How does the aerospace industry genuinely recover from the pandemic?
With approximately 16% of global market share, the UK is currently the second largest aerospace industry in the world. The unprecedented global pandemic saw the sector’s turnover plummet from £33.9bn in 2019 to £24.9bn in 2020. The impact of any decrease in revenue is troubling, but a decrease of over a quarter in a year to such a prominent sector? Alarming, to say the least.
A global centre of excellence
We don’t actually produce all too many large civil aircraft directly in the UK; rather, we export 97% of our domestic production. Reputable as a global centre of excellence for the design and production of aerospace components, ranging from wing structure to aircraft system, the UK is heavily reliant on orders from overseas.
As global flights were grounded, so too was demand for aerospace manufacturing. In July and August 2019, aircraft manufacturers received just over 150 orders. During the same months in 2020, they received only 13.
Pandemics, of global scale at least, have never really been at the forefront of aviation risk strategies. Initially, when Covid-19 hit, industry experts thought the sector may suffer a quick blip in action, but we’d be back mid-air in relatively no time at all. Fast forward two years, and the pandemic’s effects are still very much rippling – granted, to a lesser degree – meaning leaders are still having a turbulent time seeking constant process adaptations.
Volatility in the air
Thankfully, the engines are beginning to turn again with signs of recovery being welcomed by industry leaders. In terms of orders and deliveries, numbers are steadily beginning to increase as we try to leave the grips of the pandemic behind. However, mass volatility is in the air, with demand drastically differing from month to month. Difficulties are being faced when trying to forecast the pace of the recovery, with precise predictions few and far between.
It’s not just our NHS that’s facing a backlog in service provision; aircraft orders have a waiting list of their own. Substantial is probably an understated way of describing it, with years and years of work and value to be caught up on. And all of this amid pressures for one of our least environmentally-friendly sectors to try and get onboard the runway to a greener future…
Project FlyZero, the sector’s climate hero
The UK Government has commissioned the FlyZero project, aiming to activate zero-carbon emissions within commercial aviation by 2030. It’s no secret that the market opportunity for low-carbon emitting aircraft is growing daily. It’s also no surprise that to get truly ‘clean’ planes off the runway, significant advances in research, design, and manufacturing are needed. And to do that, money is needed. A lot of it.
The Aerospace Technology Institute (ATI) is responsible for creating the UK’s aerospace technology strategy. By funding world-class research and development, it’s working towards reducing the industry’s carbon emissions by up to 78% by 2035 (compared with 1990 levels). Ultimately, we want to reach an industry-wide net-zero target by 2050.
Yet, in April 2021, the ATI was forced to suspend new applications for their research and production projects due to a lack in funding. When it launched back in 2016, the ATI had a budget of £3.9bn. So far, 343 projects make up the ATI’s portfolio, but funding was due to expire in 2026.
Money, money, money
However, in last Wednesday’s spending review, the Government announced that it will be ‘extending its long-term commitment to the aerospace sector’ and ‘guaranteeing funding for the ATI to 2031’. It’s a move we reckon the ATI’s Head of International R&D and Policy Engagement, Scott Pendry, will be welcoming with open arms. Just the other week, he detailed that both French and German competitors are far more able to set out high-level ambitions relating to low-carbon aviation, thanks to increased funding. France itself has announced a commitment to a having a sustainable aircraft programme flying by 2035, injecting €1.5bn over three years into the technology development required to achieve it.
Scott also states that the UK’s position as a sector leader is ‘by no means guaranteed. International competitors are gaining ground at an accelerating pace resultant of heavy investment in research, technology, and infrastructure.’ For us to continue positioning ourselves as a frontrunner within aerospace developments, we need to scale up our operations. Pronto.
So, back to the question in hand: how does the aerospace industry genuinely recover from the pandemic? Initial suggestions indicate that the UK may need to consider its agnostic approach. As the sector pivots, with pace, towards new and improved technologies for sustainable solutions, a consensus needs to be reached on its very own ‘new norm’ for the future.
According to KPMG, supply chains need adapting to reflect revised production rates. Underpinning this is the first step to truly sustainable aviation capabilities. Developing and increasing our domestic supply chains will help to induce ever-important investment to the sector. And with a reliance on long-term investment cycles, working to streamline costs now is crucial to warding off some of the pandemic’s longer-term impacts.
Enhancing the areas of our aerospace industry that are thriving will also help to regenerate past activity levels. It’s estimated that the UK’s maintenance, repair, and overhaul sector is made up of over 1,300 companies, employing around 57k people. Service provisions are offered to the vast numbers of military and civil aircraft that fly to, from, and through the UK every year. Numbers of which had fallen, but are slowly and steadily back on the rise.
As we continue down the runway of recovery, we must look to nurture both domestic and international cooperation and coordination. Without consistency in productivity or quality, we’ll struggle to retain the commitment from our crucial foreign buyers to our aerospace supplies. Prime Minister Boris Johnson has made a point of repeatedly telling us that we will ‘Build Back Better’. Here’s hoping he truly puts his money where his mouth is so we can really Fly Back Better.
If YOU work in the aerospace sector, we’d love to hear from you. Contact us today about the industry’s post-pandemic landscape!