Despite a slowdown in new orders, Boeing and Airbus continue to deliver on their huge backlogs by increasing production on popular aircraft like the Boeing 737 MAX and 787 and Airbus A320neo and A350 (chart 1). However, this will be offset somewhat by weak demand from energy markets. Pricing pressures and higher costs on new programs have reduced EBITDA margins in recent years, but margins remain above average for a rated aerospace and defense company. However, profitability should improve as the company reduces costs, improves operating efficiency, and new products reach full rate production levels. We think higher earnings and strong cash flow will be offset by higher net debt to fund acquisitions, resulting in fairly stable credit ratios over
