Brazilian airframer Embraer expects the world’s airlines will require 5,500 aircraft with up to 150 seats in the coming 10 years, as the industry reinvents itself after the historically disruptive coronavirus pandemic. Passenger levels will likely return to 2019 levels by 2024, the Sao Jose dos Campos-headquartered company says during its 10-year market forecast presentation. Revenue-passenger kilometres will be about 19% lower over the next decade than previously projected. But in this recovery, Embraer sees a unique opportunity for its new jets in the sub-150-seat capacity category to play a leading role in the global industry’s restructuring. ”The fallout from the pandemic signals the beginning of a new industry cycle, with many unique aspects,” writes chief executive Arjan Meijer in the company’s Market Forecast 2020 report, published on 2 December. “Unlike the previous one, which was guided by a massive supply of capacity and a focus on lowest cost-per-seat, we foresee a cycle characterised by versatility, operating efficiency and profitability.” The outlook is based on several assumptions about the future of the commercial aviation industry, adds Embraer’s vice-president of marketing Rodrigo Silva e Souza. ”The commercial aviation industry will be smaller, and when it comes back we believe the growth rate will be significantly lower than what we had before,” he says. ”It will also have a different shape. Changes in the global trade flows and passenger behaviours will lead to changes in air travel overall.” Of the 5,500 anticipated deliveries, 1,080 will be turboprops and 4,420 will be jets, Embraer predicts. About three-quarters will be replacement aircraft, and net growth will be about 25%, according to the forecast. Geographically, just under one third of those 5,500 airframes, or 1,710, will go to the Asia-Pacific region, and another 29%, or 1,600, will go to North America. European customers will take about 1,350 aircraft, or 25% of the total, and Latin America will account for about 9%, or 510 aircraft. The remaining 330 aircraft, or 6%, will go to Africa and the Middle East, Embraer predicts. The main drivers in all regions will be right-sizing fleets for the new reality in air travel following the global health crisis, Silva e Souza says. That means bringing in smaller and more-efficient types to allow flexibility when planning airline networks and schedules. Shifting passenger travel habits will also broadly influence air travel in the long term. New technologies such as video conferencing may take a long-term bite out of business travel, while companies could move operations away from large and expensive urban centres, since more employees are working from home. Another trend will be increased regionalisation, and less reliance on global supply chains that had been all the rage in years past, Embraer says. This is partly due to coronavirus-driven travel restrictions. “Expect demand to be less for long-haul travel and stronger for regional travel,” the company writes in its report. “That dynamic will create new interest in secondary, less-populated destinations which, in turn, will open new opportunities for air service with smaller-capacity aircraft.” In China, the market will move more to a hub-and-spoke model, and the rest of the continent will likely see more point-to-point connections. In Latin America, infrastructure projects will drive demand for improved air connections between far-flung cities across the vast continent, where Embraer’s jet segment could sell strongly, he adds. But the economic effects of the crisis on lower-income populations could leave some people less able to afford air travel, dampening demand. In Europe, environmental concerns are top of mind, and will likely play a larger role in that continent’s aviation market growth. However, Europe is not the only region where this customer perception is growing in importance. “Passengers [everywhere] are beginning to be more conscious, and when they fly they look for more eco-friendly solutions,” Silva e Souza says. That will accelerate the replacement of older and less-efficient aircraft with, for example, Embraer’s new E2 family.

