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.
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