discipline

Has COVID-19 changed the aerospace industry forever?

In the early days of the pandemic, air travel dropped by 90 percent and whole fleets of aircraft were grounded across the globe

The COVID-19 pandemic has impacted society and ordinary citizens on a scale not seen since the Second World War. Whole continents have been paralyzed, economies have been shut down, and civil rights have been restricted in an effort to fight the virus. One aspect of this society-wide shock has been the deep impact the pandemic is having on industries such as aerospace.

During a recent profile interview, Dr. Carlos Cesnik, the director of the Airbus-University of Michigan Center for Aero-Servo-Elasticity of Very Flexible Aircraft, was asked a routine question about what he thought the aircraft of the future would look like. The result was rather surprising.

“If we are having this conversation in early March,” said Cesnik, “I could give you an answer based on what we’re doing. Today. I’m not sure if I can answer the question.

It’s hard to remember that only four months ago, the aerospace industry was churning out aircraft at unprecedented rates, and airlines were worried that the temporary grounding of the 737 MAX might interfere with what looked like a year of nothing but historic highs. Back then, there were fears that there would not be enough pilots or mechanics to handle what seemed insatiable air travel demand.

Today, in the wake of a worldwide pandemic that has already killed a quarter of a million people and shut down much of the world’s economic activity, more than 70 percent of the global aviation fleet is grounded. Of the 27,500 aircraft in service at the beginning of 2020, less than 7,500 are still flying. And the fleet is unlikely to top 27,000 again until the end of 2022 at the earliest.

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Aerospace faces an inventory pile-up of unwanted aircraft ordered in the heyday that may take up to five years to work through. COVID-19 burst the bubble that was fueled by air traffic, global economic growth, and business and leisure trends, triggering massive cutbacks in capacity, layoffs, and order cancellations all along the supply chain. The contraction’s force, depth, and duration make it an unprecedented calamity that will force the industry to consolidate and emerge on the other side more efficient and integrated, but with far fewer players.

Struggling airlines

The reason for the industry’s malaise is clear: Passenger business has evaporated and airlines — aerospace’s primary customers — are in dire trouble. The 900-plus carriers operating today will be closer to 600 within the next three years because of closures and consolidation. Only about one-quarter have enough cash to make it through the next three months without securing new sources of funding.

To offset the collapse of revenue, airlines are resorting to the quickest fix to cut operating costs — they’re taking aircraft out of service. At some point in 2020, we anticipate close to 18,000 planes to be parked or put in storage, many to never return.

Retirements will be up as well. While for the last five years somewhere between 550 and 750 planes have been retired annually, we expect to see a surge to more than 2,600 over the next 12 months. Candidates now include those planes only 20 years old rather than the typical 25-year-old aircraft.

Ripple effect of a smaller fleet

Thousands of planes sitting around will have a ripple effect through the entire aviation industry. From a manufacturer’s point of view, it means airlines will hesitate to order new planes and will be challenged to accept delivery on ones spoken for earlier. Where pre-COVID we expected 1,066 new planes to be delivered in 2020, that forecast has been whittled down to 522 since the advent of the novel coronavirus contagion. This situation is being exacerbated by the return to service of 737 MAX aircraft that were produced in 2019, but remain undelivered, given the decision by regulators to ground the aircraft in March of that year. 

In turn, that clogged pipeline is prompting a reduction in production — one that is still not deep enough to match the drop in deliveries. Right now, we estimate there will be in production somewhere between 100 and 200 so-called white tails — aircraft without buyers. That scale of mismatch between production and deliveries is unprecedented. While those planes will be among the first to be sold off once the market begins to come back, they will inevitably be bought at discounted prices. Despite the overhang, aerospace players cannot completely turn off production if they are to preserve their supply chains. We anticipate a rebound, but not for another two years at a minimum and probably longer.

The production that does happen will support a different mix of aircraft models. Narrowbody aircraft with single aisles — already increasingly favored by airlines — will represent an even larger percentage of production while the portion of widebody jets that predominantly serve international routes can be expected to shrink. In our models, international travel will be the last segment to recover because of ongoing governmental restrictions and a hesitancy among passengers to stray beyond their home countries.

The pain from too much aerospace inventory will also trickle down to the spare parts and maintenance, repair, and overhaul (MRO) aftermarket, with many of the parked planes eventually picked apart for components and other reusable materials. Ultimately, this cannibalization will cut demand for MRO services in half in 2020 — down to about $42.7 billion from the previously forecast $91.2 billion — and threaten the survival of many of the smaller, more vulnerable aftermarket suppliers. Over 10 years through 2030, we estimate the size of the MRO market will be $150 billion less than originally forecast.

New stipulations and business models

Government intervention may end up being a deciding factor on which enterprises will be winners and losers in the COVID-19 crisis. Given the potential size of the coronavirus-related corporate bailout, governments are apt to place strings on the money — requiring, for instance, that companies maintain certain employment levels or agree to specified reductions in carbon dioxide emissions. For instance, France has already said it will ask Air France to cut its emissions and the number of domestic flights it offers as a condition of receiving COVID bailout money. Other nations are expected to follow France’s lead.

