End user report
the bust
Outlook remains bright as demand continues upward

he aerospace sector is a not a fast-paced up and down industry. The longer economic cycles within the industry are buoyed by extended product life cycles and high barriers to entry. The current industry upswing may slow but it will continue to climb, a departure from what might typically result in a 30 percent or more bust cycle.

“We’re near the 15-year marker of what typically is a seven-year boom cycle—and I don’t see a bust cycle following it any time soon,” says Richard Aboulafia, vice president, analysis, Teal Group Corp., Fairfax, Virginia.

Part of the steady investment in aerospace includes years-long military contracts, which include orders for well established fighter jets and helicopters such as F-15, F-18 and A64 Apache. “These aircraft have been around since the Jimmy Carter era—while there are improvements in avionics and weapons, airframes are on a plateau,” he says.

For a company managing both commercial and military clients, Boeing’s outlook is “in good shape, but there are big concerns about its middle-market presence. Boeing jetliner success, coupled with Lockheed Martin’s F-35 and broad U.S. defense export market dominance, means good things for the U.S.’s share of the industry,” according to Aboulafia’s report for Teal Group’s World Military & Civil Aircraft Briefing, published in September 2019.

Delivery schedules
According to Boeing’s third-quarter 2019 performance review report, commercial aviation will continue to strengthen in the long-term with a “20-year commercial market outlook of 44,040 airplanes and growth opportunities over a 10-year period at $3.1 trillion [in the aerospace] services market.”

Boeing is focused on returning the 737 Max safely to service after two crashes killed more than 300 people in October 2018 and March 2019.

During its quarterly earnings conference call Oct. 30, Airbus reported that it targets around 860 commercial aircraft deliveries in 2019, allowing it to maintain its expected increase in pre-tax income of 15 percent compared to 2018. It plans to “ramp up the A320neo, including growth in its Airbus Cabin Flex plane model, and expects to see margins on its A350 craft improve.

“Airbus expects the world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions,” according to company projections.

Efforts to ensure catastrophes like those in Africa and Indonesia do not happen again continue. The Federal Aviation Administration now wants to overhaul how it certifies planes after its safety approval of Boeing’s 737 Max. The agency previously outsourced those tasks to the aircraft manufacturers themselves, including Boeing.

The actual strategy necessary to accomplish improved oversight isn’t as easy to establish. “You can believe there should be more industry oversight by the government, or you can follow the Trump administration’s deregulatory mantra where you promise to destroy two government rules for each new one created,” Aboulafia says. “It’s fine to believe either, but only an idiot can believe both.”