The Boeing (NYSE:BA) Duopoly Squeeze: Is Disaster Waiting?

One thing that has saved aerospace stock Boeing (BA) over the course of the last year is that Boeing is, basically, one of two firms in the market. The market is essentially Boeing and Airbus (EADSY) right now, and both of them are so backlogged that the choice is minimal. But what if that choice were not so minimal? What if the duopoly got broken up and forced to compete in an actual market? As it turns out, there are other firms getting more involved, and today, we are going to take a closer look at the market as it sits and what competitors could pose a threat to Boeing.

The Brazilian Connection

First out of the gate is Embraer. Embraer will be something of a difficult process to compete with Boeing, because Embraer makes a completely different type of aircraft. Embraer’s E-Jet is more of a regional player, but it also works in a lot of markets that Boeing is not. Embraer’s jet line tends to focus on the 70-130 seat range, which Boeing generally does not touch. Boeing tends to focus on larger aircraft. In fact, Boeing once tried to merge with Embraer. But since the merger failed, Boeing does not have much presence in the smaller, regional jet market.

Thus, Embraer is a competitor, but in a market where Boeing was really not doing much anyway. Embraer is a niche player, and while that does undercut Boeing’s potential growth vectors, it is not doing any real damage right now. Nor is it likely to in the near-term future. However, Embraer is currently the third-largest commercial aircraft maker, so if Embraer decides to make an expansion, then that could pose a real threat to the backlogged Boeing.

The Massive Chinese Threat

Of all the threats to Boeing right now, the Commercial Aircraft Corporation of China, or COMAC, might be the biggest. COMAC is currently working in the narrow-body jet market, and has aspirations to take on the wide-body space. COMAC’s C919, in fact, is considered generally appropriate for the same market as the Airbus A320neo and the Boeing 737 Max. This could be a serious problem, especially given the length of the backlog at both Boeing and Airbus.

Moreover, COMAC has the almost frothing support of the Chinese government, which has a lot of control in the field. In fact, the Chinese government recently posed a serious problem for Boeing when it told Chinese airlines not to take delivery of several planes. The move proved to shoot the airlines in the foot, and was quickly retracted, but the Chinese government has that kind of power. And if it compels its airlines to accept its planes—where “it” is “China’s”—that means the whole Chinese market belongs to COMAC. That’s a big loss to Boeing.

However, Boeing has an advantage here: quality perception. While that has taken a hit in recent days, China’s quality perception has long been behind the curve. The concept of “tofu-dreg” construction was essentially birthed in China, and usually refers to shoddily-made buildings. However, after scandals like lead in children’s toys and melamine in dog food, it can apply anywhere else. It can particularly be applied in a product in which users could, possibly, die in a jet-fuel fireball as a result of using it.

Thus, the idea of people flying in a Chinese-made jetliner might scare people off sufficiently that airlines would not want to take much chance. There are ways around this, particularly if COMAC can demonstrate success in safety and market that success accordingly. But that will take time, and there will be no substitute but time.

The Uncertain Japanese Future

Finally, there are reports of perhaps the darkest of horses: a rumored project from Mitsubishi to bring out passenger aircraft. Known as the SpaceJet, the project has important goals that should garner it plenty of attention: fuel efficiency, and modern avionics among others. But the project has not had the best run of luck getting off the ground so far. Reports note that it has repeatedly run into delays and problems with development, which will not make for an aircraft that threatens Boeing very hard, if at all.

In fact, at last report, the Mitsubishi project had been halted back in 2023, and Mitsubishi seemed mostly content to supply components to both Airbus and Boeing. Still, should the project start back up, and attempt to get some of Boeing’s backlog onto its own books, that could be quite a coup. However, there is another possibility that some do not even want to consider.

The Unlikeliest Team-Up

And that possibility is Mitsubishi and COMAC getting together. Some will reject this notion out of hand for its sheer implausibility, as it requires a Chinese and a Japanese firm to work together, which is a long shot under good circumstances and has been for decades. But the idea is certainly compelling enough. In fact, Mitsubishi and COMAC getting together would effectively wipe out a lot of each side’s limitations.

Mitsubishi would get the Chinese government’s support and access to the massive Chinese airline market. COMAC would get instant credibility and the concern about potentially flying in a tofu-dreg aircraft would be gone like a puff of smoke in a hurricane. Mitsubishi and COMAC working together on an airplane project could fundamentally destabilize the market, and turn a duopoly into an effective three-player market.

The Bottom Line

So, here’s how it all weighs out. Boeing, as top of the heap alongside Airbus, is pretty safe right now. Embraer is a niche player who will only pose a threat to a market Boeing is not even involved in, and may never get involved in. COMAC could be a threat, but it has a pile of issues that it has to overcome. Mitsubishi could be a threat, but seems happy as a supplier. And a COMAC / Mitsubishi team-up would be the gravest threat of all, but the odds of it happening are so remote as to be virtually nonexistent.

Is Boeing a Good Stock to Buy Right Now?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 15 Buys, four Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 15.58% rally in its share price over the past year, the average BA price target of $213.37 per share implies 5.44% upside potential.

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