Demand for New Aircraft Soars Amidst Airline Recovery
In the first five months of the year, airlines worldwide ordered nearly 1,200 new aircraft, showing a strong recovery in demand as passenger traffic slowly increases in light of COVID-19 cases slowly dropping in many countries. The rankings were boosted by three exceptional deals, notably Air India’s purchase of 470 single-aisle and long-haul widebody aircraft from Boeing and Airbus.
Airlines are Struggling to Recover and Keep Up with Growing Capacity Demands
The International Air Transport Association reports that domestic travel has now regained pre-pandemic levels, and passenger traffic grew by 46% YoY in April, largely led by carriers in the Asia-Pacific. Despite expanding levels of demand, airlines maintain capacity constraints. Airbus and Boeing, alongside engine makers, have faced challenges meeting delivery targets as a result of component shortages. Reportedly. airlines are scrambling to recover capacity, reviving idle planes, and ordering new ones, and everyone is eager to get to the front of the queue for deliveries.
The Majority of New Orders are for Single-Aisle Aircraft and A320 Jet Family
According to numbers from IBA research, published by FT.com, net orders, which factor in cancellations, totaled 1,592 in 2022, almost double the year before, at 812 orders, right before the pandemic hit. Net orders were mainly for modest-sized single-aisle aircraft, notably Airbus’ best-selling A320 jet family, which amounts to around 1,436. Net Orders for widebody aircraft, commonly used in long-haul international travel, were 156, a fraction of the 148 recorded in 2019.
The Sector’s Supply-Demand Balance is Expected to Remain Unbalanced for the Foreseeable Future
While the number of orders shows substantial growth for the sector, the balance between supply and demand remains off-balance with already-stretched delivery slots set to remain crowded for the foreseeable future. Olivier Andries, CEO of Safran, an engine maker for large passenger jets, recently announced that he expects clients to operate at least 10,000 less-than-optimal engines by 2025. Meanwhile, Boeing CEO David Calhoun warned in May that progress in solving the industry’s supply chain problems had been “frustratingly slow.” He said that while Boeing has seen improvement in some areas of its supply chain, the firm’s ability to meet customer demands would remain limited five years down the line.
In the short term, airlines’ ongoing battle to recover from significant financial losses incurred due to the pandemic is impacting the supply side of things. As many airlines hold onto planes in hopes of demand rising, it impacts the already-congested delivery slots.
Conclusion
The airline industry appears to be on an upward trajectory, with a consistent return of passenger traffic and steady growth in aircraft orders. Despite this growth, however, supply-demand alignment continues to be an issue in the industry, with many challenges from adjusting to increased capacity demands to addressing supply chain constraints. And, with many sources predicting a continuation of the supply chain crisis and its impact on the aviation sector for the next year, the industry will need to establish new and creative ways to rise above these challenges.
Additional Piece
The aviation sector, like many other industries, has felt the impact of COVID-19. For aircraft manufacturers, this impact has manifested as widespread cancellations and delays amidst customer and supply chain stress. Ultimately, airlines have struggled most throughout the pandemic, as they faced immense financial losses and reduced demand for travel.
As the world slowly returns to what has been dubbed as the “new normal,” we see the airline industry show signs of sustained recovery. One notable example is the fact that airlines placed nearly 1,200 orders for new aircraft in the first five months of the year. This signals strong growth in demand, which was further supported by three notable deals, including the Air India purchase previously mentioned.
The majority of these orders were for single-aisle aircraft, resulting in a significant uptick from the fleet commonly used for longer transatlantic flights. However, international travel still remains significantly curtailed in light of ongoing travel restrictions.
While many airlines aim to recover from the damage caused by the pandemic by bringing back planes previously stored and ordering new ones, ongoing supply chain challenges persist. The industry has yet to fully recover, which poses a challenge for companies that are struggling to meet already high demand.
The lack of availability of available planes in the short term is poised to impact the long term. The last time we experienced a similar growth trajectory in airplane orders was right before the 2008 global financial crisis, which eventually led to a sharp downturn in demand. While the current situation differs from that of over a decade ago, it does signal the potential to face similar issues when the current situation dies down.
Overall, the industry requires essential changes to ensure sustainability and supply-demand balance in the long term. Relevant players must work together to ensure adequate supply while also curbing the impact of the pandemic and future economic issues. Prolonged industry-wide collaboration and investments will be crucial to enable the recovery of the commercial aviation industry.
Summary
The global civil aviation industry is undergoing significant growth following the hit that it took due to the COVID-19 pandemic. Airlines have placed 1,200 orders this year, showing sustained growth in demand. However, the majority of these orders were for single-aisle aircraft. Despite supply chain and delivery issues, there remains an urgent need for aircraft manufacturers to build the number of available planes, as the recovery in the aviation industry continues apace. The industry is focusing on supply-demand alignment, which is likely to remain an issue for some time. The industry is brace for enduring support from the government and ongoing investment if it is to continue to thrive.
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Airlines placed orders for nearly 1,200 new aircraft in the first five months of the year, underscoring the recovery in demand from the industry as passenger traffic continues to recover in the wake of the pandemic.
The figures were bolstered by three extraordinary deals, including the announcement in February of Air India purchase 470 single-aisle and long-haul widebody aircraft from Airbus e boeing, according to research by the aviation consultancy IBA. Total orders through the end of May, including options, were 1,198.
The strong order volume underscores how quickly airline demand has returned to pre-pandemic levels. The International Air Transport Association, an industry body, said this week that domestic travel had regained pre-pandemic levels and overall passenger traffic grew 46% year-on-year in April, led by carriers in the Asia region. -Pacific.
Demand for aircraft has been fueled by persistent industry-wide capacity constraints which pushed the delivery slots available for the most popular models towards the end of the decade. Airbus and Boeing, along with engine makers, have struggled to meet ambitious delivery targets due to component shortages since the peak of the pandemic.
“Airlines are scrambling to recover capacity, bringing back stored planes and ordering new ones. Everyone is eager to get to the front of the queue for deliveries,” said William McClintock, head of market intelligence at IBA.
Net orders, which factor in cancellations, totaled 1,592 in 2022, nearly double the 812 orders placed in 2019, the year before the Covid pandemic all but brought air travel to a halt, according to IBA data.
The majority of net orders, amounting to 1,436, concerned single-aisle aircraft in particular Airbus’ best-selling A320 jet family. Net orders for widebody aircraft used on long-haul international routes were 156, a fraction of 148 in 2019.
The wide-body pickup now “seems tenable,” McClintock said. “Before the pandemic, delivery rates exceeded orders and didn’t seem sustainable.”
However, the sector’s supply-demand balance is expected to remain off balance for some time, with executives warning that delivery problems will persist into at least next year.
David Calhoun, chief executive officer of Boeing, warned on Friday that progress in solving the industry’s supply chain problems has been “frustratingly slow”.
“We have to be smart about how to manage supply against that peak demand, and it’s reasonably large,” Calhoun said at a Bernstein conference in New York. “On the flip side, on the supply chain, it’s just frustratingly slow to open constraints.”
While Boeing has seen improvements in some areas of its supply chain, Calhoun said the ability of both Boeing and Airbus to meet customer demand will still be “limited in five years.”
Guillaume Faury, CEO of Airbus, said last month that the supply chain crisis gripping the sector could last in the next year.
https://www.ft.com/content/bad858ab-f4d8-4ce9-bcef-d68ff7c7ab7d
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