Qantas will make Covid-19 vaccines mandatory for international travel when they become readily available. "Our position on this is clear," chief executive Alan Joyce said during a market update today. "We have a duty of care to our people and our passengers, and once a safe and effective vaccine becomes readily available, it will be a requirement for travel on our international services." He acknowledges that there will be some exceptions for people who cannot be vaccinated for medical reasons, and states that domestic flights and possibly trans-Tasman flights could be exempt from the requirement. Joyce states, however, that Australia's experience with the pandemic suggests that a vaccine is needed for international travel to restart properly, citing the Australian prime minister's view that international travellers will eventually have to make "a binary choice" between vaccines or quarantines. "What’s critical now is that we adopt a national framework for borders [within Australia]," he says. "A set of rules that reflects our confidence in the testing and tracing systems that have worked so well in New South Wales in particular, so that we’re not faced with borders slamming shut again." Qantas Group expects to increase domestic capacity to 68% of pre-Covid-19 levels for December and nearly 80% in the first quarter of 2021, compared with 20% for the July to September period and 40% for the current quarter. It also expects to maintain its current domestic market share of over 70%. The outlook is premised upon the assumption that international travel will only return after the first half of 2021, apart from an increase in trans-Tasman flying, and there are no material domestic border closures, subject to the availability of vaccines. On the other hand, international operations remain largely grounded, apart from repatriation services and limited trans-Tasman traffic under a one-way travel arrangement. Joyce states: “International travel is likely to be at a virtual standstill until at least July next year and it will take years to fully recover, which means we’re carrying the overhead for billions of dollars worth of aircraft in the meantime. We’re also facing a revenue drop of at least A$11 billion ($8 billion) this financial year alone compared to pre-Covid." The group had A$3.6 billion in available liquidity as at 30 November, comprising A$2.6 billion cash and a A$1 billion undrawn revolving credit facility, which is expected to be increased by A$500 million before year-end to provide additional standby liquidity. Since 30 June, Qantas has raised A$715 million of additional debt and A$1.4 billion from equity. Net debt has risen from A$4.7billion as at 30 June to A$5.9 billion as at 30 November, but it has no further material debts maturing until April 2022 and there are no financial covenants on the group's debt. Meanwhile, Qantas says its freight and loyalty divisions have performed strongly and along with the improving performance of its domestic network, has helped cover the group's overheads from its stranded costs in the international market. "We’re faced with carrying these assets [for international operations] until at least July next year before they start generating cash again," says Joyce. "We’ve have had to take on more than A$1.5 billion in additional debt to get through this crisis. We’ve lost A$11 billion revenue this financial year alone. Repairing our balance sheet is going to take a long time. And we know the domestic market is going to be very competitive." Qantas says its loyalty division continues to generate significant cash flow and has developed new ventures, while its freight division has performed "extremely well" due to the spike in e-commerce volumes across its domestic freighter network and higher yields on the international freighter network. The group has added cargo services between Los Angeles, Sydney and Hong Kong, while deploying several passenger aircraft to add cargo capacity. The freight division is also doing preliminary work on logistics for transporting Covid-19 vaccines at low temperatures. The group "is still a long way off anything approaching normal", Joyce says, but the outlook is a lot more positive than six months ago. “It’s unclear what shape the domestic economy will be in next year, particularly once broader government support winds back. Until a vaccine is rolled out, the risk of more outbreaks remains."

The US Federal Aviation Administration on 30 November issued the first Boeing 737 Max airworthiness certificate since the agency grounded the type in March 2019, the FAA confirms. Unlike type certificates, which apply to entire aircraft models, airworthiness certificates are the documents that clear specific aircraft to fly. Having lifted the Max’s grounding on 18 November, the agency is again clearing jets for flight – but only those that meet new airworthiness requirements. Boeing declines to comment about the milestone, deferring to the FAA. The FAA issues airworthiness certificates to newly manufactured jets prior to delivery to customers. Each of the roughly 450 Max in Boeing’s inventory need the certificates prior to delivery. Boeing produced, but did not deliver, those jets amid the 20-month grounding. The airframer has said it expects to deliver about half the 450 Max – some 225 – within one year. “We expect to have sufficient number of inspectors on hand to meet Boeing’s planned delivery schedule for the foreseeable future,” the FAA says. Previously delivered 737 Max – there are some 390 in airlines’ fleets – received their airworthiness certificates prior to the grounding. Those jets do not need new certificates but must also comply with new airworthiness requirements prior to being flown, the FAA says. Prior to the grounding, the Chicago-based airframer had issued airworthiness certificates itself, having been granted that authority by the FAA. But in November 2019, under intense critique for its approval of the Max design, the FAA said it had taken back that responsibility. In lifting the Max’s grounding, the FAA also released an airworthiness directive (AD) requiring all Max have updates prior to being flown. That AD requires flight control computers be modified in ways intended to prevent the type of circumstances that preceded two crashes that killed 346 people. The AD also requires that the jets’ horizontal stabiliser wires be separated to comply with FAA regulations.