As companies fight for subsidies, airlines, original equipment manufacturers (OEMs), suppliers, and MRO providers will begin to consolidate — reorganizing around those most likely to benefit from state aid and most likely to thrive in the harsh economic environment. Aerospace manufacturers can also be expected to intervene to protect their supply chain through direct and indirect aid, joint ventures, and acquisitions and by becoming much more involved in supplier operations. Simultaneously, the OEMs are likely to reduce the complexity of their networks and number of suppliers.

Because of the financial pressures, new business models are also likely to evolve. For instance, airlines may find it too expensive to keep aircraft on their own balance sheet, and aerospace manufacturers could decide it is in their interest to participate more directly in leasing and asset management services, both to generate more business and utilize undelivered airplanes. A trend like this would also impact MRO, a sector into which aerospace manufacturers are already expanding and have voiced the desire to do more. A move toward leasing increases the likelihood of OEM growth in aftermarket services, if they decide it’s cheaper to do maintenance in-house.

Moving forward

This is a challenging time for all participants in the industry — an abrupt and brutal stall in what looked to be, before COVID-19, a decade of growth. But even before the coronavirus, global economies were showing signs of fatigue, and most players were already executing on strategies to blunt any negative impact from an anticipated slowdown at least in the early years of the decade.

Now, preparations must be made for a reversal and a consolidation of players. By mid-decade — assuming an eventual containment of the virus — the industry will be back on its way to building a 35,000-aircraft fleet by 2030. It may not be the 39,000 originally forecast, but it will still represent for the remaining companies a decade of growth, despite its horrific beginning. 

Six Ways Coronavirus Could Hurt Aviation Over The Long Term

More than 500,000 aerospace production jobs are at risk in the COVID-19 slowdown, wrote the International Association of Machinists and Aerospace Workers, the principal aerospace workers’ union, in a March 23 letter to members of Congress.

For aviation, and many industries, the COVID-19 crisis is hitting faster and harder than any previous crisis. For the past six weeks airline capacity cuts, fleet groundings, and sadly, layoffs, have happened at a shocking pace, along with talk of halting jetliner production, many more layoffs, and of government aid for the afflicted parties. Time is racing by, and it’s very difficult to anticipate developments five days, or even five hours, ahead.

Strangely, it might be easier to discuss five years ahead. What will the long-term impact be of this unprecedented disaster on the aviation industry? Here are six possibilities, in order of how much they keep me from sleeping (that is, the first few are somewhat concerning, while the last one calls for an elephant tranquilizer):

1. Private aviation boosted, or not. Whenever a pandemic or terrorist incident strikes, there’s an anecdotal upsurge in wealthy people considering private aviation as an alternative to scheduled air transport. This makes sense, but has never proven to be sustainable beyond the short-term. Worse, this crisis is very badly hitting equities markets and corporate profits, both of which are closely linked to business jet demand. Perhaps worst of all, this crisis is hammering fuel prices. Resource-rich countries and energy extraction companies are crucial to large cabin jet demand, so that segment will likely be hit hardest.Today In: Aerospace & Defense

2. More Teleconferencing instead of travel. For decades, air transport observers have fretted that the remarkable increase in telecommunications technology will enable more remote meetings, at the expense of in-person meetings and conferences. There’s no evidence whatsoever of this – business travel demand growth has if anything accelerated over the past ten years. But this pandemic and the associated lockdowns is forcing people to rely much more heavily on these technologies, which in turn continue to get better. This trend, coupled with rising corporate environmental awareness and outright flight shaming, could lead to a tipping point where teleconferencing is seen as a viable substitute, thereby hurting air travel demand, particularly for airlines’ most lucrative customers.

3. More government industrial policy and industry management. The U.S. airline industry wants $50 billion in government aid in the form of grants, loans, and loan guarantees; Boeing wants $60 billion for the U.S. commercial aerospace industry. The airline industry was aided by the Air Transportation Stabilization Board after 9/11, and General Motors and Chrysler were rescued by the government in the 2008 Great Recession, but for the aircraft industry this is all but unprecedented, at least in the U.S.; the Lockheed L-1011 loan guarantees in 1971 were the last time anything like this happened. But assuming massive aid is forthcoming, the U.S. and other governments might just decide that picking winners and losers is something they should do more often.

Also, the terms and conditions associated with this aid might change how companies do business, particularly if any of this aid takes the form of an equity stake. Shareholder returns and executive compensation might be constrained, for example. Sourcing decisions might be controlled too. Senator Josh Hawley (R-MO) stated this week that corporations asking for government help would need to “explain how you will move supply chains and jobs back to America.”

