Factors Predicted to Impact Aerospace Industry Post COVID-19
The pandemic caused by the
coronavirus has the capability to trigger huge global crises affecting various
industry sectors. One such industry that is hugely impacted is aerospace.
COVID-19 outbreak has brought the air traffic to complete standstill. So, we
are yet to see how the civil aircraft sector, supply chain and aftermarket
support recover post lockdown. Being a complete global crisis of huge
magnitude, the COVID-19 impact might result in slower growth rate after the
lockdown. The extent of the air traffic crisis caused by COVID-19 can be
measured by evaluating a few key indicators.
Longer Restrictions May Increase Complications
If the lockdown lasts for a longer
period of time, then the number of airlines that tend to run out of liquidity
will also be higher. This might result in larger instances of bankruptcies,
consolidation or nationalizations, which causes irreparable change in the
landscape of this industry sector. The existing customer structure for the
aircraft manufacturers will also change. Furthermore, extended air traffic standstill
can increase the possibilities of converting temporary behavioural changes into
permanent changes. For instance, there could be a huge reduction in business
travel due to increased comfort offered by digital communication channels. With
the lockdown getting extended periodically, the number of organizations turning
to digital communication channels is also increasing. This is because effective
communication is essential for business continuity during a crisis like this.
Demand for Maintenance, Repair, Overhaul (MRO) Reduces
The need for MRO services is
primarily determined by the flight activity and size of the aircrafts. Global
fleet along with a set of complex transitory factors defines the demand for any
MRO services. As the aircrafts are grounded, the need for the flight cycle or
flight hour associated maintenance also diminishes. Therefore MRO gets a major
hit during any shutdown. This makes spare parts suppliers and MRO providers
suffer immediately. Moreover, the shutdown also delays the need to manufacture
new aircrafts. As a result, the aircraft manufacturers will also take a huge
hit.
Managing the Crisis
With the kind of seal down we are
experiencing during lockdown, one can easily anticipate that the aircraft
industry will change for good after the crisis. There will be significant
downsizing in operations involving Original Equipment Manufacturers (OEMs) and
suppliers. This industry should start by balancing the loss by increasing the
efficiency. Weaker suppliers might face severe financial pressure. To ensure
the stability of the supply chain by bailing out the suppliers, companies with
a stronger balance sheet must consider consolidation.
Post Crisis Industry Models
Considering the intensity of the
situation, there could be two possible industry models to cope up with the
situation. First, an OEM centric model could be established, where different
OEMs merge the key aspects of the supply chain in order to rationalize and
stabilize it. Second, a highly balanced industry model could be established
where there is a balance between the key tier-1 suppliers and OEMs.
Summing Up
On an industry level, governments and industries should work closely to ensure that none of the key industrial capabilities will fall apart. So, the industry as a whole should establish a joint plan to reach the new normal. Next, the elements at risk in the transition process can be identified and then a plan can be developed to support them. Once there is a clear picture, government support may be called upon to support transition and short-term functions of the aerospace industry.
