Up to 80% of regional fleets were taken out of service at the height of the outbreak between February and April, and although there has been some recovery since May, the return to normal remains slow.
CAPTIVE MARKET GAME SCENES DRIVER
But it represents a double hit for the MRO segment.įirst, as the key driver for airline MRO spending is flown capacity (best measured in available seat kilometers, ASK, for passenger aircraft and available ton kilometers, ATK, for freighter aircraft), mass groundings have hit earnings hard. This will come as a welcome boost for aircraft OEMS and their suppliers. We assume they will be replaced with new generation widebodies, such as Airbus A350s and Boeing 787s, or even long-range single aisle aircraft, such as the Airbus A321XLR, on specific routes. This includes those that have not yet reached their regular end of life. Over the past weeks, more and more airlines have announced that currently grounded widebody aircraft, especially those of older generations such as Airbus A380s and Boeing 747s, will not return to service. How COVID-19 will affect the MRO industry A double hit for the market To improve our analysis and factor in the growing rate at which airlines are now retiring aircraft, we split the scenario into two: "Recession" with retirements according to pre-crisis retirement plans (scenario 3a), and “Recession” with faster retirement of aircraft, specifically widebody aircraft (scenario 3b).ġ. Indeed, the "Recession" scenario is looking more and more likely, and it is the scenario we focus on in this article.
A "Fast recovery" was ruled out by June, and now we have to face the fact that a "Delayed cure" scenario is increasingly unlikely. In April, as the pandemic became established worldwide, we set out three possible recovery scenarios: "Fast recovery", "Delayed cure" and "Recession". We anticipate this will be a balance between recovered demand for air travel and new requirements around physical distancing, de-globalization and sustainability. We forecast the potential financial impact over the coming years, and outline how we believe the industry will adjust to the ‘new normal’. In this article, a follow up to a first article in April, we focus specifically on the effects of the coronavirus on the aerospace MRO industry. Such moves and strategy variations reflect the ongoing uncertainty. Many have dropped flight change fees, and new business models are emerging, such as Emirates' COVID-19 insurance. As a result, different carriers are employing different return-to-service strategies. But in the absence of data to accurately predict demand, they are struggling with capacity planning. The whole sector also remains at grave risk of a second wave of infections that will further prolong the downturn.ĭespite this, airlines around the world are gradually resuming services. Although Europe and much of Asia have slowly begun ramping up economic activity, many big markets are still in thrall to the virus, including the USA, India and Brazil.
Six months after the global industry all but shut down due to the pandemic, it is still in a perilous state.
But the coronavirus crisis has plunged it into turmoil and smashed further growth projections like a passing hurricane.