Commercial Aerospace Insight Report 2020

Balancing now versus next on the path to recovery

With 2020 set to go down as the worst year ever for commercial aerospace, our research and analysis suggests that commercial aerospace revenues will decline by 37% YoY. In addition to maximizing the safety of their people, customers and suppliers, commercial aerospace executives are addressing supply chain and production as a near term priority, with liquidity and financing major areas of focus over the next 6 to 12 months.

Most aerospace executives (69%) expect unit deliveries of their products to decrease in 2020 compared with the previous year. Both Boeing and Airbus saw their orderbooks enter negative territory in the first 8 months of 2020, as cancellations outpace new orders. Boeing delivered only 87 aircraft in the period (down 68.5% YoY) and Airbus 284 (down 43.2% YoY).

Airlines running on empty

With the IATA estimates showing airline revenue down by 50% in 2020 compared with 2019, the industry is expected to record a net loss of $84 billion this year. Understandably, airline industry executives must focus on addressing immediate cash losses and balance sheet demand as well as trying to stimulate passenger demand by ensuring their safety and offering attractive pricing. But recovery to pre-pandemic levels looks some way out. Our research reveals that 40% of aerospace executives believe it will take at least 24 to 36 months for airline revenues to recover and many believe the recovery period may be even longer.

As a result, aircraft delivery deferrals and cancellations are at previously unseen levels. From the levels recorded in March 2020, more than 1500 narrow-body and 228 wide body aircraft have been removed from the delivery schedule covering the next 8 years. Further reductions look likely over the coming months.

The aftermarket too has seen substantial declines as airlines defer overhauls in order to conserve cash. Global MRO spend in 2020 is projected to shrink by between 40% to 60%. One-third of the global fleet is currently grounded. Short-term, this will drive demand for storage as well as out of storage checks and return-to-service maintenance when demand picks up.

Gradual and variable recovery across the regions

While 90% of aerospace executives expect their revenues to decline or at best remain flat over the next 6 months, some recovery (albeit from a much-lowered base) will take place – with the resumption of deliveries from already built and stored 737 MAX aircraft (subject to certification) a key driver.

But the path to operating at pre-pandemic levels looks uncertain and long. In North America, growth is expected to recover in 2021 by 6.5% YoY. However, that remains 31% lower than 2019, and even lower than the levels of growth compared to pre-pandemic levels before the 737MAX was grounded.

In Europe, aerospace demand is expected to fall by 43% in 2020, largely as a result of deferrals of Airbus orders. The YoY decline for the European industry is sharper than in North America and may experience further negative impacts from the prospect of a ‘no-deal’ Brexit that could disrupt supply chains.

Relative to the other regions, Asia Pacific presents the likelihood of a faster recovery. While demand is likely to decline 8.2% on 2019 levels, domestic orders for commercial aircraft in China are relatively buoyant.

What’s keeping aerospace executives up at night?

Looking ahead, aerospace executives say their worries about the future are firmly focused on the pandemic and its economic fallout. They are not predicting other issues such as terrorism, regional conflicts or political instability as likely to eclipse their primary concerns over the next 2 years.

Creating resilience

The disruption and challenges posed by COVID-19 required immediate actions to address safety and business continuity. Now, leaders are focusing on the longer-term actions they need to take to drive resilience, in what is likely to be a period of unpredictable and possibly muted economic recovery.

Enabling a remote workforce at scale

For most commercial aerospace companies, remote working at-scale is unfamiliar territory. Addressing that need has seen a surge in digital initiatives and the deployment of cloud, machine learning and virtual/augmented reality. More than 40% of executives surveyed mentioned scaling adoption of virtual collaborative platforms and cloud-based solutions over the next 6 to 18 months.

A three-step approach to long-haul recovery

To navigate what comes now and next, we recommend a three-stage approach that addresses immediate risks and concerns while also maintaining sights on the future and the path to recovery.

In it for the long haul

The unprecedented interruptions and economic headwinds generated by COVID-19 will continue to disrupt the commercial aerospace sector for some time to come. But as they battle the near-term challenges, leaders are also looking to the longer-term future. They are putting in place the capabilities and technology investments they need to emerge as more resilient when conditions improve and economies recover.

Areas of focus over the next 6 to 18 months

Executives at major commercial aerospace companies were polled for their insights on future supply and demand outlook. The outlook indicators are based on the combination of the econometric modeling and a global commercial aerospace executive poll.

About the Accenture Commercial Aerospace Insight Report

Combining sophisticated econometric modeling methodologies to drive quantitative quarterly forecasts on the health of the commercial aviation market, with insights from leading aerospace executives worldwide, the “Accenture Commercial Aerospace Insight Report” provides a unique perspective on short- and medium-term trends and drivers in this market. Instead of focusing solely on OEM sales, the report covers a wide range of activities, from suppliers to MROs.

To complement the econometric modeling, executives at major commercial aerospace companies were polled for their insights on future supply and demand outlook. The outlook indicators in this report are based on the combination of the econometric modeling and a global commercial aerospace executive poll. Our poll was conducted in August 2020 and views are subject to considerable change as conditions can rapidly evolve.