Jet, Set, GO
It’s been a turbulent time for the commercial aerospace sector over the past couple of years to say the least. From bailouts, grounded flights, to now supply shortages and sustainability goals to quickly meet, there has been a lot happening and the industry is on the defensive, looking for ways to quickly adapt.
What has happened?
The pandemic grounded flights globally, with most countries experiencing around a 60-70% decline in flights. According to the International Civil Aviation Organisation there were just 1.8 billion passengers taking flights through 2020, compared with around 4.5 billion in 2019 (a lot of which were domestic rather than international).
Whilst there have been some re-bounds for the travel, this was often short-lived. It wasn’t just the flight aspect that came to a halt, manufacturing also was closed down or switched operations to supply immediate healthcare solutions. And with no demand for planes, those who manufacture components that sell into the aerospace faced a considerable decline.
Whilst flights were grounded, many airlines made the decision to decommission aging aircrafts, earlier than their initial retirement date, especially those quad-engines aircrafts Using the downturn as a catalyst for aircraft retirement isn’t new for the industry as low demand periods are typically when airlines restructure their fleets, yet this is the largest one in recent history. Recently British Airways, the world’s largest operator of jumbo jets, announced it would retire all of its 31 Boeing 747’s, 10% of its total fleet, ahead of a planned phasing out in 2024.
For most, this decommissioning was chosen due to the high-costs associated with maintaining airplanes, which when coupled with reduced revenue becomes back-breaking. In fact, the world’s airlines spend more than $40 billion on airplane maintenance each year, according to Boeing.
“We have found that instead of trying to consistently maintain them until flights pick back up, they are actually decommissioning these planes. So, when there is a pick up of international flights, they are going to need to buy new planes.” – Tom Martin, Jetsoft.
Since that point, there have been major vaccination rollouts globally, that have enabled international travel to resume. With this air travel is gradually recovering, albeit at a slow pace. The recent outlook from IATA states that total passenger numbers are expected to reach 3.4 billion in 2022 (4.5 billion in 2019).
Now that travel has been slowly gaining pace, airlines now require new planes to be able to transport passengers again or bring planes back into service, but many are turning to newer ones like the Boeing 787 Dreamliner and Airbus A350 XWB. There is a strong consideration from airlines to move towards those more efficient, to help both with their bottom line but also the sustainable goals still approaching.
But with travel gradually increasing, and with most airlines decommissioning huge proportions of the fleet, there is a possibility that the manufacturers that supply the aerospace sector are going to experience a considerable spike in production to be able to produce airplanes in a shorter time period. There has already been some increase this year compared with the latter. For example, Boeing and Airbus delivered 79 and 172 commercial jets in the second quarter of 2021, compared to 20 and 74 deliveries in Q2 2020.
Whilst the increase in travel may still be delayed till 2022, the aerospace supply chain, in particular OEM’s are reading for increased demand to be able to adapt quickly to a change in market conditions. Aside from this, MRO (maintenance, operations and repairs) spend is set for a strong recovery in 2022, as you can’t defer the maintenance forever.
What’s to come
Despite pandemic pause, demand for new airplanes is expected to swell in the next two decades, according to Boeing. The company’s annual market outlook predicts the global fleet of commercial airplanes will climb from around 25,000 in 2019 to nearly 50,000 in 2040 and they project that the global aerospace industry, including defence will reach $9 trillion over the next decade, this is being driven by the retirement rate reaching 25% every five years.
Whilst the timing of the market recovery still remains uncertain, the pendulum is swinging far more in a positive direction than before. The industry needs to be prepared for what is to come, with flight demand but also remembering those sustainable credentials that are going to be critical in the next decade or so.
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