ISTAT Jetrader - Autumn 2020 - 39

around 1,800 deliveries for Boeing
and Airbus. And then the grounding of
MAX dialed down delivery by quite a
meaningful number. What's interesting
is, starting this year, most people
looking at the industry were saying
that we're going to deliver a little over
2,000 airplanes between Boeing and
Airbus. Boeing is going to clear out its
MAX backlog, so that will add roughly
an extra 1,000 deliveries. In a normal
year, for 2020 to be similar to 2019, we
would have certainly seen Boeing and
Airbus deliver roughly 1,900 airplanes.
Clearly, that's not going to happen,
and what we're seeing here is current
market forecasts are somewhere
around 600 airplanes, plus or minus
100 airplanes. Post-9/11, in the course
of two years, industry production was
lowered by about 30%. Airbus kept its
production lines flat, and Boeing cut its
production almost 50%. So Boeing, in
essence, served as a shock absorber
post-9/11. So, when we are talking
about going from an anticipated 1,900
to 2,000 deliveries this year to 600 or
so this year, instead of over two years,
what manufacturers are doing is truly
extraordinary and unprecedented.
We're talking about deliveries that are
70% or so less than we were planning
in the start of the year. So, that sort of
proactive action, some of it by choice
and some of it by circumstance, is
very significant in terms of reducing
capacity growth in the market relative
to past downturns.
An interesting question that comes
up in all of these conversations is
the fact that Boeing and Airbus have
historically high backlogs. How does
that play out? It's an interesting and,
again, different behavior than what
we've seen in the past downturns and
certainly post-9/11. Post-9/11, Boeing
and Airbus continued to deliver a lot of
airplanes and could gradually reduce
production over multiple years rather
than relatively instantaneously. Even
though there were airlines post-9/11 that
said they're not taking any airplanes,
Boeing and Airbus found ways to work

with airlines and lessors to get them
the financing and share the pain. Here
things are happening a lot faster. So,
looking at these backlogs, one would
say that, in essence, it is a very set,
very big pool of very expensive options.
Because clearly the backlog is being
rejiggered; it will not simply be delivered
because it was contracted, and we will
get to find out because PDPs, the predelivery payments the airlines pay on
their contracts to secure the positions
for deliveries, are a very important
negotiating element in when and how
the pain is shared for future delivery.
Since Boeing was the only
manufacturer that was cutting
production post-9/11, and it had
very strong pre-delivery payment
schedules, it was able to do it much
more gradually than what we're seeing
in the current environment. It'll be
interesting to see how those backlogs
look on a longer term. Backlogs matter
a lot to manufacturers, but I'm not sure
they are a good indicator of long-term
deliverability of demand. The real
indicator of demand and manufacturers'
production is deliveries. And deliveries,
I do believe, are going to come down
very quickly, and we'll see how it's

rejiggered in the next year and years to
come. It will depend on genuine demand
coming back in terms of traffic.
Aviation is a key global infrastructure.
Just as nobody's discussing trains or
buses going away, aviation is not going
away. There will be a different way that
we operate those networks, including
trains and buses, and those changes
will happen, but this utility is integral to
the macroeconomic system we live in.
Reality says that as an integral part of
human infrastructure, aviation will come
back. It will be different, but it will come
back, and it will come back to the trend
lines. When I try to visualize how that may
happen, I remind people that when we
were in the post-9/11 world, I'll be honest,
I was one of the people who was in the
middle of that crisis thinking that aviation
will never be the same, that people will be
afraid to fly and they may have selected
the wrong industry to be in. I know that
there will be a lot of ingenuity during
this pandemic that when we look back
five years from now, we'll be living in a
different world, but flight will return to its
trend lines, and we will all adjust with it.
To view the full presentation, go
to istat.org/ISTAT-Online/ISTATLearning-Lab.

YEARS

Engine Aftermarket Support and Solutions

igned for You

80+ Engines Monetized
al.vorhauer@internationalaircraft.com
www.internationalaircraft.com

Jetrader

* AUTUMN 2020 * 3 9
https://istat.org/ISTAT-Online/ISTATLearning-Lab https://istat.org/ISTAT-Online/ISTATLearning-Lab http://www.internationalaircraft.com
ISTAT Jetrader - Autumn 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2020
