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.
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.
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.”
On April 2, the President signed an Executive Order imposing new tariffs on imports of all articles into the U.S. customs territory subject to certain exceptions. Then, on May 28, the U.S. Court of International Trade ruled imposition of tariffs exceeded the President’s “emergency” powers[1]. The Commerce Department is also pursuing an investigation under the Trade Expansion Act of 1962 to address the impact of imports of commercial aircraft, engines, and parts on our national security. These tariffs and trade shifts are affecting markets everywhere–learn how they’re impacting the aero and rail industries below.
The U.S. aerospace manufacturing industry has maintained the largest positive trade balance of any sector, roughly a $100 billion trade surplus in 2024. It’s the largest manufacturing sector in the U.S. that exports more than it imports. Historically, the 1979 Agreement on Trade in Civil Aircraft eliminated tariffs and established a free trade zone among signatory nations for civil aircraft, engines, and flight simulators, which was meant to encourage global technological development. Because the industry’s supply chain is complex and highly regulated, the Administration’s shifting tariff policies have introduced uncertainty into U.S. Commercial Aviation equipment planning. American aircraft manufacturing is complex, with parts sourced from around the world. The current tariff and trade landscape presents significant challenges. Tariffs not only affect direct costs but also impact market dynamics. U.S. trade policy is central to the aerospace sector’s growth success. In early May, Airbus CEO, Guillaume Faury, called for a return to tariff-free trading for the aerospace sector, and Boeing CEO, Kelly Ortberg, at a Congressional hearing last month testified the plane maker wanted free trade. Understanding this is crucial in the context of global aerospace markets.
Boeing and Airbus delivered 359 aircraft through April 2025, a 17% increase year over year. Both are under pressure to increase deliveries. Boeing delivered 45 commercial jets in April, four more than in March. Airbus delivered 56 in April compared to the 71 they delivered in March. Through the quarter of the year, Boeing has delivered 175 aircraft, including 133 737 MAX, 21 787s, and 11 freighters. At the end of April, Boeing had 6,282 unfilled orders and an official backlog of 5,643 (after adjusting for accounting standards). Comparatively, Airbus’ backlog represents 10.4 years of production based on 2025 production estimates. Boeing’s backlog would last approximately 11 years. Continuing tariff uncertainties and new equipment delivery delays support secondary market values of mid-life aircraft and influence decisions to extend leases (Aercap reported 99% utilization and 84% lease extensions in the first quarter of 2025).
The Bureau of Economic Analysis estimated U.S. GDP fell 0.3% in Q1 2025 from Q4 2024. U.S. rail volumes have remained stable: 1.13 million total carloads were originated in April, up 6.2% over April 2024 (the largest year-over-year percentage gain in 16 months and the third largest in nearly four years). Through the first four months of 2025, total carloads are up 1.8% over the same period last year, with 11 of 20 carload categories seeing gains[2]. The GDP contraction resulted from a surge in U.S. imports in Q1 2025 as businesses front-loaded shipments to beat the anticipated tariffs. Underlying domestic demand rose at a 3.0% annualized rate in Q1, pointing to continued momentum in the domestic economy. The North American railcar fleet and railcars in storage contracted slightly in April, driven by lower industry builds, an aging fleet, and attractive scrap rates. Overall fleet attrition is expected to continue to outpace new builds in 2025 (railcars in storage are below 19%). Pricing for new build rail rolling stock remains elevated due to higher steel prices and input price inflation supporting used rail rolling stock pricing. Above normal temperatures, rising power demands, and higher natural gas prices are driving the near-term outlook for coal (there was a year-over-year increase in carloads of coal in April, up 53,736 carloads, or 23.2%)[3].
The “political” question of whether a “national emergency” exists that allows the tariffs the President has imposed under the 1977 International Emergency Economic Powers Act remains. Steady job growth, consumer spending, and expanding services continue to support economic activity. As markets shift, Rail and Aero equipment play central roles. Perfect information is seldom available. Staying informed is not optional; it’s essential. Explore opportunities. Call RESIDCO.
Glenn Davis 312-635-3161
[1] The tariffs may remain until the Supreme Court Rules.
[2] AAR Policy & Economics Rail Industry Overview, May 2025.
[3] Short-Term Energy Outlook, the U.S. Energy Information Administration.
In a global market, equipment (including aero and rail) investment successes come not only from corporate strategy and execution but also from a nation’s competitive advantage. A country’s national leaders are responsible for crafting and executing strategies that maintain global economic dominance. On the worldwide stage, free markets will allocate capital efficiently, but have not resulted in mutual and equal prosperity. Trade benefits those with the best “competitive” advantages. In The Art of War, military strategist Sun Tzu wrote that the best strategy is one where you win without firing a shot.
We should not expect China to embrace Western democracy or fully open its markets, as doing so would destabilize its Communist Party leadership. Xi Jinping’s strategy has been to absorb U.S. technology, strip businesses from other countries, and replace foreign corporations with domestic ones. Self-interest[1] has driven China’s leaders to target large-scale industrialization and develop and control their domestic markets by using regulations and subsidies that advantage Chinese firms. Examples include the development of the ARJ21 (aka the C909, a 78-90 seat regional jet) and the C919, China’s first domestically[2] produced narrow-body aircraft, which is meant to replace the Boeing 737 and Airbus A320. COMAC intends to produce 200 C919 jets annually by 2029 to challenge the Boeing-Airbus duopoly. Beijing’s Communist Party has directed its national airlines to withhold new orders, not accept any more Boeing aircraft deliveries, and pause purchases of aircraft-related components and equipment from the U.S. Xiamen Airlines recently returned two Boeing 737-8 aircraft, unable to pay a 125% retaliatory tariff on U.S. goods imported into China.
With limited access to Chinese domestic markets, the value of foreign investment will vaporize. While the administration announced a 90-day suspension of additional tariffs beyond the baseline 10% tariff applicable to most countries (except China), fluctuating tariff policies have created challenges as businesses navigate a constantly changing landscape. United Airlines, during its April 15, 2025, Investor Update, stated “bookings have been stable” but then offered two separate possible macroeconomic expectations. “Either the U.S. economy will remain weaker but stable, or the U.S. may enter a recession,” and “If demand drops, new routes and bigger planes will be put on hold.”
U.S. retail sales were up 1.4% in March, the most significant monthly gain since January 2023. The uptick was largely attributed to consumers making big-ticket purchases ahead of expected tariffs. Motor vehicles and parts increased by 5.3%, with additional increases in electronics, sporting goods, clothing, groceries, and online retail. For the first 15 weeks of this year, U.S. railroads reported a cumulative volume of 3,219,891 carloads, up .9% from the same period last year, and 4,088,865 intermodal units, up 8.5% from last year. Although market uncertainty and trade policy changes increase the range of possible outcomes, CSX expects rail volume growth for 2025[3]. Tariffs, CSX said, will likely lead to more North American business. “East Coast ports can expect benefits from decoupling from China.” CSX is already seeing increased output from U.S. steel mills with positive trends in construction activity, chemicals, plastics, and agriculture, all a plus for rail volumes.
The Federal Government borrowed $1.3 trillion more than it took in the first six months of this fiscal year (a gap 23% wider than in the same period a year earlier). A weaker dollar and Treasury market volatility[4] has made hard asset Aero and Rail investment more attractive. Call RESIDCO.
Glenn Davis 312-635-3161
[3] For CSX, a difficult first quarter. CEO Joe Hinrichs, CSX, Railway Age, April 17, 2025.
[4] Markets Defy Dollar’s Haven Status as Risk Assets Plunge, Wall Street Journal, April 18, 2025.
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