AERO AND RAIL INVESTMENT – ACT WHEN UNCERTAINTY CREATES OPPORTUNITY
With no slack in the system, demand for air travel continues to outpace expectations. Air passenger traffic has grown from approximately 665-677 million in 2000 to 930 million passengers today. Approximately 17.1 million passengers are projected to fly between March 1 and April 30 this year, with Airlines for America estimating roughly 2.8 million passengers in the air every day through the spring travel season. United Airlines CEO Scott Kirby underscored the strength of demand when he announced that March 9th set a new all-time single-day revenue booking record for the carrier – up 36% over the same day in 2025. Delta, American, JetBlue, and Frontier Group also signaled that strong demand is expected to extend well into spring. Global tensions in the Strait of Hormuz and the ongoing Iran-Israel conflict have pushed Brent crude over $100 per barrel. As of late March, jet fuel, which had been forecast in the $2.27–$2.42 per gallon range, is averaging between $3.90 to $4.57 per gallon, roughly double the price of a year ago. Fuel cost escalation will compress airline margins and put pressure on operations (United’s Scott Kirby said the carrier will cut 5% of planned flights as fuel costs surge). Despite struggles to pay TSA agents and disruptions at checkpoints, passenger demand has not softened meaningfully.
New aircraft deliveries continue to lag orders. Lessors with well-maintained, properly configured aircraft are in a strong position. Age, flight cycles, and maintenance status affect valuation, particularly when an airframe is approaching a heavy C-check or an engine is nearing a shop visit. A fresh overhaul or recent engine shop visit improves lease rates and resale values. Cabin configuration and remarketing flexibility also matter as carriers reassess network strategies in the current higher fuel-cost environment. Newer aircraft offer improved fuel burn and lower operating costs, but acquisitions come at a premium to the capital cost of existing equipment.
The Association of American Railroads’ March 6th Rail Industry Overview reported total U.S. carloads averaged 224,737 per week in February 2026 – the strongest February performance since 2019 and up 6.5% over February 2025. For the first two months of the year, carloads totaled 1.76 million, up approximately 92,000 units over the same period last year. Fourteen of the 20 major carload categories posted year-over-year gains in February, led by grain, coal, chemicals, and petroleum products – a broad-based result that reflects underlying economic activity. U.S. intermodal shipments averaged 280,687 units per week in February, the highest ever recorded for that month, and marked the first year-over-year gain for intermodal in six months. The AAR Freight Rail Index, which tracks seasonally adjusted carloads and intermodal shipments in segments most sensitive to broader economic conditions, rose 1.8% in February over January – its third month-to-month increase in the last four months. For rail equipment, these data points support equipment utilization and underpin residual values.
Q4 GDP growth was revised down to 0.7%. February PCE inflation is estimated to have increased 3.0% year over year. Consumer sentiment slipped to 55.5%. March 18th, the Fed held interest rates steady (3.5%-3.75%). Fed policy makers are still expecting a one-quarter-point cut by the end of 2026. With tax cuts supporting investment, the economic backdrop remains strong. Aero demand is holding, and supply remains constrained. For rail, the latest data points to continuing carload freight demand. Both sectors are well-positioned. Portfolio management requires a clear-eyed view of residual values and a readiness to act when uncertainty creates opportunity. Be prepared. Call RESIDCO.
Glenn Davis 312-635-3161
[1] Airlines for America, News Update, February 24, 2026.
[2] March 30, Brent was trading around $107.92 to $108.63 per barrel, West Texas Intermediate at $101.65.
[4] Association of American Railroads, Policy & Economics, Rail Industry Overview, March 6, 2026.
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.
The Surface Transportation Board ‘rejected’ the UP NS merger application (“without prejudice”), stating “Under the law, the Board… must reject the application, and does so without prejudice to Applicants refiling a revised application[1] that remedies the deficiencies identified.” The STB decision was based on the incompleteness of the application and not an indication of how the Board might assess any future revised application. What’s missing? “A full system impact analysis, market share projections[2], and a copy of the entire merger agreement[3], including the submission of any contract or other written instrument that pertains to the transaction.” The application is expected to be refiled.
