Recovery will be a long-haul flight
Aerospace companies navigated a turbulent 2020, to say the least. There’s no assurance of clear skies in 2021, but the forecast is improving as governments begin to ease restrictions and air travel regains momentum.
According to Accenture’s Commercial Aerospace Insight Report, executives are cautiously optimistic about the future. While 40% still see the outlook as challenging in the next 6 months, 50% expect to see growth in the next year.
We predict that global commercial aerospace revenues will increase 9% YoY in 2021, but even that lift would leave the global industry down 15% vs 2019. Reaching pre-pandemic levels of aircraft deliveries will likely take at least as long as a full airline industry recovery.
Podcast: Commercial aerospace business outlook
It’s been a roller coaster ride in aerospace over the last year. From how to keep up with demand, to how to keep the lights on, to how to restructure and even rebound – the sector has seen it all. One year on, how is industry responding and what do aerospace and defense leaders think will happen in the coming months and years? Listen in as Aviation Week speaks to Accenture’s Aerospace and Defense team about these developments.
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Global aviation recovery: running on empty
Passenger traffic plunged by 66% in 2020, the sharpest decline in aviation history. A full recovery to pre-COVID 19 passenger levels is not expected to occur before 2024.
Airlines are experiencing a liquidity crisis, with the majority relying on government aid to stay afloat. And aircraft delivery deferrals and cancellations are happening at unforeseen levels.
At best, airlines hope to mitigate their ongoing losses and postpone any real growth prospects until the travel economy has recovered.
What keeps aerospace executives up at night?
Ongoing concerns about the global pandemic, combined with worsening economic conditions, are top of mind for executives in terms of the next 6 months.
Executives expressed increasing concern about interest rate changes in the next 2 years, while other geopolitical risk factors such as political instability, terrorism, regional armed conflict and exchange rate changes aren’t a cause of significant concern.
Has the industry weathered the worst?
Over the next 6 months, 85% of executives expect their commercial aerospace revenues to decline, or at best, be flat, but 78% expect to see an increase over the next 18 months.
Beginning to build back
88% of executives expect their production capacity to decrease or remain the same in the next 6 months, but nearly half (46%) expect it to increase over the next 12 months, rising to 68% over the next 18 months.
Supply chain challenges
Overall net new orders plunged to negative in 2020 as cancellations outpaced new aircraft orders. According to our survey:
The global Maintenance, Repair and Overhaul (MRO) revenue declined 50-60% in 2020, due to lower aircraft utilization and deferred overhauls.
What will drive recovery in 2021? The demand for passenger to freight aircraft conversion, short-term aircraft storage services, out-of-storage checks and return-to-service maintenance. Executives express optimism about the longer-term outlook.
The focus on environmental sustainability is also evident in the new range of products and services being launched in the market. Startups are now competing with industry giants to develop electrically propelled aircraft which are expected to disrupt urban and short-haul air transport in the next decade.
The runway to recovery
The travel economy was grounded by the global pandemic, but as vaccination campaigns ramp up and trends improve, travelers are beginning to dream about their next destinations.
And the aviation industry will be ready when they are.
About the Accenture Commercial Aerospace Market 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’s 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. Our poll was conducted in January 2021 and views are subject to considerable change as conditions can rapidly evolve.