More demand for aircraft manufacturers

More demand for aircraft manufacturers

17 November 2021Reading time: 3 minutes

The aviation industry is facing major changes. Stricter climate regulations and changing travel needs pose new challenges for airlines, aircraft manufacturers and the entire supply chain. In addition, aircraft manufacturers Airbus and Boeing expect the number of commercial aircraft to double to over 44,000 jets in the next 20 years.

Lufthansa

Stricter climate regulations are increasingly forcing airlines to buy new and more efficient aircrafts. Demand for short- and medium-haul jets in particular has increased. This plays particularly well into the hands of Airbus, which has been the market leader in this sector for years.
Nevertheless, demand for long-haul aircraft also remains. For example, Deutsche Lufthansa has announced that it will lease four new Airbus A350-900s. According to Lufthansa, the new aircraft produce about 30 percent fewer emissions than the older models. The current demand for new jets is partly due to low leasing rates.
Overall, according to the German newspaper Handelsblatt, Deutsche Lufthansa AG plans to renew its entire fleet and is ordering a total of 177 new short-, medium- and long-haul jets from Airbus and Boeing, while at the same time taking 97 previous aircrafts out of service.

Aircraft manufacturers ramp up production

Lufthansa is not the only airline looking to renew its fleet. Marketing Manager Darren Hulst of Boeing expects demand for up to 7,100 new aircraft by 2040 from European airlines alone. Of these, 3,000 aircraft are already expected to arrive in the next ten years.
Airbus also anticipates a sharp rise in demand and expects around 48,000 commercial planes in the air by 2040. This would mean more than doubling the current number. According to CEO Guillaume Faury, Airbus has already produced 424 commercial planes in the first nine months of this year alone. Around 600 are expected for the year as a whole. Also, Airbus has been ramping up production of the successful A320 model family again since the summer, after it was sharply curtailed in 2020. Airbus plans to produce a good 75 units of the A320 alone every month until 2025.
Despite these ambitious growth plans, some concern still exists in the aviation industry. Among suppliers in particular, there are growing concerns that they will not be able to keep up with this pace, as reported by the German newspaper Handelsblatt. One major problem is the long lead times for production. Certain sophisticated parts sometimes take up to 18 months to produce. Markus Nolte, head of Montana Aerospace, a producer of wing structures, warns: "The supply chains are enormously strained. The planned ramp-up of production at Airbus and Boeing is a real challenge for the entire industry."
At the same time, he said, there is a shortage of personnel and materials throughout the industry. Many companies have used up a large part of their financial reserves during the pandemic. As a result, these companies are no longer able to ramp up production quickly because, for example, they cannot order the necessary raw materials in such large quantities. The European aircraft manufacturer Airbus in particular has a very complex supply chain. Industry experts estimate that Airbus has around 10,000 suppliers. McKinsey expects that the biggest problem will be the different speeds at which individual suppliers ramp up. The entire supply chain is not yet synchronized.

Stock overview of Airbus

The 52-week low was reached on November 9th 2020 when the Airbus stock traded at 83.00 EUR. It reached its 52-week high on September 1st 2021 when it traded at 118.00 EUR. After a significant increase from about 98 EUR to 108 EUR end of May, the stock price remained in a range between 103 EUR and 118 EUR. On November 8th 2021, the stock closed at 115.64 EUR.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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08/12/2021 16:28:47