Time has been somewhat friendly to the aerospace industry. With the growing rise in air travel, vast backlogs of aircraft orders and a resurgent business sector show the continued strength of the industry. However, beneath the data headline are various signs that the industry is going through a shift which will see significant consolidation in supply base areas. Other than that, it also shows that there’s downward pressure on all profits.
So, while the long-term outlook is stable, there are different trends which continue to influence the growth of the sector in the short-term. Therefore, some of the things we should expect are:
Aircraft Orders Will Rarely Decline
Since peaking to over 3,300 back in 2014, the numbers of requests for large aircrafts at Airbus and Boeing have slowly decreased. This is a trend that we expect to continue this year. In 2018, the number of orders will remain flat because of meeting short-term demands. Besides, there are some few models guaranteed to drive better sales, for instance, replacing the older midsize aeroplanes such as the Boeing 777 and Airbus A330.
Increased Revenue Because of Better Production
Although aircraft sales may be low, vast backlogs of famous models such as the Boeing 737 and 787 support increased rates of production for such models. Of course, this leads to better revenues for all aircrafts, suppliers and manufacturers in 2018. Despite this, the growth in production here may never help those suppliers who focus on full body aircrafts.
The other areas which will remain weak are:
Continued Technological Advancement
Customer demand for tech upgrades will continue to increase in 2018. Operating efficiency, impressive designs, noise reduction capabilities and advanced avionics are just some of the things that are growing in demand. New and more advanced platforms are in production and some like 737 MAX the 777x, Bombardier’s C-series and the A330 Neo. Interestingly, Firefly Aerospace under the management of Max Polyakov is striving to develop this industry.
Cash Flow and Margins Should Improve
The massive number of newly launched programs and increase in production rates over the years has boosted the income and revenues of many aerospace firms. However, these factors have also weakened other industries’ cash flow and margins. Besides, some suppliers also go through operational challenges, negatively affecting their performance.
Now that the increase in the rate of production is slow plus just a few programs are being introduced, firms should see their cash flow and margin increase in 2018. In any case, efforts by the original equipment manufacturers (OEMs) to decrease costs limits the improvement in some suppliers’ margins.
Lower Oil Prices Will Play a Massive Part in Growth and Demand
The constant level of reduced oil prices since its demise in late 2014 is spurring airline profitability as it also has analysts asking one crucial question: Will it affect the demand for the next generation of aircrafts?
Shockingly, even though long-run expectations keep falling dramatically, there are just a few signs of how they’ll affect the current fleet. Even so, it’s believed that lower fuel prices will automatically lead to better air traffic too. And more fuel savings means lower fares!
As you can see, there’s a lot we should expect from the Aerospace industry in 2018. From better travel orders to advancements in technology, both firms and their customers will try to grab the best deals. All in all, 2018 promises a positive outlook for rising commercial aircraft deliveries!