The Singapore Air Show is getting started, but with 8% fewer participating companies, including some major industry players, and about a dozen fewer aircraft on display than planned. The Coronavirus, which has already impacted travel to and from China, is expanding its impact as the outbreak continues in China.
While the impact on airlines has been quick and Airbus and Boeing have each shut their doors in China, the major impact may be felt a couple of months from now, when raw materials and components from China run out and cannot be replenished from inventories. Of course, this impact will hit not only aviation, but the economy in general, providing an additional shock to the system.
While most aerospace components are produced outside of China, metals, rare earths, and other raw materials are often sourced from China. As margin pressures emerged from Boeing and Airbus, many smaller suppliers turned to material suppliers in China that were 30-40% less expensive than domestically sourced materials, enabling them to meet the OEMs requirements for cheaper goods. But with that supply potentially drying up, and demand continuing for Airbus and anticipation of a MAX restart, the scenario of aircraft without parts is looming. All it takes is one out of hundreds of thousands of parts being unavailable to make an aircraft unable to fly and potentially shut down production.
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