Despite Setbacks, Airbus and Boeing May Recover Sooner Than Later

By Thomas Price Friday, October 23, 2020

Commercial travel was practically shuttered in 2020, and many different industries involved with it have struggled to maintain footing as the year drags on. This especially comes to a head when discussing air travel, and the two most important manufacturers in air travel are Airbus and Boeing. With wide-scale commercial air travel severely diminished around the world, and less than positive signs for when it will return to full force, each company has taken losses over the course of the year. However, there have been signs that these companies will continue to survive and perhaps even thrive in the coming years.

Boeing and Airbus in 2020

It is no surprise to anyone that both companies have seen a steep drop in income over the course of the year. Without commercial air travel operating to the fullest capacity, the need for newer and better airplanes has fallen away.

Boeing’s most recent quarterly report exemplifies their losses: the company only took in $11.807 billion, a 25.04% decline in revenue compared to the same quarter a year prior. Because of this steep drop in money coming in, along with reports from the International Air Transport Association that global travel demand will not recover until 2024, Boeing has slashed their 10-year forecast by a whopping 11%.

In a similar vein, Airbus may have fared even worse than Boeing in 2020. In its most recent quarterly report, the company only generated $9.158 billion. That $9 billion translates to a 55.52% drop off in revenue in comparison to 2019.

The ongoing trade disputes in the European Union (EU) with the US over tariffs have further exacerbated problems for both companies. The US has imposed a series of tariffs on European imported products resulting in over $7.5 billion worth of imports being subject to some level of tariff. This, of course, includes a 10% tariff on most European-made Airbus jets, which has caused an expected retaliation. Additionally, in mid-February, the US announced that the tariff on aircraft built in Europe would soon rise to 15%. In response, the EU has been cleared by the World Trade Organization to impose tariffs up to $4 billion on American-made Boeing jets, leading to both of these companies possibly losing out on even more of their dwindling revenues. Despite all of this, there are some small encouraging signs from each company that they still may be able to recover.

Positive Signs

While it is certainly not an overwhelming tide of good news by any stretch, both Boeing and Airbus have shown some markings of promising recovery in the near future. For Boeing, it comes in the form of stability. With more planes grounded, the need for air cargo planes will continue. However, more important is how much money Boeing will continue to receive from the US government in the form of defense contracts. Boeing expects to see an increase of over $100 billion in space and defense sectors leading to a $2.6 trillion market over the next ten years. With 44% of their entire 2020 revenue being a direct result of space and defense contracts, Boeing has a steady and possibly increasing base of money to pull from.

As for Airbus, the company has put more stock into research and development, with the focus on hydrogen propulsion technology and carbon fiber aeroelastic wings making headlines. As the company looks to reduce its carbon footprint, these two new technologies provide more environmentally-friendly options than prior means of transportation. However, these innovations are not the only spot of good news for Airbus. During September, Airbus delivered the most jets they have since before the pandemic began. While there have not been new orders on the horizon, their deliveries in September are the highest on the year, beating out August by eight jets.

Final Conclusions

It has been a remarkably difficult year for both Boeing and Airbus. With the pandemic reducing the need for commercial air travel by unprecedented levels, and the demand for it not set to return for at least four years, both companies have taken losses. Compounding this is the ongoing trade disputes between the EU and the US, which are set to impose higher tariffs and do more damage to the companies involved in the meantime. However, innovations, stable defense contracts, and record deliveries in a month, both Boeing and Airbus seem at least semi-prepared to continue weathering the storm of economic downturn sweeping the globe.

About the Author

Headshot for author Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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