With improved production discipline, Boeing delivered 600 commercial aircraft in 2025[4], a 72% year-over-year increase from 2024 and the best since 2018. At year’s end, Boeing’s backlog was 6,730[5] aircraft (11.4 years). Airbus delivered a total of 793 units to ninety-three customers last year[6]. At year’s end, Airbus’ backlog was 8,754 planes (11.1 years). OEM airframe order backlogs continue into the early 2030’s. With delivery delays, existing aircraft load factors are reaching record-high levels. The International Air Transport Association (IATA) projects annual load factors of 83.8% for 2026 (which would surpass the 2024 record). Delta’s decision to purchase 30 Boeing 787-10 aircraft, with options to buy an additional 30, signals a bullish long-term outlook (deliveries will not begin until 2031). Delta also entered into an agreement with GE Aerospace to service the GEnx engines selected for the aircraft.
Despite CFM International’s (a joint venture between GE Aerospace and Safran) delivery of 1,802 LEAP engines in 2025 (a 28% year-over-year increase from 2024), engine deliveries and new engine reliability issues have resulted in aircraft remaining grounded. The newer engine designs require more frequent removals and overhauls. Because the designs are new, the aftermarket supply chain has not caught up, resulting in extended shop times of 100-110 days, plus time waiting for a maintenance slot to open. Legacy CFM56 engines are known for their reliability, with average time on wing of 18,000 to 30,000 hours, and with heavy maintenance shop turnaround times shorter (around 70 days). When a spare is needed, engine inventory serves as an operational hedge. With the engine shortage, air carriers are forced to extend leases and keep existing equipment flying. The result? Existing legacy engines are in demand, and increasingly, air carriers do not want to return engines.
Measured by spending, the U.S. consumer market is the world’s largest. The Bureau of Economic Analysis updated its third-quarter estimate for 2025 U.S. GDP to 4.4%[7]. The Federal Reserve Bank of Atlanta estimates real GDP growth for the fourth quarter of 2025 at 5.4%. AI, consumer spending, stock market valuations, expanded tax deductions, regulatory relaxation, and lower interest rates are driving growth. Immigration restrictions are slowing job market growth as the U.S. added 584,000 jobs last year, about 49,000 a month[8].
In a hot economy, the Fed held interest rates steady at its January meeting. Aero and Rail investment requires deep asset knowledge, market access, and an ability to get the economics and residual valuations right. Opportunities exist. Call RESIDCO.
[1] UP and NS must respond by February 17 regarding whether they will refile their application. The revised application must be submitted no later than June 22, 2026.
[2] The application does not contain future market share projections showing the expected effects of merger growth, diversions, and other changes.
[3] Certain schedules and documents that supply the terms of define Applicants’ obligations that may impact the merger agreement/competitive issues.
[5] And, Boeing Shipped 600 jets in 2025, Wall Street Journal, January 14, 2026.
[6] Airbus Hits Plane Delivery Target, Wall Street Journal, January 13, 2026.
[8] WSJ, January 13, 2026, America’s Job Market Has Entered the Slow Lane.
RESIDCO Announces Closing of $100 Million Commercial Aircraft Engine Acquisition Facility Provided by Huntington National Bank
Chicago, Illinois – RESIDCO today announced the closing of a $100 million commercial aircraft engine acquisition facility provided by Huntington National Bank, a $223 billion asset regional bank headquartered in Columbus, Ohio. This newly formed debt facility is designed to support RESIDCO’s strategic expansion within the global aviation secondary market, specifically focusing on the acquisition of high-demand commercial aircraft engines.
