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Aerospace Industry Reshaping Begins To Deal With COVID-19 Effects

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Commercial aviation faces much pain and turbulence in the years ahead as it tries to deal with the fallout from the COVID-19 pandemic.

Almost exactly 15 years ago, tens of thousands of spectators positioned themselves around the fences of Toulouse’s Blagnac Airport. On April 27, 2005, the Airbus A380 took off for its very first flight, heralding what many believed was going to be a new era of flight. Fast forward to April 2020: Almost the entire fleet of A380s is grounded, as are tens of thousands of smaller aircraft. And Airbus CEO Guillaume Faury wrote in an internal memo that “the survival of Airbus is in question.”

That such a message would come from Airbus, arguably the soundest commercial aircraft manufacturer in terms of finances and strategic positioning, was unthinkable just two months ago. But similar memos could have been issued by any of his colleagues or competitors as the novel coronavirus wreaks havoc on commercial aviation. Many airlines are on the brink of collapse, as are many suppliers. And the financial pressures on the OEMs and large suppliers are so intense that they have no choice but to focus on their own survival rather than considering customer financing or supplier support at any scale.

The COVID-19 pandemic is reshaping aerospace and, about two months into the sector’s worst crisis ever, its future shape is becoming clearer. The industry is becoming much smaller than it was just a short while ago. Bankruptcies are almost guaranteed and will not be limited to smaller, weaker firms. State bailouts and the rising influence of governments will soon be commonplace. Research and development has slowed or is on hold. And transactions are collapsing, most prominently the planned commercial aircraft joint venture between Boeing and Embraer, Boeing Brasil-Commercial. There will continue to be two major players. A third, Embraer, is trying to compete in its own niche against the giants while new rivals such as Mitsubishi slowly appear on the horizon.

The only bit of good news is that while air transport is about to reach rock bottom in some of the hardest-hit markets, it is on a slow upward slope in others, particularly in Asia where some airlines have cautiously begun to add flights. Unfortunately for the aerospace side of the business, the full effect of the declines is only beginning to filter through and will dominate industry activity for the foreseeable future, with analysts generally not expecting traffic to recover to precrisis levels before 2023.

Full report here: https://aviationweek.com/aerospace/manufacturing-supply-chain/aerospace-industry-reshaping-begins-deal-covid-19-effects

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