The aerospace sector, a cornerstone of global industrial growth, saw turbulence this week as Airbus (EADSY Quick QuoteEADSY - Free Report) shares experienced a sharp decline, at one point falling as much as 9% on the afternoon of Dec. 1, 2025 (as reported by major news media, including Forbes). This sudden slump was triggered by reports of a newly identified industrial quality issue affecting the jet giant’s widely used A320-family aircraft.

This also jolted the broader aerospace sector, causing the S&P 500 Aerospace & Defense Index to slip 3% on Dec. 1, 2025.

In a disappointing turn of events, Airbus lowered its 2025 delivery target on Dec. 3, 2025, turning analysts’ concerns about potential delays into reality. The jet maker attributed the reduction to fuselage panel quality issues affecting its flagship A320 model.

Airbus now expects its full-year 2025 commercial aircraft deliveries to total 790, down 3.7% from its initial target of 820.

For ETF investors, this development prompts an important question: Is it time to revisit their aerospace ETF allocations, considering Airbus’ significant role in the global aerospace sector?

What Triggered the Slump?

The recently reported ‘supplier quality issue’ emerged after Airbus disclosed that certain metal panels supplied for some A320s did not meet quality specifications. Although the root cause has been identified and contained, and new production panels meet standards, up to 628 A320 aircraft worldwide are expected to be inspected for the issue (as per a report by AFP, cited in Yahoo Finance).

This follows a separate software problem linked to solar radiation that caused thousands of Airbus planes to be grounded earlier this week (as mentioned by a BBC report), for a software update. This update is required across roughly 6,000 A320-family jets worldwide.

Together, these issues knocked investor confidence and fueled fears of potential delays, retrofit costs, or additional regulatory oversight, which thereby triggered a share-price drop.

What Lies Ahead for Airbus?

The news of the delivery target reduction is likely to once again drag down Airbus’ share price in the near term, following its brief uptick yesterday from Monday’s low.

However, no one can deny the fact that Airbus remains a leader in the single aisle aircraft market, with the A320neo family carrying a multiyear backlog that underpins deliveries and cash flow. 

The company’s scale, high book-to-bill ratio, and focus on capital discipline should support a solid balance sheet and long-term earnings growth, even if margins face temporary pressure due to the cost of remedial associated with the quality issues and necessary software upgrades.

Moreover, Airbus’ relatively low debt-to-equity ratio of 59.43 versus an industry average of 89.26 suggests a more conservative balance sheet. This should give the company greater capacity to navigate the financial headwinds from reduced deliveries and the resulting pressure on revenues and profitability.

Meanwhile, EADSY’s management emphasized that the number of in-service aircraft requiring panel remedies is limited, and that the vast majority of A320s have already received the necessary software modifications, minimizing operational disruptions.

So, despite the immediate setback, Airbus' underlying business fundamentals should help it remain buoyant in the commercial aerospace market over the long run.

Should Aerospace ETF Investors Worry?

Given that Airbus and its main competitor, Boeing (BA Quick QuoteBA - Free Report) dominate the commercial aerospace duopoly, any major issue at Airbus can ripple through the global supply chain, directly impacting suppliers and component manufacturers included in these ETFs.

That is why the current situation may prompt investors holding a broad aerospace ETF to revisit their portfolio, but it does not necessarily warrant divestment.

For an ETF investor, the key cushion lies in the inherent characteristic of a fund, which is diversification. Since most aerospace and defense funds also hold other major aircraft makers like Boeing and General Dynamics (GD Quick QuoteGD - Free Report) , engine manufacturers and avionics suppliers such as RTX Corp. (RTX Quick QuoteRTX - Free Report) , as well as core defense contractors like Lockheed Martin (LMT Quick QuoteLMT - Free Report) , short-term weakness in Airbus can be offset by strength elsewhere in the value chain.

Over a full cycle, robust underlying air travel demand, replacement needs, and defense spending should continue to support the broader aerospace complex, suggesting that, while this episode merits a fresh look at position sizing, it does not automatically argue for abandoning aerospace ETFs altogether.

So, in light of the recent development, you may continue to hold your assets in the following prominent Aerospace-Defense ETFs:

Invesco Aerospace & Defense ETF (PPA Quick QuotePPA - Free Report)

This fund, with a net asset value of $149.15 per share, offers exposure to 60 companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations. Its top three holdings include RTX (8.55%), General Electric (7.74%) and BA (7.10%). 

PPA lost 2.5% on Dec. 1, 2025, following the Airbus news announcement regarding the A320 quality issue. However, it has surged 30.5% year to date. The fund charges 58 basis points (bps) as fees.

State Street SPDR S&P Aerospace & Defense ETF (XAR Quick QuoteXAR - Free Report)

This fund, with assets under management (AUM) worth $4.34 billion, offers exposure to 40 large, mid and small cap aerospace and defense stocks. Its top three holdings include ATI Inc. (4.34%), Carpenter Technology (4.24%) and Woodward (4.19%). 

XAR lost 2.6% on Dec. 1, 2025. However, it has surged 36.8% year to date. The fund charges 35 bps as fees.

iShares U.S. Aerospace & Defense ETF (ITA Quick QuoteITA - Free Report)

This fund, with net asset worth $11.77 billion, offers exposure to 39 U.S. companies that manufacture commercial and military aircraft and other defense equipment. Its top three holdings include GE Aerospace (21.45%), RTX (15.80%) and Boeing (7.92%).  

ITA lost 2.9% on Dec. 1, 2025. However, it has surged 39.3% year to date. The fund charges 38 bps as fees.