Aerospace Industry Will Struggle to Turn Profit in 2021, Report Says
(Bloomberg) -- The commercial aerospace industry will struggle to make a profit this year despite recent news of big orders for jets and announcements that production rates are rising, according to a new report.
Jetliner manufacturers, parts suppliers and lessors at best will barely break even this year, consulting firm AlixPartners said in a report released Thursday that blamed pricing pressures, a weakened supply chain and depressed output of wide-body aircraft production.
The industry posted a loss of $18.4 billion before interest and taxes last year and won’t return to its pre-pandemic peak –– a $45.6 billion profit in 2018 -- until the latter half of the decade, the firm said.
Air travel within the U.S. has been around pre-pandemic levels, according to the Transportation Security Administration, leading to renewed airline demand for planes. Airbus SE and Boeing Co. reported strong deliveries for June, and United Airlines Holdings Inc. agreed to purchase 270 planes from the companies. International and business travel has been slow to return, however, forcing manufacturers and lessors to hold inventories that are outpacing demand.
That oversupply is driving down prices for jets, leading manufacturers to squeeze suppliers, according to Eric Bernardini, AlixPartners’ global co-leader of aerospace, defense and aviation.
“If you want to buy aircraft, you can get very good deals,” he said. “The suppliers are going to have to adapt because otherwise, how are they going to survive?” That puts the industry as a whole at risk of posting a loss for the second consecutive year.
“In a way, North America is biased because of what happened with the domestic traffic picking up a lot of speed in the last three or four months,” Bernardini said. “But for me, this is a blip in the big scale of things.”
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