One would be hard-pressed to overstate the effects of the Covid pandemic on the aerospace industry, but the level of impact has varied considerably between sectors and among individual suppliers. For example, as a general rule, larger companies fared better than smaller ones. Those that controlled enough resources to absorb 30 percent declines in revenues through spending cuts likely can look forward to a fairly strong recovery. For others—mainly the so-called Tier 2 and Tier 3 suppliers—the future might look less encouraging, particularly for those that depended on government support to stay afloat.
Another divide resides between companies involved heavily in military activity and those whose business depends more on civil programs. Throughout the pandemic, governments generally did not reduce defense spending, meaning suppliers whose product portfolios tilted toward military equipment fared comparatively well. A few even saw single-digit revenue growth last year, while the pandemic decimated the finances of those more dependent on airliner sales and support.
Among the major Tier 1 suppliers, Raytheon subsidiary Collins Aerospace falls into the category of those whose business volumes lean more toward the commercial side, which accounts for some 64 percent of its sales. The U.S.-based aircraft systems supplier maintains a particularly strong position in the Boeing Max airliner, for example, and enjoys a presence on virtually all the Boeing and Airbus commercial programs. Its comparative lack of exposure to defense, however, hurt its financial performance last year, when it saw a 26 percent decline in revenues compared with 2019.
Covid Brings Flood of Supply to Aircraft Recycling Business
Few would disagree that aircraft recycling has evolved from an almost non-existing, polluting industry to become a textbook example of how aerospace contributes to a circular economy and aviation’s overarching environmental sustainability goals. Depending on the type of aircraft, recyclers can recover about 90 percent of an aircraft's weight for reuse in aviation or other sectors, a level that Tarmac Aerosave CEO Patrick Lecer described as “fantastic.” The company, a joint venture of Airbus, Safran Aircraft Engines, and waste specialist Suez, has disassembled, dismantled, and recycled 291 aircraft and 141 CFM56 engines in an eco-efficient manner since its creation in 2007, including 75 percent of all the A340s that companies have recycled.
Yet Lecer expressed concern about the sector’s post-Covid course. Due to the pandemic, the number of aircraft that owners have stored is enormous, he noted during a webinar organized by France’s aerospace business club, Usaire. “Of course, not all of them will be parted out but there is a risk of increased so-called dry dismantling when aircraft are scrapped with poorly-controlled processes and end up as landfill waste—particularly in certain parts of the world. This is very different from what we do; we recycle to maximize reuse and focus on the safe disposal of non-recyclable parts,” he explained.
Lufthansa Technik several years ago switched its strategy to dismantle aircraft of Lufthansa Group— which includes Lufthansa, Swiss, Austrian Airlines, and Brussels Airlines—with European providers only, said Fabrício La Banca, Lufthansa Technik senior director of corporate purchasing. “By doing so, we avoided the traditional ferry flights to other destinations, saving tons of kerosene and CO2. On top of that, the European providers we are using are AFRA [Aircraft Fleet Recycling Association] members that follow rigid processes and rules in regard to recycling and final demolition of the aircraft,” he told AIN. AFRA’s more than 70 accredited members must pass an audit based on best management practices. The International Air Transport Association (IATA) also has developed the "Best Industry Practices for Aircraft Decommissioning” manual.
Global Flight Data Highlights Harsh Realities of Covid Impact
The Covid pandemic’s initial impact in the spring of 2020 constituted an unprecedented shock to the global industry, and ever since the recovery path has been hard to chart. At the request of AIN data analytics specialist Spire Aviation generated data from its own constellation of more than 110 satellites to track the number of flights operated by six international carriers between January 2020 and the end of May 2021. The variations in their fortunes are striking, reflecting wide differences in Covid’s continuing impact, governmental responses, and, very likely, societal attitudes toward the risk from travel.
Air China has fully restored pre-pandemic levels of flight activity, hitting a year-to-date peak of almost 40,000 flights in April. In the U.S., United Airlines has yet to completely reverse its descent but has achieved a mainly steady recovery to reach almost 54,000 flights in May after hitting some new turbulence around September 2020 and February 2021.
In Europe, where new waves of Covid infection and vexatious switches in restrictions have been more challenging, Lufthansa remains at less than half of its pre-pandemic activity levels. In May, it operated just under 12,000 flights, having never pushed above a monthly total of 16,000 since the nadir in April 2020.
Additive Manufacturing Gains Altitude as Technology Matures
Additive manufacturing continues to proliferate across the aerospace sector as leading OEMs and their suppliers find new ways of tapping the flexibility—as well as cost and weight savings—that the approach can deliver. Increasingly, the techniques, which in some cases entails 3D printing where objects are made by building layers from either metal powder or composite materials, have become more competitive with castings for smaller parts. As the technology matures, including for both materials and machines, manufacturers will increasingly apply it to making larger components and structures too.
“Both the technology and our confidence in it is improving,” Eric Gatlin, GE Aviation’s additive manufacturing leader, told AIN. “Our forward trajectory now is to use additives wherever it differentiates a product in terms of weight and design.”
For the U.S. group, that now means using additives to make components such as the fuel nozzles for the Leap turbofans it makes through its CFM International joint venture with French aero engines group Safran. Similarly, on each GE9X engine, additive manufacturing now delivers no fewer than 292 parts, which Gatlin said represents a big increase over past practice. The company’s new Catalyst general aviation and business aircraft engine also will feature significant additive content.
The proposed $30 billion merger of aircraft leasing giants Gecas and AerCap and the likely further consolidation of lessors in the wake of Covid-19 does not seem to worry airlines and aircraft manufacturers, at least not publicly.
“My first observation on the lessors is that they have remained very strong over the last year,” Airbus CEO Guillaume Faury told analysts during the company’s first-quarter earnings conference call. “They've been instrumental in enabling that industry to keep moving forward in a very, very challenging situation. It relies on the stability of the financial system. There's no financial crisis, and that's very important for us.” Faury acknowledged that Airbus considers the consolidation of some lessors important. “There are pros and cons in these situations. But overall, I would say, we're fine with it,” he stressed.
Willie Walsh, director-general of the International Air Transport Association, also dismissed concerns about too much consolidation and the potential risk of anti-competitive behavior in the leasing sector. “It is still a pretty fragmented industry,” he said, speaking to media during a recent briefing on the impact of the pandemic on the global aviation industry. Even the combination of Gecas and Ireland’s AerCap—the largest aircraft lessors in the world by portfolio value, with a combined fleet of more than 2,000 airplanes and an additional 500 on order—does not represent a significant percentage of the supply from the lessors, he asserted.
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