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News Article

COVID-19 Hurts Giants Airbus, Boeing in 1H20

By Alicia Arizpe | Thu, 07/30/2020 - 12:03

The fallout from the COVID-19 pandemic continues to hurt the global aerospace industry as supply chain disruption and a greatly reduced demand for new aircraft led to significant losses for major planemakers Airbus and Boeing.

Travel restrictions implemented to contain the spread of COVID-19 have led to the greatest crisis in the history of the aviation industry, which in turn is having deep consequences in the entire aerospace supply chain. As a large part of the world’s fleets were grounded, airlines dialed back on the order of new aircraft and deferred orders made on greener times. These circumstances led to significant losses for major aerospace OEMs, which have seen a sharp reduction in new aircraft orders and were also forced to reduce their production due to supply chain disruptions as following plant shutdowns in accordance to local guidelines to avoid the spread of COVID-19.

French planemaker Airbus reported today that it had seen €900 million (US$1.06 billion) in losses related to COVID-19 during the first half of 2020. Revenues also decreased by 39 percent during this period for a total of €18.9 billion (US$22.3 billion), leaving the company with an adjusted EBIT of negative €945 million (US$1.1 billion). Deliveries also shrank significantly during these six months as Airbus delivered only 196 commercial aircraft, while it had delivered 389 during the first half of 2019. “The impact of the COVID-19 pandemic on our finances is now very visible in the second quarter, with 1H20 commercial aircraft deliveries halving compared to a year ago,” said Guillaume Faury, CEO of Airbus. Orders, on the other hand, were better for this period as the French planemaker received 298 for commercial aircraft, while it had seen 88 in 1H19, leaving the company with a 7,584-strong backlog.

Boeing had to grapple with the effects of the COVID-19 outbreak while already dealing with another prolonged crisis caused by the two 737 Max crashes that killed 346 people. The crashes led to the global grounding of the once best-selling jet, which has now lasted for 16 months with no clear end in sight. This crisis led Boeing to close 2019 with 87 negative orders and cancellations would only mount up during 2020 as the COVID-19 outbreak worsened an already bad situation. "The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability," said David Calhoun, President and CEO of Boeing. In the first half 2020, Boeing saw a total of 355 cancellations of the 737 Max and while the planemaker did receive orders for 737s, 767s and 787s, among others, at the end of the day Boeing closed the first half of 2020 with 323 net cancellations/conversions. Deliveries for the period were also down to only 20, 77.8 percent less than during 1H19, which led Boeing to report a 25 percent decrease in revenue for a total of US$11.8 billion and a total net loss for the period of US$2.94 billion.

Both OEMs have implemented several adjustments to preserve cash reserves until demand recovers, including reduced production, layoffs and loans.

Alicia Arizpe Alicia Arizpe Senior Writer