The duopoly that dominates most of the world’s aircraft production has spent more than a decade racking up record orders for the aircraft they claimed to save millions of fuel.
“One thing that kept the industry high during the great financial crisis [in 2008] is that fuel prices have actually gone up, “said Richard Aboulafia, aeronautical analyst to vice president of Teal Group, referring to record oil prices that year.
Rising oil prices can help stimulate sales of more fuel-efficient aircraft, in contrast to sales trends for larger personal vehicles like SUVs.
The Airbus A320neo and Boeing 737 Max, each manufacturer’s best-selling narrow-body aircraft, were developed after the Great Recession when fuel prices rose again and airlines were looking for models that would help them reduce fuel costs. The two companies have accumulated years of orders for thousands of aircraft.
But automakers have lost that outlet, adding to a series of challenges that are expected to last at least until 2021, if not later, and a sharp turnaround from the start of this year when airlines could not not get new single aisle planes fast enough.
Aboulafia estimates that large aircraft manufacturers such as Airbus and Boeing should make up for about 1,000 canceled orders this year combined, an unprecedented drop from 681 net orders last year. Boeing, already reeling from the grounding of its 737 Max after two fatal accidents, is posting an increasing number of canceled orders. Airbus, for its part, said earlier this month that it would cut aircraft production rates by about a third “to adapt to the new environment of the coronavirus market.”
As the pandemic cracks demand for travel and cities are blocked, demand for kerosene is decreasing faster than other petroleum-based products. Globally, demand for kerosene is expected to drop 47% in the second quarter compared to the previous year, almost twice the rate of expected decline in gasoline consumption and more than three times the rate of the drop in diesel, which is crucial for freight. transport, according to estimates by S&P Global Platts. The price of kerosene in the United States has dropped more than 65% from the start of the year to Friday’s close.
“The problem that is happening right now is [the crisis] hits all countries at the same time, “said Claudio Galimberti, energy analyst at S&P Global Platts.
Airlines are now focusing on reducing flights to meet paltry demand from potential travelers as they navigate home stay orders and other tough measures to prevent the spread of the virus.
These carriers also park hundreds of aircraft and postpone orders for new aircraft. Some customers completely cancel their orders, which causes more trouble for aircraft manufacturers. Although airlines are planning to speed up the phase-out of older, fuel-efficient jet aircraft, this should not be enough to spur a spate of new orders with an uncertain recovery in air travel demand.
As of April 15, American airlines had slowed down more than 2,700 aircraft, or more than 44% of their fleet. Airlines for America, a lobby group that includes American companies, Delta, United Southwest and other large American carriers, said that by April 15, American airlines had slowed more than 2,700 aircraft, or more than 44% of their fleet.