A sudden collapse in air travel will reshape a trillion-dollar industry
With so many aircraft sitting idle and balance-sheets in tatters, airlines are getting rid of planes. Even low fuel prices will not save older, thirstier models. Four-engine wide-bodies are all but finished. On July 17th British Airways (BA) said it would retire all 31 of its Boeing 747 jumbo jets. IBA, an aviation-research firm, expects 800 planes around the world to be retired early.
Not all orders will dry up. Airlines, as well as leasing firms, which now own close to half the global fleet, are contractually obliged to take aircraft on order. Many buyers will have made pre-delivery payments of up to 40% of the price. Airbus and Boeing are, to varying degrees, pushing customers to take deliveries. Most negotiations have centred on deferring deliveries. EasyJet, a British low-cost carrier, has pushed back delivery of 24 Airbuses by five years. At Boeing, delays related to the problems of the 737 MAX allow airlines to ask for refunds. More assertively, Airbus’s boss, Guillaume Faury, does not rule out suing customers who renege on their orders.
并非所有订单都会“流产”。根据合同规定，航空公司和租赁公司（目前拥有全球近一半的飞机）必须接收已订购的飞机。许多买家会在交付前支付最高达售价40％的预付款。空客和波音都在以不同的力度催促客户收货。大多数谈判都围绕延迟交付展开。英国廉价航空公司易捷（EasyJet）已将24架空客飞机的交付推迟了五年。在波音，与737 MAX的问题相关的延误允许航空公司索要退款。空客的老板纪尧姆·傅里（Guillaume Faury）态度更明确坚决，不排除可能把拒绝收货的客户告上法庭。
A stock of “white tails”, as unsold planes are known in industry vernacular, may be the price to pay for protecting a supply chain that had been investing heavily for ever-higher production rates. Airbus will make 630 planes this year but deliver only 500, Citigroup reckons. It has the balance-sheet to carry inventory, thinks Sandy Morris of Jefferies, another bank. The new rate will preserve jobs and industrial efficiency, and make an eventual ramp-up easier.
Even this artificially high production will struggle to sustain the planemakers’ supply chain, however. This comprises manufacturers of engines (like Rolls-Royce and GE), producers of fuselages and other parts (such as Spirit AeroSystems), specialised materials firms (Hexcel and Woodward) and companies that produce avionics and electrical systems (including Honeywell and Safran). And that is not counting their myriad smaller suppliers; Boeing’s MAX supply chain stretches to around 600 firms. Many had invested heavily before the crisis, expecting strong demand. Defence contracts, which firms from Airbus and Boeing down are involved in and which covid-19 has not really affected, provide only partial respite. On July 29th Boeing said it had delivered just 20 planes in the second quarter, down from 90 a year ago, and that commercial-aircraft revenues had dropped by 65%, to $1.6bn. The next day Airbus and Safran also disclosed sharp falls in revenue.
The engine-makers provide a case in point. Besides lower demand for their kit—Rolls-Royce was gearing up to supply 500 units a year to Airbus but will now probably make 250—they face a collapsing aftermarket for spares and fewer overhauls, points out David Stewart of Oliver Wyman. Airlines with in-house maintenance divisions can scavenge parts or whole engines from grounded planes. Rolls-Royce, whose engines power two-fifths of all long-haul jets, has suspended dividends, said it would cut 9,000 jobs and taken a £2bn ($2.6bn) loan. It may have to ask investors for another £2bn. GE’s second-quarter revenues from its aviation business fell by 44%, year on year, dragging down the conglomerate’s overall results.
At the other end of the air-travel industry are airports. About 60% of their revenues comes from charges on airlines and passengers, and the rest from things like retail and parking. All are taking a hit. Airport shops and restaurants in America will lose $3.4bn between now and the end of 2021, forecasts the Airport Restaurant & Retail Association. As Mr de Oliveira of ACI World notes, two in three airports were losing money before the crisis; now all are. Some smaller ones may close if subsidies to support tourism from regional and national governments start to dwindle. Outside America commercial operators have not been treated by governments as generously as airlines have.
