Aircraft manufacturers ramp up for recovery

Judging by their production plans, aircraft manufacturers seem certain recovery is imminent – particularly when it comes to narrowbody jets. Airbus this week confirmed that monthly output of A320 family aircraft will rise to 65 by mid-2023, with the A220 rate also increasing from five to six early next year. The European airframer, however, remains cautious about prospects for twin-aisle types, including its flagship A350.

Meanwhile, rival Boeing intends to raise the number of 737s it makes each month to 31 by next year. That figure is, of course, well down on previous targets, but the US company has been affected not only by the pandemic, but the long Max grounding which saw it accumulate stocks of around 450 undelivered aircraft. And that projection is dependent on China – the final large market still to approve the Max’s return to the skies.

However, the biggest problem for the two manufacturers next year could be not so much how many aircraft they can sell, but whether they can build enough of them. “By the second half of next year, our industry will be supply constrained,” warns Boeing chief executive David Calhoun. With recovery from the pandemic creating its own pressures, there is a squeeze on the availability of many raw materials, a labour shortage, and logistical logjams at ports and in the road haulage sector.

Many smaller manufacturers have this week reported strong financial results, with a booming business aviation sector benefiting, among others, Gulfstream, Textron, and Bombardier. According to Gulfstream parent General Dynamics, the backlog at the Savannah-based corporate jet company is at a six-year high, with order activity remaining strong throughout the pandemic. Much of this has been the result of high-end business travelers turning from the airlines to private aircraft.

Textron Aviation – which is behind the Cessna, Citation, and Beechcraft brands – is also buoyant on the back of an almost 50% year-on-year increase in revenue in the third quarter. Its chief executive Scott Donnelly notes that the number of used aircraft for sale is at “record low numbers”. Rather than a sign of a languid market, this indicates owners are holding onto their assets, and pushing potential purchasers to buy new.

We have written about controversial moves by a several airlines to require staff to be vaccinated. A similar trend is sweeping aerospace, driven by a US federal mandate for government contractors to have all employees jabbed by 8 December. The move will undoubtedly lead to firings – in the USA there is a large and vocal anti-vax lobby that includes aerospace workers. That is a concern at a time of skills shortages, but most companies believe the edict will help drive an economic rebound.

On the airline side, results announcements this week broadly painted an optimistic picture, although the confidence is not universal. Like most of the sector in the Asia-Pacific region – where countries have been among the slowest to remove travel restrictions – AirAsia Group has taken a hammering in the past 20 months. However, the carrier now expects a “strong revival” to begin before the end of the year as key tourism markets reopen.

However, Japanese airline ANA has cut its full-year earnings forecast, and expects to remain in the red for 2021, citing a delay in the recovery. And Cathay Pacific remains even more beleaguered. Once one of the world’s best-connected international carriers, its ability to restore services is hampered by a Hong Kong administration in lockstep with Beijing’s zero-Covid strategy that still believes closed borders are the surest way to contain the virus.

Elsewhere in the world, the news has been largely positive, with Air France-KLM back in profit in the third quarter but holding back on confirming 2022 capacity plans because of uncertainty about the Asia-Pacific market. In Latin America, Brazilian carriers Gol and Azul are anticipating a strong resurgence in international travel, as the last restrictions are removed. Brazil also has an under-served domestic air network for its vast size, and they believe that too is ripe for expansion.

In the Middle East, coronavirus severely clipped the wings of the Gulf-based global connectors – Emirates, Etihad and Qatar Airways – whose relentless expansion was one of the big themes of the 2010s. Now Emirates is preparing for a “sooner than expected surge” in customer demand, launching a recruitment campaign this week for 2,500 pilots, engineering staff and ground workers. That is on top of a previously-announced drive for 3,000 cabin crew and other service staff.

With COP-26 due to take place in Glasgow, sustainability is very much on the agenda for the airline sector as it prepares for recovery. Emirates’ neighbour Etihad claims to have cut CO2 emissions by 72% on a London to Abu Dhabi flight with the 787 “Greenliner” testbed it operates in partnership with Boeing by using a blend of sustainable aviation fuel, or SAF. However, it warns that more needs to be done to lower the cost of SAF and make it widely available at the world’s airports.