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- The industry has lost the equivalent of 1,000 737 and A320 flying from the effects of COVID-19.
- China remains the source for current capacity reduction, however the drop in demand is quickly spreading to other regions.
- As the effects of the virus extend into the summer season, the oversupply could collide with the reintroduction of the Max, affecting aircraft values and leasing rates and putting future deliveries at risk.
How can we quantify an industry free fall? Travel restrictions, avoidance and sharply lower bookings stemming from COVID-19 have had an accelerating impact on the world’s airlines. As the economic effects of the virus continues to spread beyond China, critically delaying the traffic recovery, airlines will be forced to make longer-term fleet decisions to adjust. These longer-term impacts are likely to begin being felt in the commercial aircraft market while the industry’s focus remains on the virus’s immediate effect on the airlines. In the context of a fleet of almost 800 grounded 737 Max’s, we must now consider what effect this reduced level of flying will have on aircraft orders, deliveries, and ultimately asset values.
Related: Coronavirus is seizing the engine of global commercial aviation
According to this analysis by The Air Current, in the span of weeks, the global aviation industry has gone from a scarcity of airplanes to an oversupply.When considering the combined 737 and A320 family fleets, there is an at least a 1,700 aircraft difference between what the industry had forecast and the current need (or lack thereof), as of February 2020. Further complicating the equation is the reality that this drop in core demand is being driven by a panic from a flying public that now equates travel with disease.
COVID-19’s black swan impact on global flying is the second in a year. The first was the unexpected grounding of the 737 Max, which sidelined nearly 400 aircraft and has halted deliveries of some 400 more.
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