COVID-19 Impact on Retrofit & Modernization Market, Mid-April Update

As the COVID-19 pandemic continues to rage, the question of when – and where – to re-open the global economy lingers. As was the case in our previous update on the status of the global R&M market, Forecast International analysts, and the general population, are overburdened with an unceasing onslaught of COVID-19 news, hardly any of which is positive, and absolutely none of which can give concrete answers to the questions plaguing the industry: when will manufacturing plants fully open, will they remain open – and, at what cost?

Boeing plans to send 27,000 employees back to work in plants responsible for the manufacture of the 747, 767, 777 and 787 beginning April 20 or 21, a welcome sign of progress toward a semblance of normalcy. As of publishing, that appears to be about the most positive news on the wire.

A report from the International Civil Aviation Organization (ICAO) paints a bleak picture for aviation, particularly in the commercial segment. The ICAO predicts a loss of $112-$135 billion in operating revenues for airlines in the first half of 2020. If the contraction in business continues until September 2020, the segent may incur an additional monthly loss of $35-$40 billion for every month of Q3 2020, with North America and Europe being hit particularly hard.  Airbus and Boeing both temporarily suspended all production, and production cuts have been announced across the board, as discussed in our blog covering March 2020 commercial aircraft orders and deliveries.

Referencing the Oliver Wyman report covered in our previous blog on the impacts of COVID-19 on the R&M/MRO market, the outlook has worsened over the last two weeks. Forecasts for 2020 anticipate a loss of 57 percent of MRO activity in the widebody segment, 50 percent for narrowbodies, 47 percent for regional jets, and 43 percent for turboprops. This equates to an annual loss of $48 billion in MRO activity for 2020. 2021 is projected to fare better, though the effects of production shutdowns, deferred orders, and global aircraft groundings will still be felt then as well. Annual revenues had been projected to top $96 billion in 2021 – that figure has been adjusted to $79.1 as of press time.

The impacts of such drastic losses in revenue are difficult to fathom at this time. Businesses closed by the crisis may still be waiting weeks, if not months, to reopen their doors, and exactly what the eventual reopening will look like is still undetermined. The Trump administration has outlined a three-phase plan for opening the American economy, which includes strict social distancing measures and limits on non-essential travel until it appears the virus is leveling off in intensity. We are still in the midst of the first phase of re-entry, where some states have not yet neared their projected peak infection timeframe. As such, all we can expect is a prolonged and incremental reopening of the American economy, and the same can be expected for the world as a whole.

Additional information will be reported as it becomes available.

About Richard Pettibone

A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter. As the Internet grew in importance as a research tool, he helped design the company's Forecast Intelligence Center and currently coordinates the EMarket Alert newsletters for clients. Richard also manages social media efforts, including two new blogs: Defense & Security Monitor, covering defense systems and international issues, and Flight Plan, which focuses on commercial aviation and space systems. For over 30 years, Richard has authored the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed data on major aerospace and defense contractors. He also edits the International Contractors service, a database that tracks all the contractors involved in the programs covered in the FI library. More recently he was appointed Manager, Information Services Group (ISG), a new unit that encompasses developing outbound content for both Forecast International and Military Periscope.

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