“As the aviation industry continues its robust recovery, the demand for engine leasing solutions and liquidity has never been higher,” said Scott Daniels, Managing Director-Aviation of RESIDCO. “We are thrilled by the trust Huntington has placed in RESIDCO’s Aircraft Engine leasing platform. This facility provides us with the necessary capital to execute our growth strategy and continue delivering value to our global airline and trading partners.”
“This significant funding is a direct result of the incredible dedication and expertise of our team, whose relentless work ethic has been the bedrock of our success and growth,” said Michael Yovkovich, President of RESIDCO. “It is a pivotal moment for our company as a whole. We are excited to start building a major, long-term relationship with Huntington and deeply appreciate the confidence they have shown in our business model and our people.”
The facility will enable RESIDCO to further leverage its deep technical expertise and asset management capabilities. By securing this $100 million commitment, RESIDCO is well-positioned to capitalize on immediate market opportunities and enhance its already substantial portfolio of mid-to-late-life commercial aircraft engines.
“We are pleased to establish this partnership with RESIDCO and provide the financing to support their acquisition goals,” said Michael Labrum, Managing Director of Lender Finance at Huntington. “RESIDCO’s specialized focus and proven track record in the aviation sector make them an ideal partner. This transaction underscores Huntington’s commitment to providing tailored financial solutions for industry leaders in the specialty finance and transportation sectors.”
Vedder Price served as legal counsel to RESIDCO on the transaction, while Chapman and Cutler LLP provided legal counsel to Huntington.
With some dissent[1] the Fed cut the overnight lending rate to a range of 3.5% to 3.75% at its December meeting. It’s the sixth consecutive reduction since September 2024 (a total rate reduction of 1.75 percentage points). The Bureau of Labor Statistics reported that November CPI rose 2.7% year over year (after increasing 3% over the 12 months ending September). Unemployment rose to 4.6% in November, up from 4.4% in September (the Labor Department will release the December jobs report in January, before the next Fed meeting, January 27-28, 2026). The Fed also restarted quantitative easing (calling it a ‘technical adjustment’) at its December meeting ‘to manage market liquidity’. Lower rates, tax cuts, and QE2 will keep the economy stable, directly influencing the transportation merger trends we are seeing across the industry in 2026.
The UP and NS filed their comprehensive merger application with the STB (Docket No. FD 36873) on December 19. The nearly 7,000-page document can be accessed here[2]. Union Pacific CEO Jim Vena, “We look forward to working with the Surface Transportation Board as it reviews our historic application to create America’s first transcontinental railroad.” Norfolk Southern President and CEO Mark George, “This combination will bring together Union Pacific’s expansive Western reach and Norfolk Southern’s unparalleled access to Eastern manufacturing and population centers in an end-to end combination. It will create a cohesive freight rail solution with 50,000 route miles that connect 43 states and more than 100 ports.” The Board will decide by January 18, 2026, whether to accept the application for consideration or consider it incomplete. If accepted, the STB review process is expected to continue into early 2027. In another combination, the GATX and Brookfield Infrastructure transaction is expected to close in the first quarter of 2026. It will result in the largest railcar fleet in North America (242,000 railcars).
Boeing completed its acquisition of Spirit AeroSystems on December 8, 2025. Spirit was split: 15,000 personnel to Boeing, 4,0000 to Airbus. The $8.3 billion acquisition is intended to address quality issues and supply chain bottlenecks and to ramp up 737 Max production. Airbus confirmed it expects to deliver 790 units in 2025, short of its target of 820. Boeing is forecast to deliver 590 aircraft. The FAA has allowed Boeing to lift 737 MAX production to 42 per month. Boeing’s November deliveries: 32 737 MAX, the majority delivered were 737 MAX 8 and MAX 8-200 variants, with four MAX 9s completed. Boeing’s longer-term goal is to deliver 52 aircraft per month. 737 MAX 10 and 7 certifications are expected to happen in 2026. All projections assume suppliers can keep pace.
