High flyers in the aircraft sector land at the Farnborough Airshow despite disruptions in the supply chain
After the pandemic, concerns about a downturn in the aviation industry were replaced with worries about not being able to meet demand.
The flights to and from the busiest private airport in the UK continuously disturb the people of Farnborough, Hampshire. However, for one week in July every two years, the bone-jarring roar of fighter planes takes the place of the whine of commercial aircraft.
The event is the Farnborough International Airshow, when senior executives from airlines, aircraft manufacturers, and arms manufacturers come together in an attempt to market their products and get publicity.
The aerospace and defense sector was just beginning to recover from the pandemic’s chaos two years ago. This week’s guests will be asking more questions about their ability to produce goods quickly than about whether there is a market for them.
“By now, the supply chain should be better than it was in 2022,” says Agency Partners aerospace and defense stock analyst Nick Cunningham. However, things have not worked out as planned.
By 2050, the International Civil Aviation Organization predicts that air traffic will have tripled worldwide. That would result in a rise in carbon dioxide emissions from roughly 500 million to over 1.5 billion tons in the absence of technological advancements.
Even though there is always a cloud over airshows over how to get rid of those carbon emissions—especially in 2022 during a record-breaking heatwave in England—Europe’s Airbus and America’s Boeing are still vying for airline orders.
By the end of the previous year, Airbus had 8,626 orders in backlog, whereas Boeing only had 5,600. That is indicative of the latter’s slide from crisis to crisis following the deaths of 346 people in two of its best-selling 737 Max disasters in 2018 and 2019. Fortunately, there were no casualties in Boeing’s most recent mishap, which occurred in January when a door panel blew off on an Alaska Airlines flight.
This month, the American aircraft manufacturer entered a guilty plea to charges of breaking a plea agreement pertaining to the 737 Max crashes. The corporation might be able to resume its rehabilitation efforts with the support of a robust airshow order book.
Airbus now leads the industry by a wide margin as a result of the crisis, and it will fly an A321XLR at the exhibition. There has been tremendous pressure on Boeing to react due to the demand for the passenger jet’s “extra long range.” However, Airbus is finding it difficult to emphasize its benefit. Due to difficulties locating engines, seats, and cabin parts, the company reduced its estimate of the number of planes it will build this year from 800 to 770 last month. The new variation was also delayed by a full year.
“Supply chain and other issues have continued to hold up new aircraft deliveries and cloud the outlook,” states Vertical Research Partners analyst Robert Stallard. He continues, “doubts have replaced the narrative of gradual improvement above the capacity to speed up production.
Regarding defense, Farnborough serves as a convenient showroom for businesses looking to supply the UK government. The town itself, which is a part of the Aldershot constituency, serves as proof of the shift on that front. For over a century, it was the Conservative stronghold of a sizable British army garrison before voting Labour in the general election.
Editor of the Defence Analysis magazine Francis Tusa claims that when former Tory prime minister David Cameron took the stage in 2012, he was “mobbed” by bosses who were trying to figure out what the government was thinking.
He indicated that the situation for Labour’s new defense ministers, who are anticipated to go, maybe with Keir Starmer, would probably be similar. These ministers include John Healey, Vernon Coaker, and Maria Eagle.
Executives will want to know if orders that are in the works will be delayed as a result of the recently announced strategic defense review.
For manufacturers of weapons, the alarming rise in hostilities in recent years has been a goldmine. Following the most recent Farnborough airshow, the market values of UK weapons manufacturers Babcock, BAE Systems, and Rolls-Royce have increased by 60%, 64%, and almost 400%, respectively. The battles in Gaza and Ukraine contributed to higher military budgets, which in turn helped the global aerospace and defense industry achieve record revenues of $829 billion in 2023.
According to Cunningham, before the Second World War, there should be a “upturn on the scale and duration of the prewar rearmament,” according to government armaments plans.
However, despite the demands of the defense sector, manufacturers might have to respond to some of the same sharp concerns regarding their readiness.
Defense “didn’t suffer that extreme initial impact of the supply chain that we saw in civil” following the outbreak, according to Cunningham. Still, he says, there are indications that it might be on the way: “We’ve just not seen any of it yet.“
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