The global aviation industry continues to be hit hard by the coronavirus pandemic, with the global air traffic to plummet by 60 per cent this year, according to data released by Euler Hermes Economic Research and Allianz Research on Monday (12 Oct).
The research figures indicated that August 2020’s global air traffic has contracted by 75 per cent year-on-year, as measured by Revenue Passenger Kilometers (RPKs), after the 80 per cent drop in July.
Air traffic is expected to plummet by 60 per cent for the full year 2020 compared to last year, due to the lack of convenient testing and compulsory quarantines on arrival.
The insurance companies also forecasted 2021’s global air traffic to remain 35 per cent below the level in 2019, adding that air traffic is not likely to recover to its pre-crisis level before 2024.
“Even as domestic markets in the EU [Europe] and Asia are seeing a slight rebound, we do not see overall demand soaring again unless business travel strongly resumes by the end of the year,” it asserted.
Based on the research, Airbus and Boeing are expected to see 57 per cent and 26 per cent decline in new plane deliveries in 2020 and 2021 respectively, compared to last year.
“In this context, aircraft manufacturers have had no choice but to slow down their production-rates to around 40 aircrafts a month, well below their target of 60 a month a year ago,” said Euler Hermes and Allianz.
The companies warned that the production rate cuts might put the aerospace players’ profitability at risk.
“We expect plane makers as a whole to post a USD4bn [US$4 billion] operating loss in 2020 and the average aircraft manufacturers’ operating margin rate to plunge into the red at -2.5% after an all-time high of 9% only two years ago.”
“However, aircraft part and engine suppliers should get away with an operating margin rate divided by three to around 3% in 2020 and 2021, compared with their global average of 11% over the latest decade,” it added.
Euler Hermes and Allianz also noted that Europian aircraft manufacturers and suppliers are “heading for a harder time” in the long run, as they need to wait for the production rates of new planes to bounce back and cope with losses of capacities.
“The US aerospace sector can at least count on unchanged demand from defense, which accounts for around one third of Boeing’s revenue,” said the companies.
“As for Russia’s UAC [United Aircraft Corporation] and China’s COMAC [Commercial Aircraft Corporation], being state-owned means they can bear a long regime of structural losses as long as they are bailed out.”