Retirement data suggest passenger jets are typically retired after 25 to 30 years of service, but economics determine flight lifespan. The value of mid-life commercial aircraft is dependent on traffic (network needs), aircraft type, equipment availability, and maintenance condition. The Boeing 737 and Airbus A320 family narrowbody aircraft are designed for service lives of 60,000 to 75,000 flight cycles (approximately 25 years). Service life can be extended through proper maintenance and refurbishment. Aftermarkets include smaller airlines, cargo operators, and charter services. At retirement, engines, avionics, and landing gear are valuable components that can be refurbished and resold (most of the value lies in the engines). Mid-life in service units are attractive alternatives as new deliveries continue to be delayed.
Airline and railroad transport are market bellwethers. In mid-December, the Dow Jones Transportation Average was up 10%. Third quarter GDP rose at a seasonally and inflation adjusted 4.3% annual rate[3]. To identify investment opportunities that unlock portfolio growth? Call RESIDCO.
[1] With three dissenting votes for the first time since 2014 and four nonvoting regional bank presidents opposed.
The Federal Government reopened on November 12th, 43 days after the October 1st shutdown. The Affordable Care Act insurance subsidies that prompted the Senate to block funding are set to expire at the end of this year. Without a bipartisan Congressional solution, a January 30, 2026, budget deadline remains. The November jobs report is scheduled for release on December 16, 2025. With the October job markets information not available for the December (9th -10th) Fed meeting, the Consumer Price Index up 3% year over year (September data), and the September’s jobs report (issued seven weeks late due to the Government shutdown) unexpectedly showing 119,000 jobs added, it is likely a data driven Fed will remain divided and hesitate to ease policy further. Until we know more, positive market sentiment continues to drive the 2026 aero and rail sectors.
Boeing is improving deliveries and production quality, but the A320 family has surpassed the 737 as the most delivered aircraft [1]. Boeing delivered 53 aircraft in October. Airbus reported 78 deliveries. Boeing’s October deliveries included thirty-nine 737 MAX, three 787-10, four 787-9, two 777F, two 767-300F, two 767-2C, and one 737-800A. Led by Kelly Ortberg, Boeing has exceeded its total deliveries for the entire year of 2024, indicating a strong recovery in production. GE Aerospace projects a year-over-year increase of over 20% in LEAP engine deliveries in 2025 compared to 2024 (reaching approximately 2,000 units). Deliveries will support aircraft production rates for both Airbus and Boeing (the A320neo is powered by the LEAP-1A, the 737 MAX is powered by the LEAP-1B). The CFM56, the most prevalent engine fleet in service (over 33,000 delivered), remains in strong demand, servicing the existing midlife fleet. Pratt & Whitney GTF-powered aircraft, primarily A320neo, A220s, and Embraer E-Jets E2s, remain grounded due to the need for prolonged inspections. Engine repair turnaround times are reaching 300 days, and recovery has been pushed back to the end of 2027 or early 2028.
Manufacturing accounts for about 11% of U.S. GDP and 8% of employment (the services sector accounts for roughly 77% of GDP and 85% of private-sector jobs). The manufacturing Purchasing Managers’ Index (PMI) remains below 50%. Even with manufacturing sluggish, railcarloads[2] remain nearly unchanged from 2024. Total carloads year to date through October were up 1.9%, more than 180,000 carloads over the same period in 2024. Through October 13, of the 20 carload categories the AAR tracks saw year-over-year gains. Year-to-date intermodal volume through October was 11.94 million units, up 2.8% (over 320,000 units) over last year, the most since 2021 and the third most ever. Carloads excluding coal were 1.0% higher in October 2025 than in October 2024, their seventh increase in the past eight months and the 19th increase in the past 21 months. Year-to-date carloads through October were up 1.3% (more than 93,000 carloads, a sign of positive market sentiment) and were the most since 2019.
