Aviation: Commercial aircraft deliveries have improved in 2023 (+10% y/y) and are expected to climb by +12% in 2024. Although narrowbody airplanes are the best sellers in volume terms (accounting for 81% of annual global deliveries), widebody planes posted the highest growth rate in production last year (+15% y/y). However, aircraft makers are still far below the delivery levels seen prior to the pandemic as supply-chain challenges have persisted for longer, while Boeing has been struggling with quality/safety problems. This lower production capacity of brand-new planes has been positive for companies in the aftermarket, who have seen demand for parts and repair services soar.

Vessels: Ship prices continue rising in 2024 (tankers: +11% y/y, bulkers: +12% y/y and containerships: +6% y/y), thanks to robust demand as the global merchant fleet is aging (the average age of commercial ships exceeds 20 years). Old ships are not only less fuel-efficient but are also more polluting. As a result, shipping companies with old fleets are unable to comply with the stricter international standards for CO2 emissions. In the past two years, vessel sales have reached record highs and further growth is on the horizon, with revenues for 2024 and 2025 expected to remain above USD50bn annually, thanks to the large-scale fleet renewal that is in the pipeline. Indeed, shipyards around the world have announced that they are operating at their maximum capacity.

Trucks OEMs: Supply-chain constraints have improved, accelerating production rates and boosting delivery volumes after years of poor output due to a lack of supply. In Europe, for instance, new heavy truck registrations grew by +13.5% y/y in 2023. However, as new orders are not increasing at the same pace as the output, backlogs have been declining. Still, we can expect demand to start to increase for electric trucks as companies have to shift away from diesel-powered trucks.

Market practice in purchasing contracts: The manufacturing process of transport equipment is costly and time-consuming as it can take about 2-4 years to design and build a brand-new vessel, airplane or train. Because of the long duration of projects, there are risks throughout the process and a lot can go wrong. Therefore, purchase contracts often go hand-in-hand with insurance bonds (bid bonds, performance bonds and advance payment bonds). In many cases, the transportation company places an order for several units, which considerably enlarges the size of the contract. This is why we tend to see transactions backed by an export credit agency (ECA).

Backlogs: The large increase in capex of companies in the transportation industry during 2021 and 2022 led to a backlog in 2023 not seen before. However, backlogs have declined significantly in 2024 as output has improved, with companies delivering more and faster. In parallel, the weak economic context has caused new orders to slow down, making it hard for the backlogs to increase again.

New orders could increase in H2 2024. The weak economic outlook, notably for the US and Europe, has deteriorated business confidence. As a result, new order volumes have remained relatively weak in the past quarters, with transportation companies being cautious in terms of cash utilization. However, new orders could start to jump in the second half of the year in anticipation of interest rates cuts that could have a positive effect on the overall economy. For the mid to long term, the pressing need to decarbonize the transportation sector will keep orders rising, especially in the shipping and airlines industries.