Future of the commercial airline industry

Nicolas Jouan, Aerospace and Defense Analyst at data and analytics company GlobalData, says: “The hardest-hit regions are set to be Europe, the Asia-Pacific and North America, the dominant engines of air travel growth. In other words, air travel is set to disappear almost entirely in 2020. This projection is deeply problematic for the big players of the commercial aviation industry such as Boeing and Airbus and will likely result in successive cancellations of orders from clients wary of Covid-19’s long-term impact.

More cancellations are to be expected with the prolongation of the Covid-19 air travel ban, but the slimming down of airlines’ fleet is expected to be a longer-term trend

“Boeing and Airbus have already seen multiple cancellations from airlines and leasing companies in 2020 so far. However, it would be wrong to reduce everything to Covid-19 as some more fundamental issues of the commercial aviation industry are also at play. Boeing has made unfortunate headlines with massive cancellations of B737 orders this year. While some cancellations have been connected to Covid-19 and the slowdown of activity − for example, Avolon announcing 75 B737 cancellations at the beginning of April − other cancellations such as Air Lease Corporation’s or Air Canada’s earlier this year, could be explained by a wider-scale strategic decision to slim order books in front of a pre- Covid-19 slowdown of the Asian market.

“Boeing is of course confronted to the grounding of its best-selling B737 MAX since two successive crashes last year. This grounding has made the B737 a privileged target for cancellations when things get rough for airlines. However, fuel-efficient single-aisle are generally losing steam for other reasons, such as the collapse of oil price rendering cost-saving engines less essential than in the past. Airbus’s A320neo family registered 29 cancellations in 2020 so far, with most of them from Avianca, a Columbian airline invoking business transformations. More cancellations are to be expected with the prolongation of the Covid-19 air travel ban, but the slimming down of airlines’ fleet is expected to be a longer-term trend.”

Additionally, regional German airline LGW, which is owned by Berlin-based Zeitfracht, has filed for bankruptcy due to the coronavirus crisis. “The insolvency is a direct consequence of the travel restrictions and the general economic situation during the coronavirus pandemic,” a spokesperson said.