Themes that will influence Aero and Rail equipment values and investment markets in 2026 include: tax cuts and deregulation, corporate earnings growth, inflation, interest rates, AI driven investment, technology gains, Aero OEM material shortages, supply chain disruptions, production bottlenecks, a lack of skilled labor, tariffs, nationalism, global competition, and MRO activity for aircraft[3] and engines will increase.
Solid demand and financial conditions support midlife aircraft. Freight rail remains steady. Market sentiment is positive. Benefit from strategic investment insight on the positive market sentiment that is driving 2026 aero and rail. Call RESIDCO.
Glenn Davis 312-635-3161
[1] Airbus chief executive Guillaume Faury remarked at the company’s third-quarter briefing that the A320, after 37 years, had “reached a major milestone, becoming the most-delivered airliner in history, surpassing the Boeing 737.”
2026 Investment Outlook – Market Support for Aero and Rail Continues
To stabilize jobs, the Fed cut interest rates an additional 25 basis points on Wednesday, October 29th, lowering the federal funds rate to 3.75% to 4%. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% on a seasonally adjusted basis in September[1]. The Conference Board’s Consumer Confidence Index fell 1.0 point in October to 94.6 from September’s 95.6, reflecting consumer concern over inflation, financial conditions, and the job market. Trade uncertainties remain for manufacturers, and future rate cuts are uncertain[2]. With the government shutdown, the Surface Transportation Board suspended operations. The Federal Railroad Administration has furloughed 23% of its staff. Shortages of federal air traffic controllers and Transportation Security Administration (TSA) agents are delaying flights. Despite all of this, the 2026 investment outlook indicates strong market support for aero and rail.
Yet the Board of Governors of the Federal Reserve’s October 2025 Beige Book reports economic activity has changed little. GATX Rail North America reported rail fleet utilization (excluding boxcars) at 98.9% at the end of the third quarter of 2025. Third-quarter renewal lease rates rose 22.8%, with average renewal terms of 60 months. GATX’s aircraft Engine Leasing portfolio reported segment profits of $60.4 million for the third quarter compared with $37.5 million in the prior year period. CEO Robert C. Lyons: “Robust global passenger air travel continues to drive strong demand for aircraft spare engines.”
Brett Hart, President, United Airlines: “This summer was the busiest in United’s history.” United surpassed 1 billion available seat miles in a single day and flew over 48 million customers in the third quarter. In 2026, United expects to hire over 2,000 pilots and over 3,200 new flight attendants. United had the company’s all-time highest business revenue ticketing during the week ending October 5. Of the top five best weeks in United’s history, three of the remaining four occurred in September 2025. United is forecasting fourth-quarter operating revenue to be the highest in the company’s history. The International Air Transport Association (IATA) reports air cargo demand grew 2.9% year over year in September, the seventh consecutive month of overall growth. Willie Walsh, IATA’s Director General: “We are seeing air cargo patterns adapt as trade patterns shift due to US tariff policies.”
Total U.S. rail carload traffic averaged 226,670 cars per week in the third quarter of 2025, the most for any quarter since the second quarter of 2021. Growth in grain and motor vehicles & parts more than offset declines in metallic ores and food products. Excluding coal, U.S. carloads were up 1.8%, their ninth year-over-year gain in the previous 10 quarters. Third quarter’s intermodal volume rose 0.6% over the same period in 2024, the 8th consecutive quarter of year-over-year intermodal growth. Year-to-date through September, U.S. intermodal volume was up 3.5% over last year. There is a close correlation between domestic U.S. rail volume and manufacturing output. Concerns remain, as U.S. manufacturing capacity utilization has trended downward over the past three years. The AAR’s Freight Rail Index (“FRI”), which measures seasonally adjusted rail volumes (excluding carloads of coal and grain), fell 0.8% from August to September 2025, reflecting demand uncertainties.
