2020 Forecast: Restoring aerospace growth

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Easing trade tensions, a rebound in commercial aircraft production, and military modernization can revitalize the aerospace and defense industry.

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January 30, 2020

Photo credit: Boeing
Boeing hopes to get the 737 MAX 8 in service by mid-year.
Photos credit: Boeing & Airbus

Despite Boeing’s really bad 2019, there are reasons to believe aerospace in general will improve this year. Easing trade tensions between the U.S. and China, progress toward resolving Boeing’s 737 MAX crisis, increased defense spending, a budding commercial space sector, and Airbus’ robust sales and production portend well for 2020.

Airbus delivered 863 commercial aircraft to 99 customers in 2019, outpacing 2018’s record output by 8%. Only the A380 declined. For the 17th year in a row, production increased, and Airbus delivered 173 wide-body aircraft, its highest number in a single year.

Airbus had 1,131 new orders for the year, with net orders reaching 768, compared to 747 in 2018, taking Airbus’ cumulative net orders higher than 20,000.

The single-aisle A320 family tallied 654 net orders, including an enthusiastic market for the A321XLR. Cancellations of 363 aircraft reflect specific airline situations in 2019 as well as the decision to end A380 production. At the turn of the year, Airbus’ backlog stood at 7,482 aircraft.

Boeing delivered only 380 planes in 2019, a 53% decrease compared to 2018. Its gross orders were 246, a 77% decrease compared to 2018. Boeing’s net orders after cancellations and conversions were 54 planes, compared to 893 the previous year. Boeing’s backlog now stands at 5,406 airplanes.

The company’s efforts to return the single-aisle 737 MAX to service included more than 800 test and production flights through October, clocking more than 1,500 hours with new software.

Embraer ended Q3 2019 (the latest figures available) with a firm order backlog of $16.2 billion. Its commercial firm order backlog of 345 includes 181 E175 and 123 E195-E2 airliners. Embraer’s contract with SkyWest Inc. for a firm order of seven E175 jets in a 70-seat configuration is worth $340 million.

The most deliveries for the year were of the E175 model. Embraer also delivered its first E195-E2, the largest of the three members of the E-Jets E2 family of commercial aircraft. The recipients were aircraft leasing company AerCap and Azul Linhas Aéreas Brasileiras, the global launch customer for the E195-E2, which placed 51 firm orders.

Airbus’ A220 should get rolling off the new U.S. assembly line in Mobile, Alabama, this year.

Private jet company Flexjet ordered a fleet of Praetor 500, Praetor 600, and Phenom 300 jets valued at up to $1.4 billion.

Embraer also delivered the first KC-390 airlifter to the Brazilian Air Force, and the Portuguese Air Force ordered five, the type’s first international order.

Horizon Air, a subsidiary of Alaska Air Group, selected Embraer Aircraft Maintenance Services (EAMS) in Nashville, Tennessee, as the exclusive heavy maintenance provider for the company’s fleet of 30 Embraer E175 aircraft. The multi-year agreement includes airframe maintenance, modifications, and repair services.

Industry trends

In 2020, the aerospace and defense (A&D) industry is likely to return to growth, according to Deloitte’s Global Aerospace and Defense Industry Outlook. Robin Lineberger, Deloitte Global’s aerospace & defense leader, outlines a few trends to watch in the coming year.

Bombardier Business Aircraft delivered its first Global 6500 in 2019.
Photo credit: Bombardier
  • Global defense budgets up 3% to 4%, reaching an estimated $1.9 trillion
  • U.S. foreign military sales (FMS) likely to remain steady as global threats persist
  • Commercial aerospace sector should recover in 2020, grow in deliveries after the recent downturn; long-term commercial aircraft demand remains robust, with 14,000-aircraft commercial order backlog
  • Regional jet market remains strong; forecasts anticipate more than 5,000 units required during next 20 years
  • Increasing aerospace electric propulsion system development to reduce carbon emissions, make flights quieter, decrease costs
  • Commercial space sector investment in new and existing space technologies, services should remain steady, funded primarily from governments, venture capital
  • Urban air mobility (UAM) vehicle development to accelerate during the next decade; challenges remain in regulations, energy management, collision avoidance, infrastructure needs, air traffic management, overcoming passenger anxiety
  • Mega-mergers may decrease; further industry consolidation possible as smaller companies may not meet increased financial, program management, skills, risk-taking, investment requirements
  • Consolidation of components, aero-structures, electronics, interiors expected to continue as companies focus on gaining economies of scale

In 2020, the Deloitte analysts expect the A&D industry to get back to its growth trajectory with the commercial aerospace sector recovering from its decline in 2019 and the defense sector continuing to soar.

“To meet the increased demand and improve production yields, A&D companies should leverage highly agile production that adapts to changes in demand, including digital technologies,” Lineberger writes. “As A&D customers become more demanding in terms of customization, industry players could be at the forefront of manufacturing, enhancing productivity and efficiency by investing in areas such as smart factory initiatives.”

Lineberger tells AM&D readers to be prepared for market disruptions, such as fallout from Brexit – the United Kingdom quitting the European Union.

“Inventory your supply chain, understand where they are and what’s at risk, and ensure you have material on hand to buffer any delays at the border until things get sorted out.”

He adds that the era of just-in-time supply chains is over, that companies must manage in a different way.

“Be cautionary, have supplies on hand” to get through any unexpected production bumps.

About the author: Eric Brothers is AM&D’s senior editor. He can be reached at 216.393.0228 or ebrothers@gie.net