Industry's Flight Paths Forward: Optimistic, Neutral and Pessimistic Outcomes

A year may seem like a long time in politics, but for Boeing, two years in aerospace must be an eternity as it begins the slow recovery from the unparalleled series of setbacks, accidents and downturns that have struck it since 2018.

Here are some potential outcomes:

Optimistic

Air travel rallies quickly and evenly around the world (2019 levels by 2022), the Boeing 737 MAX returns to service in 2020, and Boeing begins to ramp up production across the board.

Neutral

Demand recovery takes several years, and sluggish new-aircraft sales hamper most, if not all, of Boeing’s product line.

Pessimistic

Demand headwinds are coupled with program-specific challenges, such as lukewarm acceptance of the MAX, problems with Boeing 777X certification or a long-term widebody orderbook slump.

Read the full analysis. 

Suppliers across the western aerospace and defense industrial base faced an existential crisis entering the second half of 2020.

Here are some potential outcomes:

Optimistic

• Consolidation focuses on distressed assets that existed before pandemic
• Production rates across shipsets remain above lowest-sustainable levels with higher end-market demand
• Demand returns to prepandemic levels by 2022

Neutral

• Consolidation includes distressed assets as well as roll-up mergers to make more resilient suppliers
• Production rates across shipsets are stabilized at lowest sustainable for all providers
• Prepandemic demand levels are achieved in 2023-25

Pessimistic

• Consolidation and market-exiting lead to up to 20% of suppliers in lower tiers leaving A&D
• Production rate planning is abandoned and the supply chain faces fluctuating purchase orders
• End-market demand resets to a new normal below pre-pandemic levels with no recovery

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Airframers strive for a balance between the maximum the market will accept and the minimum the supply chain and employees will endure.

Here are some potential outcomes:

Optimistic

COVID-19 is successfully contained, leading to a sustained recovery of air travel in the summer and stronger aircraft deliveries in 2021.

Neutral

Air travel recovery remains volatile until at least early 2021; production outpaces deliveries until the end of next year.

Pessimistic

A second pandemic wave stalls air travel again; further production cuts are implemented with recovery starting in 2022. 

Read the full analysis. 

Leaps in computing power, sensors and weapons will benefit the F-35 in the next eight years—if Lockheed can keep modernization on track.

Here are some potential outcomes:

Optimistic

• After short-term stagnation, global defense spending resumes growth and Lockheed delivers 4,000 F-35s overall 
• Despite early concerns, Lockheed completes the Block 4 modernization program on-time and on-budget

Neutral

• Global defense spending stagnates through 2040, increasing downward pressure on programs of record
• Block 4 modernization suffers some delays and overruns but does not affect aircraft procurement

Pessimistic

• Global defense spending enters a long-term decline, setting off a 1990s-style “procurement holiday” for fighters
• TR-3 Refresh and Block 4 are delayed significantly, with cost overruns leading to further cuts in the procurement budget

Read the full analysis. 

Since June, airlines have started to reinstate substantial capacity, and now must hope demand will return as expected.

Here are some possible outcomes:

Optimistic

• Better business confidence indicators translate into greater demand for flying.
• With COVID-19 better contained, supported by an efficient vaccine from early 2021, leisure travel returns more quickly than expected as airlines benefit from pent-up demand.
• Airlines surviving with government help benefit from a consolidated market; can establish higher pricing earlier.
• Short-haul flying recovers almost fully in 2021; long-haul returns by 2023.

Neutral

• More countries manage to contain the pandemic, and the industry’s health measures prove to be efficient.
• Air travel returns to 40% below 2019 levels by the end of 2020, recovering further in 2021.
• Long-haul flying remains severely suppressed through 2020 but makes a steep recovery in 2021.
• A COVID-19 vaccine is created, though the effects of a global recession continue to affect demand.
• Traffic returns to precrisis levels by 2023; the industry makes its first post-coronavirus profit in 2022.

Pessimistic

• Containing the further spread of COVID-19 takes longer than expected and affects major air transport markets such as the U.S.
• Bookings weaken and international travel restrictions remain in place longer or are reinstated.
• Traffic recovery is delayed and much weaker than forecast; more airlines fail; aircraft production is cut further.
• Slow recovery begins only in 2021
• after a vaccine reassures travelers.
• A return to 2019 traffic levels is achieved after 2023.