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The aeronautical industry is not experiencing a production bubble in the commercial sector, but supply will need to keep up with demand, David Baxt, Global Head of Aerospace and Defense at Jefferies, told CNBC.
“Jefferies does not believe that is the case," the aerospace analyst said when asked if we were currently in a production bubble.
"Passengerload factors are averaging 78-79 percent. Demand is there…year to day traffic is up seven percent. By way of background, airlines brings capacity into the system when they run 70 percent load factors so airlines are looking to bring as much capacity into the system as possible,” he said.
Airbus, a subsidiary of EADS , and Boeing have both experienced problems in their supply chains and have, “not by their choice” Baxt said, had to buy their suppliers PFW Aerospace, Alestis and Vought Aircraft respectively.
However, Baxt said the problem had not gone away and there could be more potential for supply problems if suppliers cannot keep up with the growing demand for commercial planes.
“I think first is getting deliveries right and getting the orders right and I think that will be sustained as technology [and fuel-efficiency developments] fundamentally changed airlines' desire to take delivery of new aircraft. Can the supplier base keep up? That’s the million dollar question," he said.
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