The continuing Boeing 737 MAX crisis and soap opera at Boeing, combined with the Coronavirus flight and new route cancellations and postponements, supply chain shortages from China’s shutdown, and a stock market correction will likely result in 2020 as a year to forget in the civil aviation sector. While we expect dramatic improvement from this influenza, which now appears to have a low fatality rate, the hope is that its spread loses its intensity with the onset of spring and then summer in the Northern Hemisphere.
The impacts will be widely felt by airlines, particularly in Asia, where demand has dropped precipitously in China and neighboring markets. With traffic down substantially, carriers have already begun deferring new aircraft deliveries, including AirAsiaX deferring 78 A330neos. While Cathay Pacific
has parked half its fleet. While the deferrals are not permanent cancellations, the impacts on Airbus and Boeing will be substantial in 2020.
Analysis
Even if the coronavirus crisis only lasts six months, damage to airline balance sheets will be substantial. China has already been considering airline bailouts and as the crisis spreads to Italy and South Korea, other governments may need to follow suit. That balance sheet damage may result in continued deferrals of new aircraft through the first six months of the year. While this will harm both Boeing and Airbus, the impact on Boeing losing 787 or 777 deliveries while the MAX remains grounded could result in substantial further losses for the company over a longer period of time.
The continuing Boeing 737 MAX crisis and soap opera at Boeing, combined with the Coronavirus flight and new route cancellations and postponements,supply chain shortages from China’s shutdown, and a stock market correction will likely result in 2020 as a year to forget in the civil aviation sector.While we expect dramatic improvement as this influenza, which now appears to have a low fatality rate, the hope is that its spread loses its intensity with the onset of spring and summer in the Northern Hemisphere.
The impacts will be widely felt by airlines, particularly in Asia, where demand has dropped precipitously in China and other markets.With traffic down substantially, carriers have already begun deferring new aircraft deliveries, including AirAsiaX deferring 78 A330neos.While the deferrals are not permanent cancellations, the impacts on Airbus and Boeing will be substantial in 2020.
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