Narrow-body production ramp-up and aftermarket growth to persist amid record aircraft deliveries and declining orders. The combined aircraft net order book of Boeing and Airbus is still over 40 percent, down from their peak in 2014. Increasing MRO demand, low fuel prices and higher aircraft deliveries are driving the commercial market.
New aircraft deliveries in 2018 met overall expectations with increases anticipated for 2019. The aftermarket continues to be healthy, driven mainly by traffic growth and older fleets continuing to fly. These factors are shoring up the overall commercial aerospace market, with both North America and Europe driving global demand for commercial aerospace production in 2019 growing at 5.4 percent and 5.3 percent respectively. Economic slowdown in China is slowing growth in the APAC region. The 2019 forecast shows Middle East witnessing the highest commercial aerospace industry growth rate at 7.7 percent YoY, followed by 6.0 percent YoY in Latin America. Growth in APAC is expected to slow down to 5.0 percent YoY in 2019 as a result of manufacturing slowdown in China amid a weak economic environment.
What keeps aerospace executives up at night?
Macroeconomic risk factors continue to weigh on industry executives’ minds.
Interest rate changes and regional armed conflicts are laying the groundwork for executive concerns
in the near term. They show a little more optimism about the decreasing risk potential of political instability and terrorism. While still considered threats, these are not at the same levels as interest and exchange rate changes.
Implications: Steady on course
2018 was a strong year for commercial aerospace with record commercial aircraft deliveries with Boeing and Airbus together accounting for 1600+ deliveries growing at 7.8 percent YoY compared to aircraft delivered in 2017. However, net orders have declined 18.9 percent YoY in 2018 and we see overall production rates and in-service demand continue to stress the supply chain.
Ongoing production ramp ups will continue to put pressure on costs and drive additional investments in efficiency, production automation, cost visibility, and supplier development. As our research has found, only one in 10 aerospace firms are successfully driving new growth and operational efficiencies at the same time.