Boeing Forecasts Slow but Sure RecoveryBy Alicia Arizpe | Wed, 10/07/2020 - 11:24
Boeing’s latest 20-year forecast predicts an increasing focus on fleet renewals after the COVID-19 outbreak disrupted the global aerospace industry. With many points of uncertainty for the near future, the aerospace giant points to the historic resilience of the sector and the growth of developing economies as signs that the aerospace industry will remain strong for the foreseeable future.
COVID-19 has thrown the once steadily growing aerospace sector into chaos as air traffic plunged to its lowest point in history, leading airlines to cancel flights and ground large parts of their fleets. Airlines across the globe suddenly found themselves with more aircraft than necessary to face a diminishing number of passengers, little income and fixed maintenance and personnel costs. During 2Q20, airlines burnt through US$51 billion and are expected to lose US$77 billion during the second half of the year, according to the International Air Transport Association (IATA). Under these circumstances, many airlines have chosen to defer new aircraft they had ordered in greener times. This put commercial planemakers in the uncomfortable position of having to adjust their production to shrinking demand, which had a rippling effect throughout the entire aerospace supply chain. The full impact of the COVID-19 pandemic in the aerospace industry is still unclear as countries that had contained the outbreak are facing second waves and studying whether to close their borders a second time.
Boeing’s estimations for a recovery in air travel to 2019 levels are no shorter than three years, with recovery to former growth rates taking even longer. The recovery rate of air travel will resonate in the aerospace sector. “The global aerospace industry is reliant on the aviation sector,” explained Felipe Sandoval, President of FEMIA. However, Boeing seems confident that the replacement of older aircraft will continue to support the sector in the middle term, allowing it to grow again in the long-term. At this point, airlines are taking advantage of the downtime to replace older aircraft, explains Boeing. While the sector was growing, airlines delayed retiring their older aircraft to ensure they could cater to a larger number of passengers. Now, this trend has shifted. While in average 2-3 percent of a fleet is retired annually, during previous downturns the trend increased to 4-5 percent. Boeing expects that between 2020 and 2039, the world will require 43,110 more aircraft, of which 2,610 will head towards Latin America. “Commercial aviation has always been a long-cycle business and stakeholders in our industry know that it is imperative to plan for the future. This is even more true today,” said Darren Hulst, Vice President of Commercial Marketing at Boeing in the report.