航空旅行业的另一端是机场。它们约60％的收入来自对航空公司和乘客的收费，其余来自零售和停车等。这些收入来源都在经受冲击。机场餐厅和零售协会（Airport Restaurant & Retail Association）预测，从现在起到2021年底，美国的机场商店和餐厅将亏损34亿美元。国际机场协会的德奥利维拉指出，疫情之前有三分之二的机场在亏损，现在是全体在亏损。如果地方和国家政府支持旅游业的补贴开始减少，一些较小的机场可能会关门歇业。在美国以外的地方，政府对商业经营者没有对航空公司那样慷慨。
In July Standard & Poor’s again downgraded the debt of four European airports, including Amsterdam’s Schiphol and Zurich, and placed London Gatwick and Rome on watch, questioning their ability to raise charges while airlines continue to bleed cash. The rating agency estimates a cut of €10bn ($11.8bn) in planned capital spending by European airports in 2020-23, which may crimp efforts to install contactless technology that could help reassure travellers that terminals are safe to re-enter.
As dark as the skies have grown for the air-travel complex, there are some opportunities. Airlines are restructuring. Europe’s big legacy carriers, under pressure from low-cost rivals, are slashing costs. BA has suspended 30,000 workers and wants to rehire them on less generous terms. Bankruptcies and cutbacks will leave gaps in the market, aircraft are cheap, once-scarce pilots are plentiful, and airports will have spare slots, if they are allowed to redistribute them.
Strong challenger carriers have a chance to gain market share. Wizz Air, a Hungarian low-cost carrier, hopes to add capacity by March; its main markets in central and eastern Europe have been hurt less by the pandemic than those elsewhere, its customers are generally young and less worried about getting on a plane, and two-thirds of demand is related to visiting family and friends, which seems more resilient to covid-19 than business travel is.
Some carriers may radically rethink their financial structures, which could help leasing grow even faster. Domhnal Slattery, boss of Avolon, a big lessor, thinks that heavy debts airlines incur to survive the pandemic may convince many of them that they need not own aircraft but should instead concentrate on sales and marketing, just as hotel chains have turned their backs on owning property.
The industry is also rethinking its environmental footprint. Bolder airlines with stronger balance-sheets may use the crisis to renew their fleets, making them greener. They have bargaining power: everything is negotiable, including deferrals, prepayments and price.
Rolling with the punches
Warren East, boss of Rolls-Royce, suspects that the “pre-covid call for sustainability will come back stronger than ever”. Airbus is still committed to the journey to zero-emissions flying, Mr Faury says; he sees it as an opportunity. Boeing would have to respond to stay competitive. European governments in particular regard it as a priority. France’s €15bn aid package for its aerospace sector includes a €1.5bn research-and-development fund to help Airbus launch a zero-emissions short-haul passenger jet by 2035 (probably powered by either biofuels or hydrogen). Mr Faury accepts that there is less money to invest. But also, he says, “more need”. The crisis has led to greater collaboration with suppliers that could make innovation “faster, leaner and cheaper” (though that has meant laying off 15,000 workers).
China, desperate to become a power in commercial aerospace, may see the disruption as a way to speed up entry into the global market, says Robert Spingarn of Credit Suisse, a bank. He speculates that Brazil’s Embraer, whose merger with Boeing fell apart in April, might collaborate with China’s COMAC to build a plane capable of competing against Airbus and Boeing. The Brazilians could supply the industrial knowhow and the Chinese the industrial might.
迫切希望成为商业航空制造大国的中国或许将这场破坏视为加快进入全球市场的机会，瑞信（Credit Suisse）的罗伯特·斯宾加恩（Robert Spingarn）表示。他推测，巴西航空工业公司与波音的合并在4月告吹后，它可能会与中国商飞合作，制造一款能与空客和波音竞争的飞机。巴西人可以提供工业技术，中国人提供制造实力。
To the masked passengers on half-empty planes, boarded from ghost-town airports of shuttered shops, it may seem that the experience of flying will never be the same again. Yet aviation has bounced back before. It is likely to do so again—and may change for the better in the process. ■