Aviation industry.. Pending investments are waiting for a more stable business environment

Do 2021 current indicators support the executives’ optimistic outlook of 2022 in the Aviation sector?’

As we cannot assume that the world to recover in a blink of an eye, the aviation industry played the scapegoat since the #Covid19 began.

Crossing the 2nd year of the pandemic, the flashlight question in the investor`s mind is ‘When will it recover?’.

Perhaps, the recent circumstances will not provide a clear response about an exact timing, but there are clues with the existence of Deloitte ‘2021 aerospace and defense industry outlook’, a report expected that travel demand will not return to pre–COVID-19 levels before 2024.

Now, we see the numbers of covid19 infections grow rapidly in India with a possibility of expanding its extension to other regions in the world.

This comes after Brazil and Latin America had their fair share of the 3rd wave. There will be, of course, a profound impact on the economies of both territories which will affect the global GDP negatively.

The Global 2021 aviation spending is projected to be 25%-35% lower compared to 2019 resulting net losses of $39B.

2020 witnessed the sharp drop by 66% resulting $84B loss. Boeing and Airbus saw their respective financial losses reach $11.9B and $1.4B for 2020 and their combined deliveries decline 42%.

Major Considerations.. sustainability is the key:

Sustainability is going to be an increasingly important topic over the next three years According to a recent report of Accenture.

The commercial aerospace sector continues to be under considerable pressure to reduce its carbon footprint and become more environmentally conscious.
As the industry rebounds, executives expect to add sustainability, talent development and inclusion and diversity to the usual financial and customer performance elements.

Suppliers must rebalance production lines as uncertainty persists and demand changes to return to a pre-pandemic level of 95% for both timeliness and quality. Some tier 3 suppliers are on the verge of bankruptcy, even after receiving federal support.

Do regulations help ease the situation?

There is less information about that international organizations recommendations and governments regulations could help improve further the situation of the aviation sector.

Stimulus packages are not always a life saver. The main idea here is that they will not survive for too long unless they coincide with special health regulations and preparations.

The weak level of collaboration between the WHO and IATA, no single vaccine authorized yet to be the official Covid19 killer, the lack of adequate testing equipment at some airports and aviation facilities and the local health laws and regulations concerning aviation are topics of main concern in this regard.

The International Air Transport Association IATA estimated that by the end of 2020 airline debt witnessed a significant rise to reach $220bn as a result of government aid and market issues.

• Aviation tech.. the future:

The Technologies such as green aircraft, hybrid propulsion and aviation biofuel are going to be on top of the suppliers agenda, and this will determine how their products are being designed, manufactured and serviced.

Financing such transformation will rely on Crypto currency and blockchain technologies revenues.
In the 2018 IATA study “Future of the Airline Industry 2035”1, Blockchain has been identified as one of the technologies that may have a major impact on the future of aviation, among other drivers of change such as new modes of consumption or the privatization of infrastructure.

Travelers need not carry cash as they can use a digital wallet. Payments using the currency are free from exchange rates, unusable automated teller machine cards and cross-border fees, allowing travelers to spend their money on other travel amenities.

The evolution of digital currency conversions allows industry players to leverage efficiency and improve consumer options that leads to revenue.

Defense investor..a way to go:

Away of the recent employment report of the Federal Reserve which was not encouraging, the United States defense spending is likely to remain flat in 2021. Global defense spending is expected to grow about 2.8% in 2021, crossing the $2 trillion mark.

However, fiscal pressures from reduced tax receipts due to the current recession and a potential need to reverse current levels of deficit spending could affect defense budgets from fiscal year 2022 onward.
As most countries have not significantly reduced defense budgets and remain committed to sustaining their military capabilities.

However, given the disruption in the complex global supply chain, some defense programs could face minor cost increases and schedule delays in 2021.

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