Airframers might cut aircraft production even further in 2021 owing to the depth of the pandemic-driven aerospace downturn, according to some financial analysts. “Aerospace manufacturer build rates will likely be cut over the next year as deliveries from Airbus and Boeing miss expectations,” says a recent report from Bloomberg Intelligence. “Airbus may need to cut its 40-a-month rate on the A320 unless demand improves quickly and significantly,” the report adds. It notes that Boeing has aimed to deliver, in 2021, roughly 450 737 Max – aircraft the company produced but has not delivered owing to the regulatory grounding. Reaching that goal “will be difficult, especially as airlines have little need for planes,” Bloomberg writes. Teal Group analyst Richard Aboulafia likewise thinks more rate cuts are possible. He notes Airbus and Boeing have been unable to deliver all the jets they are now producing. As a result, the companies are sitting on costly stockpiles of new aircraft. “It’s clear that, for a time, while there’s a surplus of already-built jets, they might just be considering lower rates,” Aboulafia says. “I think that there’s a very strong chance of it, especially on twin-aisles.” Airbus and Boeing could disclose more details about their 2021 plans in the coming days when they issue third-quarter financial results. Boeing intends to release its results on 28 October, followed by Airbus the following day. The companies trimmed commercial aircraft production rates earlier this year as the pandemic depressed demand for new jets. Airbus brought A320 rates to 40 jets monthly, down from 60. It trimmed A330 production to two jets monthly, down from roughly 4.5 monthly in 2019, and cut A350 production to six jets monthly, down from about nine monthly last year. Boeing likewise is bringing 787 production to six jets monthly, and 777 production to two jets monthly, in 2021. Prior to the pandemic, Boeing had been making 14 787s and five 777s monthly. Boeing has not specified near-term 737 Max production rates, saying only that its output will reach 31 Max monthly by early 2022. In recent days, some US airline executives have expressed optimism that demand for leisure air travel will rebound amid upcoming end-of-year holidays. Bloomberg, however, predicts “slowing leisure demand” this fall and warns of additional virus outbreaks. “Our expected delivery rates are lower than Boeing and Airbus guidance,” Bloomberg says. It anticipates Airbus and Boeing will each deliver about 30 jets (737 Max, A320neos) monthly in 2021. Bloomberg expects neither company will increase widebody production in 2021. “Demand for the largest twin-engines, the Boeing 777-9 and Airbus A350-1000, won’t rebound soon,” it says.

Source: Cirium

The coronavirus travel downturn is accelerating the retirement of aircraft that are older, less fuel-efficient, and higher maintenance, including Boeing 777 aircraft, Airbus A330 and A380 aircraft, as airline capacity may not return to pre-pandemic levels until 2024, if at all. Airlines will have to reduce costs by selling or retiring aircraft, which means that higher maintenance aircraft will be the first to go. These include Delta Air Lines and Qatar Airways' retirements of 777s, American Airlines retiring its A330s, and Air France retiring its A380s. There are a significant number of Airbus and Boeing narrowbody aircraft that were headed for retirement age even before the pandemic, president of MRO provider GA Telesis, Abdol Moabery said during Aviation Week's virtual MRO Transatlantic conference on 27 October. "[Retirements] through 2025 were already going to be 600 to 800 aircraft per year," Moabery said during the event. With airlines retiring aircraft even earlier than planned, Moabery expects "a massive surplus" of used aircraft until around 2030. The biggest challenge, he adds, will be for the manufacturing and aftermarket sectors to "coexist in the same industry with this amount of material". A silver lining of oversupply in used aircraft and parts is the potential for "airlines [to] enjoy significant access and cost savings because of availability" Moabery says. Cost reduction during the uncertainty of the pandemic means "the idea of sustainability is going to come back even stronger" as airlines will increasingly consider not just fuel burn but supply chain and MRO costs, Airbus senior vice-president of customer support Valerie Manning said during the online discussion. While the MRO sector is poised to recover faster than air travel due to maintenance costs, airlines must also be able to reduce expenses to ensure their ongoing survival, Carlyle Aviation Partners president Robert Korn said during the conference. "Replacing new aircraft parts with used aircraft parts is one way to let the process go at lower costs without affecting labor costs or reducing other people's margins," Korn says. The retirement of long-haul 777 aircraft can be partially explained "since that mission is not as demand", Korn said, while noting that the long-haul A350s and 787s "are fantastic aircraft". The lack of demand for international travel is much less of a factor than high maintenance costs, says Cirium aviation analyst Syed Zaidi. "The 777 overhaul costs are among the highest in the industry for any aircraft type, and A330s are in oversupply with many younger aircraft available," Zaidi says. "The result is the older A330s and 777s getting retired sooner than originally anticipated and being replaced with newer generation, more economical widebody aircraft like the A350 and 787." Many airlines are retiring their A380 fleets sooner than they intended, Zaidi says, because there is "little to no secondary market prospects and the aircraft is out of production sooner than Airbus had initially anticipated resulting in long-term residual value impact". Aircraft including A320s, however, are considered by Carlyle's Korn to be more versatile and less likely to be retired in the coming years. "There will always be demand for [A320] aircraft", he says.

Source: Cirium

South African Airways is to be allocated R10.5 billion ($642 million) to implement its business rescue plan, the country’s finance minister has disclosed in a speech to parliament. Tito Mboweni outlined the funding in a medium-term budget policy statement on 28 October. He said that R10.5 billion would be assigned to SAA to fund the rescue plan. “This allocation is funded through reductions to the baselines of national departments, public entities and conditional grants,” he added. The funding would be “in addition” to the R16.4 billion, for settling guaranteed debts, granted in the medium-term expenditure framework during the February budget. “Our approach is in line with the principle that funding to state-owned companies must come from within the current framework and reprioritised from elsewhere,” says Mboweni. “We cannot break the fiscal framework.” But the political opposition party Democratic Alliance has described the government’s decision to “fund another bailout” of SAA – at the expense of reducing other public services – as an “indefensible, immoral choice”. “It amounts to throwing South Africans ‘under the plane’ to pay for SAA,” the party’s shadow finance minister Geordin Hill-Lewis, adding that Mboweni “should have held the line” and refused funding the carrier. “South Africans will continue to pay for a zombie state company, and will continue to suffer the consequences of ever-higher debt.” Hill-Lewis claims the SAA bailout is being funded by cutting the budget for policing, education, courts, and reducing conditional grants to provinces and local governments. “They are choosing SAA over fighting crime. SAA over education. SAA over South Africa,” he says.

Source: Cirium