In what has seemed like a few short weeks, a pandemic has turned the aviation world completely upside down. What will be the lasting impact?
In what has seemed like a few short weeks, a pandemic has turned the aviation world (and the rest of the world) completely upside down. Previous forecasts have become completely useless, and companies at every level of the value chain are scrambling to correct.
The supply chain has been hit especially hard. Crunched airlines are conserving cash or paying it out to workers, but not generally to vendors.
Cuts to flight capacity arrived quickly and have been deep. Parts demand has not fallen as far yet. There has been a 75% drop in daily flights (i.e,. cycles) since the beginning of March . Parts demand (approximated by RFQ volume) is only down by about half as much.
In the eyes of the optimist, parts trading may be hitting a floor, supported by essential service that is still flying, the gradual reopening of some countries, and pre-scheduled base maintenance.
Just as likely is that parts trading trends lag flight volume trends by a month or more, and the decline is set to continue. There are still significant capacity reductions happening .
Broken down by week, demand for parts has fallen significantly in 4 of the last 5 weeks. Reduced flying has translated to reduced need for materials and repairs. There was an encouraging jump in the last week, which we believe to be related to cargo service and one-off demand. The US government also passed a large relief package. Despite this, we do expect the overall declining demand trend to continue for at least the next few weeks.
Some caveats on the above:
While we don't know how quickly the recovery will come, there will almost certainly be lasting change for the aftermarket.
This might mean faster adoption of new technology (for communication, inspection, etc.) to stay competitive, a prolonged focus on efficiency/cost, and more intense competition for fewer contracts.
At Rotabull, we're seeing a significant uptick in signups for our own system, and other technology that make it easier to work remotely.
The effects of this crisis to the aviation industry already are wide-ranging. Here are a few of the macro effects we're already seeing playing out:
The next few weeks will be telling as it becomes clear whether parts trading volumes bottom out, or keep falling. The effect of the US stimulus will also become more clear. We will keep an eye on these macro effects.
 Source: Seer Aerospace Daily Flight Data, 2020-04-07.
 Source: Diio, Coronavirus Flight Cancelation Tracker