COVID-19 Pandemic Brings Aerospace Industry Down to Earth

Film director Ricardo Arnaiz announced he would make a documentary for the 35th anniversary of the first space trip made by a Mexican, scientist Rodolfo Neri Vela, on Nov. 26, 1985, during the STS 61-B mission aboard the Space Shuttle Atlantis, according to an interview with Arnaiz conducted by Redes de Negocios. "As a child, I wrote letters to some aeronauts and NASA. So when Neri Vela traveled to space, I wrote him a letter and I sent it to him through UNAM. To my surprise, he replied and sent me some space souvenirs. Over the years, I grew up and entered the world of cinema but I never forgot my interest in space and astronauts." Arnaiz explained this inspired him to share his passion and interest about the space with the public.

Now let’s jump into the Week in Aerospace! 

Airbus Concedes to End 16-Year Old WTO Dispute

French planemaker Airbus announced on Friday that it would agree to higher interest rates on the loans it received from French and Spanish governments for the development of the A350. This move is expected to be a step forward in the resolution of a 16-year old trade dispute between the EU and the US. 

The decades-old rivalry between Airbus and Boeing was instrumental in a trade war that dates back to 2004, when the US accused Airbus of receiving unfair subsidies from the EU. The EU, in turn, pointed to subsides Boeing received from the US government, forcing the World Trade Organization (WTO) to launch separate investigations on both matters the following year. The WTO ruled that some of EU’s loans to Airbus were unfair but a different WTO panel backed the EU’s claim against the subsidies Boeing received from the US government and NASA.

COVID-19 Hurts Giants Airbus, Boeing in 1H20

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).

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.

Grupo Aeroméxico Reports MX$23.4 Billion Operating Loss in 2Q20

The company, which operates Aeroméxico and Aeroméxico Connect, has been in cost-cutting mode since the start of the outbreak. In its 1Q20 report, Grupo Aeroméxico indicated a 14.0 percent year-on-year decrease in revenue for a total MX$14.1 billion (US$620 million). This drop in revenue led the airline to end the quarter with a MX$2.5 billion (US$110 million) net loss, leaving it with a 17.8 percent negative margin. Demand continued to plunge during the following months. In April, the airline transported 91.1 percent fewer passengers year-on-year with the sharpest drops being felt in international travel, which decreased by 87.7 percent. The trend continued in May and June, when Grupo Aeroméxico saw a 92.4 and 86.1 percent decreases year-on-year, respectively. 

Volaris Faces Harsh 2Q20

Volaris saw double-digit growth in passenger traffic during the first two months of 2020, only for it to shrink rapidly in March, a trend that persisted throughout the second quarter of 2020. In April, the airline sharply reduced its capacity in response to lower demand, shrinking its available seat miles (ASM) to 10 percent year-on-year. May saw a further reduction in capacity leaving the airline operating only at 12 percent of its ASM. Behind the shrunken demand are the measures to contain the spread of COVID-19, which led many to shelter in place, which caused several of Volaris’ destinations in Central America to close their borders. However, the tide turned in June as an increase in demand led Volaris to increase its capacity to 41 percent. The airline explained that by late June, it had restarted operations in 49 of its domestic routes and 22 of its international routes to the US.