With the government shutdown, key economic indicators are limited. The Congressional Budget Office projects the U.S. economy will lose between $7 billion and $14 billion if the shutdown continues through the end of November. Questions remain about employment (AI spending is the most significant single driver). Trade tensions with China will remain even after the U.S. dropped 10% tariffs in return for progress on soybean imports, rare-earth exports, and fentanyl issues. The bottom line? Strong market support for aero and rail continues. Call RESIDCO.
Glenn Davis 312-635-3161
U.S. payroll growth slowed, adding only 22,000 jobs in August, the lowest since December 2020. Unemployment was 4.3% in August, still low, but the highest since October 2021, nearly four years ago. Initial jobless claims edged slightly higher. Recognizing that the labor market drives consumer spending (accounting for 70% of the U.S. economy), the Fed, on September 17th, moved to lower interest rates by a Quarter Point to a range of 4% to 4.25% and projected two additional rate cuts for the remainder of this year. This sets the stage for growth: activities in the Aero and Rail investment markets are likely to rise as consumer spending and business investment are driven by expected additional rate cuts and cash tax savings from bonus depreciation generated from the July 4th tax legislation.
Less regulation will foster economic growth (the EPA has moved to repeal a 2009 declaration stating that greenhouse gases[1] pose a public threat, saying the finding was “unduly pessimistic”). Foreign manufacturing companies are responding to the Administration’s drive to revive U.S. manufacturing, creating jobs and implementing new technologies. Hitachi Rail opened a new carbon-neutral railcar manufacturing facility in Hagerstown, Maryland, on September 8th (the factory uses AI and other digital technologies for enhanced production). It’s part of Hitachi’s $1 billion investment in U.S. manufacturing. South Korea based JS Link plans to establish a rare earth permanent magnet manufacturing facility in Columbus, Georgia, to accelerate production capability for rare earth permanent magnets in the U.S. U.K. based GKN Aerospace is expanding its facility in Newington, Connecticut by adding a production line focused on Fan Case Mounting Rings (FMCR) which connect Pratt & Whitney’s GTF engine to the aircraft’s pylon on the A220. A new bill has been introduced in the U.S. Senate: “Halting International Relocation of Employment” (the HIRE Act) which seeks to discourage American companies from outsourcing jobs overseas and includes a 25% tax on payments made to foreign firms for services used by American customers, a ban on deducting those expenses from taxable income, and the creation of a Domestic Workforce Fund to support training and apprenticeships in the U.S. The combination of new manufacturing projects and supportive legislation significantly bolsters the outlook for aero and rail investment.
For the first 38 weeks of 2025, U.S. railroads reported a cumulative volume of 8,423,372 carloads, up 2.2% from the same point last year, and 10,289,962 intermodal units, up 3.6% from last year. Total combined U.S. traffic for the first 38 weeks of 2025 was 18,713,334 carloads and intermodal units, representing a 3.0% increase compared to the same period last year. Delta’s fall revenues are expected to be stronger based on booking trends and commentary from executives. At the Morgan Stanley Laguna Conference[2] Glen Hauenstein, President of Delta Air Lines, Inc., remarked: “We’re seeing very strong domestic corporate demand into the fall. We had our highest post-pandemic corporate sales number of any day in any week this September. Bookings for both corporate and high-yield leisure are doing incredibly well. October has become a peak month for transatlantic travel. Domestic capacity rationalization has occurred, and demand trends are improving.” These strong performance metrics confirm the growing opportunity in aero and rail investment.
The Rail Customer Coalition (“RCC”), initially formed in 2015 as Consumers United for Rail Equity (“CURE”), a group of freight rail shipper associations (manufacturers, agricultural producers, and energy companies), are asking for a thorough review of the proposed UP/NS merger and advocating the STB impose conditions that ensure “actions to enhance competition, service, and supply chain stability.
