Unfriendly Skies Upside: Ducommun (DCO)
Image Courtesy: Leander, via Pexels.
in Our Latest PodCast: worries over aviation safety mask a shortage in spare jet parts
When planes crash, they create damage. They also create news. Interest in aviation disasters at least doubled this year over last. According to Google, a search engine a mid-air collision over Washington D.C. and the grounding of a Air India 787 drove intense speculation about aircraft safety in general and jet makers like Boeing, in particular.
But a look into the air-worthiness of air travel revealed a much subtler story that featured an unexpected winner: the Costa Mesa, Calif.-based medium-sized air frame and electronics spare parts maker, Ducommun (DCO).
Understanding why, is a bit of a flight out and about several corners of the aviation industry.
Let’s begin with the overall number of aviation accidents. They continue to fall, at least in North America, according to the National Transportation Safety Board, which publishes the U.S. Civil Aviation Accident Dashboard. It breaks down the decline in annual incident rates since 2008.
The dashboard overall offers a dynamic picture of what it takes to measure air safety accurately.
The National Transport Safety Board does an excellent job quantifying aviation safety. Here is its Accident Dashboard, which tracks the decline of air incidents since 2008. (Courtesy NTSB)
Next, embattled jetmaker Boeing has been doing nothing but producing aircraft. Some 45 jets were delivered in April 2025. That’s about double the 24 jets it delivered during the same period last year and the fourth month it shipped more than 40 jets. Most deliveries were 737-Max aircraft going to American operations like United Airlines and Southwest. But it even shipped a legit monster 777 freighter to a leasing company servicing Asia. Investors responded to positive earnings news and guidance earlier this month.
And overall the airline industry appears to have recovered from its pandemic down-cycle. The International Air Transport Association’s (or IATA) much-quoted 2025 financial outlook nudged the sector close to $1 trillion in total revenues for 2025, with improving profits, net margins and even rare for the airline industry a positive return on invested capital of about 6.7%.
But a breakdown of the industry data reveals a much more fragile profitability.
A breakdown of air industry data shows most of the profits are coming from less expensive fuel. Jet fuel costs dropped by roughly 20% over the past 24 months, which non-fuel expenses were up by about 8%.
The Nickle and Diming of the Skies
What is driving aviation’s performance is the ever-lower costs of fuel. Jet fuel is essentially 10% cheaper this year over last, and something like 25% less costly since 2023! That is hiding ever more expensive non-fuel costs, which were up about 1% over the past 12 months and up 8% over the past 24 months.
The industry agrees, of the expected $693 billion in 2026 passenger revenue, a full $144 billion will come from so-called “ancillary revenues” of bag fees, meals on planes, and ticket changes, all of which can alienate travelers. This tight operating window is going to put a premium on the carrier efficiency. But that won’t be easy.
Aviation is facing a continuing shortage of pilots, service personal, and especially spare parts. Reliable market forecasts indicate that what new planes there will be will not flow to North America. Growth in air travel will be in India and Asia over the next decade.
North American carriers will face intense competitions for planes and spare parts from groweing competition in Asia and particularly India, according OliverWyman, an aviation consultancy.
Buddy, Can You Spare a Jet Part?
What today’s aviation sector is suggesting is a stubborn and sustained scarcity in the components needed to keep aging widebody jet engines, air frames and electronics operational. And even a glimpse at values of the companies the provide such parts show the value to be captured.
Even the most basic value breakdown of aviation companies shows some of them are cheap. To us, Ducommun is the logical point of entry. But there are others.
For a trend this obvious, there are many points of entry, but we like the story from Costa Mesa Calif.-based Ducommun. The firm was started in 1849, by Charles Louis Ducommun, a Swiss watchmaker, as a Los Angeles supply store selling to miners. By some measures, it is the oldest business in all of California. A son was an early backer of aviation frame maker Donald Douglass; Ducommun steel was in Lindbergh's Spirit of St. Louis when it flew to France. The firm almost went out of business in the late 1980s.
It since has restructured and focused on electronics and and parts. Times are good. Free cash is highest in 5 years, with major recovery from the burn rates in 2013. Institutional holdings are up. The company was awarded major defense contracts recently. It has made some nice acquisitions.
But on a certain level, these details don’t matter. North America’s airplanes will continue to age. There will be a growing need for spare parts. For a stock market overwhelmed by distractions, how can these fundamentals be anything but overlooked?
For those who realize that, there will be smooth flying ahead.
Image courtesy Gemini Model 2.5 Flash, from the prompt: “Create an image that sums up air parts maker Ducommun.”