In recent months, Boeings share price has fallen almost as fast as its aircraft parts have tumbled from the sky.

There have been a series of harrowing incidents this year involving defects on Boeing planes. Some cases were routine hiccups, but others involved alarming oversightsmost infamously, the loose bolts that led a door-plug panel from an Alaska Airlines 737-9 Max to land in the yard of an Oregon schoolteacher on Jan.5. This latest round in Boeings struggle with manufacturing debacles and quality-control problems led CEO David Calhoun to announce his resignation. The Federal Aviation Administration, meanwhile, has cracked down on the manufacturer, limiting Boeings ability to deliver new aircraft.

This has meant headaches for investors: Boeing shares were down more than 30% year to date in mid-May, and other aviation and airline stocks have also tumbled. But in an industry as essential to the economy as aerospace, any bad patch can turn into an opportunitywhich raises the question of whether Boeing or the airlines that fly its planes might now be bargains.

Despite the cascade of disasters and the deep-rooted cultural problems underlying them, theres a case to be made for Boeing as a long-term playbecause the company enjoys the benefits of a duopoly. Boeing produced around 40% of the 29,000 commercial aircraft flying today, as Fortune recently reported, and along with Europes Airbus it has a lock on that market for the foreseeable future.

Nicolas Owens, an industrials equities analyst at Morningstar, notes that the spectacular nature of aviation mishaps can produce overreaction on the part of investors. The reality, he notes, is that Boeings order book is crammed: The companys report for December revealed net orders of 369, a monthly record, and each represents hundreds of millions of dollars in sales. If and when the company overcomes its quality problems, that revenue stream could flow freely again. (Boeing brought in $78billion in revenuein 2023.)

Owens adds that broader travel trends also bode in favor of the aircraft manufacturer. The commercial aerospace sector has a very long runway of strong demand, he says. Middle-class people all over the world want to fly, especially in places like India and Asia.

Boeings door-plug disaster in January also triggered a drop in airline stocks across the board. Since then, though, different carriers shares have followed different flight pathsshowing how much they vary in their reliance on the manufacturer.

Delta Air Lines, whose fleet comes mostly from Airbus, quickly bounced back. United Airlines shares initially were pummeled when the carrier had to ground dozens of 737-9Max jets, but they rallied after Boeing agreed to compensate United for lost revenue. Southwest took a more sustained hit, cutting routes and trimming hiring as its plans to add dozens of Boeing planes were delayed. Southwest shares were down 3% year to date through mid-May.

Boeings troubles are likely just a temporary setback for airlines, but theyre one more risk factor in an industry that offers investors many reasons to be wary. Airlines are highly cyclical; air travel rises and falls with the macro economy. The industry is also both highly regulated and brutally competitive. Because they need so much cash to operate, most airlines offer modest dividends or none at all, and bankruptcies are a perennial risk.

The biggest knock on the sector may be that its core productseats on planeshas historically been viewed as a commodity, forcing airlines to compete on price alone. But new trends may be addressing that drawback, at least for the Big Four (Delta, United, Southwest, and American Airlines).

Bernstein analyst David Vernon says that moves by the majors to create more sections within cabinsbeyond coach and first-classand to sell more services la carte have reduced the commodity effect: Theyre plowing money into their networks, differentiating cabins, and extracting more money from customers.

Ironically, airlines may also get a boost from Boeings woes. Vernon notes that increased FAA oversight will limit Boeings output of new aircraft, so the supply of seats will stay tight, protecting carriers profit margins from overcapacity. Meanwhile, Vernon notes, players like Delta and United have significantly increased their revenue from credit card operations, diversifying their businesses and making them less dependent on cyclical travel.

Ultimately, both Boeing and the major airlines represent potential bargains for those with a high tolerance for risk. Those looking to buy aviation-related stocks also have a third optionone thats, well, flying high.

That option is military aircraft. Boeing and Airbus have footprints in that sector, but so do firms like RTX and Lockheed Martin that are not closely tied to the passenger-jet industry. Geopolitical conflicts around the globe have boosted sales of craft like fighter jets, and contractor order books are likely to grow as Western countries rearm. Stephen Scott, a retired law professor and veteran investor, says he has always stayed away from shares of airlines and commercial manufacturers, but is comfortable buying those that make military aircraft, like General Dynamics.

The defense sectoris a whole other universe, Scott tells Fortune. And there are a lot more players than Boeing and Airbus.

This article appears in the June/July 2024 issue of Fortune.

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Are cheap aviation stocks like Boeing a good investment? - Fortune