Robin Lineberger, Deloitte’s Global and US Aerospace Leader, provides compelling evidence of continued aerospace sector growth in 2019. In his report titled “2019 Global Aerospace and Defense Industry Outlook” Mr. Lineberger cites numerous sources to buttress his findings. With solid 2018 passenger travel demand, his analysis points to a continued strong growth trajectory. With high commercial airframe demand, production backlogs at Boeing and Airbus remain at unprecedented levels. Further, uncertainty regarding fuel pricing supports the the drive toward modern fuel-efficient fleet renewals. Similarly, the International Air Transport Association’s Chief Economist outlines positive, yet tempered expectations in their forecast available here.
Production Ramp-Ups and Supply Chain Stresses
With order books growing, Boeing and Airbus are both focusing on meeting airline demand and strengthening supply chains. Interestingly, Mr. Lineberger cites encroachment of super-efficient, high-density narrow-body (single-aisle) aircraft on wide-body markets employed on thinner routes. Combined with an already large backlog, there is unquestionably a somewhat slackening wide-body demand. Consequently, many airlines are deferring wide-body upgrades waiting for new technology-proven next generation aircraft.
Unsurprisingly, the Deloitte report cites trade tensions as a risk to the global supply chain with potential for resultant increasing costs. While these tensions create some uncertainties, it is causing manufacturers to consider some degree of strategic repositioning. For example, tariffs on steel and aluminum will likely drive changes in supply chains to minimize cost impacts. As Mr. Lineberger points out, a key for manufacturers will be “nurturing long-term stable partnerships across the industrial base and managing their global supply chain relationships.”
Regionally, the Mr. Lineberger states that global Aerospace industry growth is primarily led by the United States; however, other key regions are expected drive growing demand. Similar to IATA’s view, he points to China and India as key drivers; however, he also cites Japan’s transforming market as key. Some highlights include:
- China: Over the next 20 years, China should require 7,690 new commercial aircraft worth US $1.2 trillion
- India: By 2025, India is expected to become the third largest aviation market and supply about 478 million passengers by 2036
- Japan: With somewhat sluggish forecast growth, healthy Low-Cost Carrier competition and collaboration with high-growth Asia-Pacific partner airlines will fuel healthy returns
See Avi8ion’s other blogs on Asia-Pacific challenges with attracting and retaining a high-quality workforce to meet these growing demands.