4. New product development cuts. Government aid is unlikely to prioritize new product spending, and given the damage this crisis will inflict on company balance sheets, they’ll be less even less eager to fund new technologies and programs. For Boeing, a company that very badly needs to create a mid-market jetliner to respond to the Airbus A321neo, this could lead to a disastrous loss of market share. But even Airbus, which stands to control 60% or more of the jetliner market if Boeing fails to do a new jet, runs the risk of getting complacent and losing its core jetliner design capabilities. It has absolutely nothing in the new product pipeline, and looks content to focus on cranking out large numbers of A320 series jets.

5. China going its own way. China’s economic, air travel, and jetliner market woes actually began early in 2019, well before COVID-19. Worse, this crisis has exacerbated tensions with the US and the West. As economic nationalism increases, and as state aid plays a bigger role in many economies, China might just decide to pursue an autarkic future. Commercial jets are already a priority in the country’s 2035 plan, and while the results so far have been poor, that problem could be solved with high trade barriers. Chinese airlines would be forced, against their will, to buy local jets. Since China is the biggest and fastest growing export market for Western jets, this would be a serious impairment to future industry growth.

6. Slower growth with de-globalization. This goes beyond China-Western relations. The biggest question of all concerns the geopolitical and macroeconomic drivers behind the aviation industry’s remarkable jet age growth. We’ve lived in a happy world where businesses are global, trade was increasingly free, and people are free to discover exciting new places and cultures anywhere on the planet. But those trade barriers could persist for years, affecting the entire business world, not just aviation. Even without government pressure, the disruption to supply chains induced by this crisis will likely further moves toward inshoring, for many industries. Meanwhile, the increased public, corporate, and personal debt resulting from this crisis could crimp economic growth for years to come.

Chances are, the macro trends that have benefited aviation will resume their historical direction, with a typical strong post-crisis jetliner market recovery. But it’s almost as easy to envision a dystopian future with slower growth and higher borders. That would not be good for the aviation industry at all. Except, that is, for the military side.

How playing piano makes you more successful in life

Happy man standing on a mountain

Did you know that when you’re learning to play the piano you are actually improving several skills that will help you be more successful in other areas such as university or work? In fact, multiple studies link the study of music to increased success in other fields, as this article from the New York Times points out.

So what is it that makes musicians more successful in life? Here is a list of six essential skills that you will master by practicing the piano:

1. Playing the piano sharpens your concentration

Student

When you’re playing the piano, you have to focus on the rhythm, pitch, tempo, note duration, and several other things. Even though your’re doing something you acutally enjoy, this is really a multi-level concentration exercise.

In fact, studies have shown that every time a musicians picks up his or her instrument, there are fireworks going on in his or her brain (for more information, see this Ted Lesson). Playing an musical instrument is perhaps the only activity during which almost all brain areas are simultaneously activated.

2. Playing the piano teaches you perseverance

keep going

Learning new songs on the piano takes time and effort. Until you can actually play a song fluently by heart, you’ll probably spend several weeks practicing it. As you look forward to being able to play the song, you stay motivated, learn patience, and increase your perseverance. These skills will always help you when you are confronted with difficult tasks at school, university, or at work.

3. Playing the piano teaches you discipline

Playing the piano can be quite challenging. However, practicing frequently and working hard will not only teach you perseverance, but also discipline. Consider the parts of the song you will have to practice over and over again. There is one “magic key” to successfully playing the piano (and yes, I will share it with you, just like that): practice, practice, practice.

Practicing regularly requires discipline. Maybe at the beginning it will be harder for you. Maybe you have to come up with some little treats to get yourself there. However, slowly but surely, you’ll get used to it and being disciplined about your practice time won’t be hard at all

4. Playing piano improves your time management skills

full schedule

Many of us have quite busy schedules. Unfortunately, scientists haven’t found a way to make one day last more than 24 hours yet. So to get all your activities and duties done, you need to organize them. When you get used to practicing regularly, you also learn how to use your time efficiently and how you can use a 20-minute time slot for a quick piano lesson.

5. Playing the piano improves your emotional intelligence

Playing the piano enhances your listening skills. These are also very important when you interact with other people. Emotions are not only expressed by facial expressions and body language, but also by the tone of voice, the speed of speech, and the melody of speech. People who play an instrument are better listeners, and it is not surprising that studies have actually revealed that musicians are more perceptive in interpreting the emotions of others.

6. Playing the piano increases your memory capacity

voller Stundenplan

Playing the piano stimulates your brain. While you learn and play songs, the stimulated areas of your brain become larger and therefore more active. The areas that are responsible for the storage of audio information, particularly, are more developed in musicians then in non-musicians.

So when you play the piano, your ability to memorize audio information increases. The chance of saying something like: “I’m sorry! Maybe you told me, but I really don’t remember…” most likely will occur less often.

Isn’t it amazing what playing the piano can do for you? If you’ve always been looking for an excuse to pick up that tricky piano, well, here — now you’ve got more than one. 🙂