired, are parted out for serviceable ‘green time’ material or repurposed to power data centers.
For the first six weeks of 2026, U.S. railroads reported cumulative carload volume of 1,297,249, a 3.4% gain over the same period last year. For the same period, combined traffic (including intermodal) was up .4% from 2025.[3] Railcar scrapping is outpacing new deliveries, resulting in overall fleet contraction. Fourth quarter railcar deliveries surprised with upside totaling 8,224 units; 2025 full year railcar deliveries were over 31,000 cars. As CEO Robert Lyons said during GATX’s February 19th earnings call: “Demand for existing railcars remains solid.”[4] UP and NS notified the Surface Transportation Board they will refile their merger application. Expect STB approval to require operating concessions and restrictions on the conduct of the combined business.
Core prices as measured by the Fed’s preferred Personal Consumption Expenditures Price Index (‘PCE”) remain above the Fed’s 2% target. The Bureau of Economic Analysis’ 2025 Q4 advance estimate of GDP growth was 1.4%, down from 4.4% in Q3. Speaking on February 11th, Kansas City Fed President Jeffrey Schmid reaffirmed his resistance to further interest rate cuts, arguing inflation would remain too high, saying: “The economy is entering 2026 on a strong footing.” With demand driving AERO OEM backlogs and continuing supply chain issues, lease rates for mid-life aircraft will remain above historic norms. Elevated engine values are driving further opportunities.
In an environment dominated by unexpected event risk, Aero and Rail economics remain strong. Investigate investment opportunities. Call RESIDCO.
Glenn Davis 312-635-3161
[1] State, Clean Air Act, and International mandates remain.
[3] Rail Traffic Uptick for Week 6, Railway Age, February 18, 2026.
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