COVID-19 troubles are only beginning for Boeing and Airbus

posted on 23rd April 2020 by Eddie Saunders
COVID-19 troubles are only beginning for Boeing and Airbus

Following yesterday’s release of the International Civil Aviation Organization’s (ICAO) air travel forecast projecting a 1.2 billion travelers drop and US$160bn to US$253bn in revenue losses for the air travel industry in 2020;

Nicolas Jouan, Aerospace and Defense Analyst at GlobalData, a leading data and analytics company, offers his view on the future of the commercial aviation industry:

The hardest hit regions are set to be Europe, Asia-Pacific and North America, the dominant engines of air travel growth. In other words, air travel is set to disappear almost entirely in 2020. This projection is deeply problematic for the big players of the commercial aviation industry such as Boeing and Airbus and will likely result in successive cancelations of orders from clients wary of COVID-19’s long-term impact.

Boeing and Airbus have already seen multiple cancelations from airlines and leasing companies in 2020 so far. However, it would be wrong to reduce everything to COVID-19 as some more fundamental issues of the commercial aviation industry are also at play. Boeing has made unfortunate headlines with massive cancelations of B737 orders this year. While some cancelations have been connected to COVID-19 and the slowdown of activity – for example Avolon announcing 75 B737 cancelations at the beginning of April – other cancelations such as Air Lease Corporation’s or Air Canada’s earlier this year, could be explained by wider-scale strategic decision to slim order books in front of a pre-COVID-19 slowdown of the Asian market.

Boeing is of course confronted to the grounding of its best-selling B737 MAX since two successive crashes last year. This grounding has made the B737 a privileged target for cancelations when things get rough for airlines. However, fuel efficient single-aisles are generally losing steam for other reasons, such as the collapse of oil price rendering cost-saving engines less essential than in the past. Airbus’s A320neo family registered 29 cancelations in 2020 so far, with most of them from Avianca, a Columbian airline invoking business transformations. More cancelations are to be expected with the prolongation of the COVID-19 air travel ban, but the slimming down of airlines’ fleet is expected to be a longer-term trend.”