The pandemic is taking its toll on aerospace manufacturing. Boeing Co announced that it would halt production of most wide body jets. In addition, Airbus SE restarted only partial output after a four-day shutdown as suppliers cut jobs.
With airlines unable to fly because of a collapse of demand over fears of contagion, reinforced by air travel restrictions, plane makers and their suppliers are under pressure to save cash to ride out a squeeze on liquidity.
Moody’s cut its outlook for the aerospace manufacturing and defense industry to negative from stable. Even when markets recover, the damaged balance sheets of most airlines would hurt demand for new aircraft. Afterwards, it became a warn.
Global passenger capacity fell by 35% last week. It was the worst since the start of the crisis. according to data from airline schedules firm OAG.
According to theedgemarkets.com, Boeing faces the shutdown of key assembly lines for the second time in a year. It halts production of its grounded 737 MAX aircraft in January.
Industry executives said the biggest source of alarm was the global supply chain of thousands of suppliers. It would be severely hurt by abrupt stop-start movements in plane output. By the year long 737 MAX grounding, the stress came up then.
The shutdowns are designed in part to allow for deep cleaning and the re-organisation of factory workers, who must stand further apart and avoid working in clusters, slowing output. But analysts expressed doubts over the strength of future demand as the industry recovers from its worst crisis.
A global recession combined with the possibility that corporate travel does not recover could hamper a full recovery, said Martin Hallmark, a senior vice president at Moody’s Investors Service.
The ratings agency expects airline passenger volumes to fall by 25% to 35% this year.
