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Stock market picks for the $340 billion supersonic jet industry, UBS

  • UBS is predicting that the supersonic jet industry will be worth $340 billion by 2040, according to a new research report.
  • “We  see  supersonic  bizjets  viable  in  the  late-’20s  and  supersonic  commercial  jets  in  the  mid-to-late-’30s with  hypersonic  travel  a  decade  later,” said UBS equity analyst, Myles Walton.
  • Business Insider lists the 17 stocks best-positioned to benefit from the booming supersonic industry.

By 2040, UBS envisions business travellers will once again be jetting around the globe faster than the speed of sound.

A recent UBS evidence lab survey found around 25% of over 6,000 respondents would be willing to pay for speed.

The last time passengers could travel at supersonic speeds was in 2003 when Concorde made its final flight. However, UBS is predicting a return to supersonic travel. In a new evidence lab report released on December 1, UBS equity analysts take a deep dive into the current, and future, state of the industry.

“We  see  supersonic  bizjets  viable  in  the  late-’20s  and  supersonic  commercial  jets  in  the  mid-to-late-’30s with  hypersonic  travel  a  decade  later,” UBS equity analyst Myles Walton said. ” Implications beyond aero/airlines include air freight, lodging and broader industrials, as ‘just-in-time’ is redefined (30%+ time savings potential).”

The supersonic industry is predicted to be worth $340 billion by 2040, UBS says. This will be divided up with $85 billion for business jets, $75 billion for commercial and $180 billion for operators.

Supersonic is defined as travelling at a speed greater than the speed of sound, which around 760 miles per hour at sea level, also known as Mach 1.

Commercial jets generally fly between Mach 0.75 and Mach 0.85 at cruising altitude, Walton said. However, some business jets can hit speeds of Mach 0.95.

Concorde, an Anglo-French supersonic passenger jet that entered service in 1976,  was the only commercial aircraft to routinely travel faster than Mach 1, enabling passengers to travel from London to New York in three and a half hours. 

In 2000, Concorde crashed on an Air France flight from Paris to New York, killing 100 passengers, nine crew members and four people on the ground, according to the I paper. It was the only fatal crash in Concorde’s 27-year history, but it resulted in the aircraft being grounded for over a year, returning to service with a test flight on September 11, 2001.

The combination of the crash in 2000, high costs and a general slump in travel following 9/11 resulted in Concorde being retired in 2003.

There is also hypersonic travel, which is speeds above Mach 5. But most business models currently target between the Mach 1.4 and Mach 3.0, Walton said.

Supersonic travel could disrupt a number of industries. It could change how the aerospace and airline industry operate, in particular the high-end private jet industry. 

“As adoption spreads in commercial air transport, airline business models would have to change to accommodate re-banking of hubs to enable the dramatic changes to schedules that could arise from transit times that are cut in half,” Walton said. “We suspect an arms race for the business-jet traveler among the global airlines in the age of supersonic travel would put pressure on capital budgets, as well as aircraft valuations, which would be victims of cannibalization.”

Consumer habits might also change as it creates more options for high speed delivery, less need for overnight stays for business trips and potential shifts to airport scheduling.

“Within the air freight industry, a new premium product of super-high speed delivery options would be available that while likely small to start could have a bigger than expected impact over time,” Walton said. “For example, the global supply chain is able to get even smaller and high value inventory safety stocks around the world are materially reduced.”

However, even with technology advancing rapidly. Several challenges remain, the sonic boom is the biggest obstacle for the adoption of supersonic air travel.

A sonic boom is the noise made when an object travels through the air faster than the speed of sound generating an enormous amount of sound. Many compare the noise of a sonic boom to the sound of an explosion.

Several firms are exploring the concept of a quiet boom. NASA launched a program targeting the mitigation of sonic boom effects and awarded the contract to Lockheed Martin, Walton said. They received a subsequent contract in 2018 to build the 100 foot long X-59 QueSST with a goal of achieving a flight at Mach 1.4 with  a sound that is the equivalent of a car door closing, Walton said.

Another headwind is that supersonic travel goes directly against the growing movement towards investing in assets and projects that meet ever-tougher environmental, social and governance-related (ESG) criteria.

“The new supersonic jet players are targeting messages around sustainability merits of their offerings, but the greening of aviation will be a counterweight to faster adoption,”  UBS head of sustainability and ESG research Americas Aniket Shah said.

Unless emissions decrease significantly through technological advancement, Shah expects there will be significant implications for the supersonic travel segment. However, Shah also notes that if supersonic travel could replace the private jet segment, then it could have a net positive impact on the environment. If it replaces business, or first-class, commercial travel, then it could have net negative impact.

Several private companies are leading the way in supersonic innovation. Boom Supersonic is focusing on the commercial market by creating a 50- to 80-seat business class aircraft. This year Boom began ground testing their prototype, XB-1, and will start flight testing in 2021. 

Their competitor is Aerion Supersonic, which was founded in 2002 by Robert Bass, is aiming to design and develop an 8 to 10 person business jet. In August, Virgin Galactic entered the speed race announcing that they were in the first stage of designing a new high speed aircraft. 

UBS also notes there are two other start-up competitors, Spike Aerospace and Gulfstream. Major aerospace companies, such as Lockheed Martin and Boeing, are doing research in this space.

Several companies are expected to be best positioned for the adoption of supersonic travel, either directly or indirectly.  Here is UBS’s list of companies expected to have the most positive impact from supersonic travel:

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