Production rates will recover medium term: AFJ LATAM 2020
Boeing remains optimistic that aircraft production rates will recover in the medium term.
Addressing the audience at the Airfinance Journal LATAM 2020 virtual event, Boeing vice president commercial marketing Darren Hulst says last month production rates cuts reflected how significantly the industry has been impacted by the Covid-19 crisis.
“Some markets may recover before, especially in countries like Brazil and India. But as a whole it will take time. It is a testament of how deeply the industry has been impacted,” he says.
“But I am optimistic that aircraft production rates will recover in the medium term.”
Last month the manufacturer announced it will cut its Boeing 787 monthly rate to six aircraft from 10 currently in 2021. The rate is planned to increase to seven a month by 2022.
On the 777 production line, monthly rates will drop to two aircraft from five a month currently. The 767 lien and the 747 production lines will remain at three aircraft a month and six aircraft a year, respectively.
The 737 line will see a gradual increase to 31 aircraft a month during next year with further gradual increases planned to correspond with market demand.
Hulst says the fundamentals have not changed. “If the industry does not resume it’s trajectory it will be the first time ever,” he says.
But he admits that the crisis is shifting the needs but also the trends in aircraft demand.
“Versatility will become a very important factor going forward. We are seeing moves to the middle of the narrowbody and widebody aircraft size.”
In the meantime Boeing expects around 2,000 aircraft to not return full time service over time. Huslt says 75% of those will be narrowbody aircraft while the remaining 75% will be widebodies.
Hulst believes air traffic recovery will not recover to pre-Covid levels until 2024. His “three-speed recovery” outlook sees domestic traffic recovering first as it is less impacted by air travel restrictions.
He also anticipates regional travel to recover in the near term as there is a lower risk.
Premium traffic will recover last as long haul travel remains impacted by risk and restrictions.
Some domestic markets have recovered well, he adds. China, year-on-year, is operating at 83% of its 2019 capacity, whereas Europe and North America are at 62% and 54% respectively. Latin America’s share of flights over the past week was 43% of this time last year, he says.
Hulst believes the different pace of recovery by region is explained by the trajectory of the Covid-19 virus and different policies on travel restrictions.
“Globally the domestic market is at 42% year-on-year in terms of capacity but the real challenge is the widebody with only 8% of normal.”
In Latin America Hulst expects a full recovery by 2025 when all key indicators will have exceeded expectations levels.
Despite the region going through restructurings with the three largest airlines in Chapter 11 bankruptcy status, Huslt says the focus will be on airlines “having the right size and fleet”.
For him the region’s domestic and regional operations resilience will help resume growth. “These are the parameters we are watching because LATAM is a diverse, dynamic and a resilient market.”