Second quarter GDP growth was revised up to 3.8%. Value appreciation of aircraft (and engines) is accelerating. Policy and tax uncertainty are clear. Investment momentum is improving. To hit your Fourth Quarter targets and capitalize on the current momentum in aero and rail investment, benefit from deep industry experience. Call RESIDCO.
Glenn Davis 312-635-3161
[1] Less emphasis on carbon emissions will allow air carriers to continue to operate of existing midlife equipment.
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.
We face a multipolar geopolitical environment: Iran/Israel, Russia/Ukraine. China/Taiwan. North Korea/South Korea, each seeking to demonstrate regional dominance. The Administration’s response has been to prioritize U.S. interests. Tariffs, the “Big Beautiful Bill,” deportations, deregulation, the Department of Government Efficiency, airstrikes on Iran’s nuclear facilities, and a subsequent cease-fire. All this activity has occurred since January. It’s been quite a dramatic six months. Business owners, investors, economists, and consumers are hesitating to make decisions. Even the Fed is holding.
The uncertainties surrounding the extent of the Administration’s policies are creating a drag on the economy. Yet North American rail freight volumes remain stable. May carload traffic rose 5.9% compared to a year ago. Year-to-date carloads through May were up 2.5%[1]. In May, 13 out of 20 carload commodity categories notched annual gains, suggesting freight demand is broadly improving. Overall, rail traffic continues to outpace 2024 levels. The AAR Freight Rail Index, which excludes coal and grain, fell 3.2% in May from April, reflecting softness in intermodal (intermodal volume grew .6% in May, the weakest in nearly two years). Data center demand and current hot weather are driving coal demand (NS and CSX are expected to order new replacement coal cars). Used rail equipment pricing and lease rates continue to be supported by current high new car pricing. GATX’s combination with Wells Fargo is a strong signal supporting the long-term economics of investment in rail rolling stock.
At the June 17/18 FOMC meeting, the Fed held its benchmark interest rate steady in a range of 4.25%-4.5%. It’s been there since January. Rates were cut 100 basis points in 2024 (the last cut was 0.25% in December). The Fed raised its projection for inflation and unemployment while lowering expected economic growth. Fed Chairman Powell, in his testimony before the House Financial Services Committee on Tuesday, June 24, stated recent economic data would have justified a rate cut, but the Fed is holding, waiting for additional data regarding the impact of tariffs on inflation. Projections now are for two 25 basis point reductions later this year. Consumer spending has slowed, and home builders are reporting that the uncertainty over tariffs is driving rising costs and making it difficult to price new home construction. Housing mortgage rates remain between 6.8% and 7%. Oil prices have dropped back to levels seen before the conflict between Iran and Israel as the ceasefire appears to be holding.
For Aero OEMs, demand for new aircraft remains high. Supply tensions are easing. Engine issues continue to delay deliveries. Airbus left the Paris Air Show with $21 billion in orders. Airbus’s orders included both A350 and A220 models (Polish Airlines LOT ordered up to 84 A220s, 40 firm with options for an additional 44 aircraft). Boeing kept a low profile, choosing to focus on the Air India Flight 171 787 Dreamliner crash, which occurred the Thursday before the Air Show’s Saturday start. The 787 had flown for over a decade without a single fatal crash. Known for fuel efficiency and long-range capability, they are a favorite for long-haul international routes. Over 1,100 Dreamliners are currently in global service.
In today’s uncertain environment, rail equipment markets are stable. Demand for commercial aircraft remains strong. Both asset classes provide long-term investment opportunities. Deregulation and an expected pro-growth tax policy favor an improving investment environment. According to Boeing, the answer is to “Focus on supporting your customers.[2]” For insights into current opportunities, Call RESIDCO.
Glenn Davis 312-635-3161
[1] Association of America Railroads, Policy & Economics, Rail Industry Overview, June 2025.
[2] At the Paris Air Show 2025, “Boing to Focus on Customers, Innovation and Partnership.”
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