Aerospace sector to rebound after Covid-19 crisis

The Malaysian aerospace industry is expected to fight through although the businesses worldwide have been badly affected by the coronavirus, or the Covid-19 outbreak

The Malaysian aerospace industry is expected to fight through although the businesses worldwide have been badly affected by the coronavirus, or the Covid-19 outbreak.

Many airlines have been reported to either shift or cut their China routes and readjust their daily operations following a major lockdown order from the authority in the mainland.

However, in aerospace — which entails a holistic market from aircraft manufacturing to plane services, it is still business as usual.

Malaysian Aerospace Industry Association (MAIA) president Datuk Naguib Mohd Nor said air travel is still a necessity around the world and the industry is still betting on a better growth year-on-year despite the outbreak. This was proven by data collected along the years.

“We have to admit that it is a bit tricky this year, with all that is happening, such as Covid-19, corruption cases of an aircraft maker, and the Boeing’s cancellation of jets due to fatal crashes.

“However, history has shown that the aerospace industry around the world had always bounced back after a disaster,” Naguib told The Malaysian Reserve in a text reply recently.

The Airbus’ Global Market Forecast (GMF) for 2019-2038 shows that aviation traffic has not only been resilient to external shocks, but doubled every 15 years since 1978 after the oil shock during the Iranian Revolution — an incident which drove the crude oil price to double within 12 months.

Other external incidents were the Gulf Crisis (1990), Asian Financial Crisis (1997), the Sept 11 attack in the US (2001), SARS of 2003 and the latest financial crisis in 2008.

Although the graph pointed to lower growth within the next couple of years after the crisis, it re-bounced higher in the next decade by twofolds.

“This industry is very hard to disrupt because air travel is still a necessity,” Naguib said.

On Feb 11, Asia’s largest aerospace and defence conference — the Singapore Airshow 2020 witnessed some 70 international aviation firms pull out from the event due to the Covid-19 concern. These included the American global aerospace defence Lockheed Martin Corp and US defence contractor Raytheon Co and more than 10 Chinese firms, according to Bloomberg. This, however, only represented less than 8% of parti- cipants, said the organiser.

Besides Covid-19, large planemakers are also being hit with scandals that involve procurement processes and system quality.

On Jan 15, Malaysia Airlines Bhd confirmed the suspension of 25 units of Boeing Co 737 MAX jets, citing the model’s delayed return to service since it was grounded last year following two fatal crashes.

The decision represents another setback for Boeing, which already reported its worst annual net orders in decades, along with its lowest number of plane delivery in 11 years — after the grounding of the 737 MAX, causing it to fall far behind main competitor Airbus SE.

Recently, Airbus was also slapped with corruption allegations with AirAsia Group Bhd, involving a sum of US$50 million (RM208 million) sponsorship for Caterham Formula 1 racing team which was led by the low-cost carrier founder Tan Sri Dr Tony Fernandes.

The quantum was claimed to be part of buying the French maker’s aircraft. “For now, Malaysia is an Airbus-centric market, so the Boeing (quality) issue may positively impact the orderbooks of Airbus,” Naguib said.

The International Trade and Industry Ministry has forecast between 10% and 15% of growth in the aerospace industry this year from last year’s total earnings of RM14.4 billion, mainly via the manufacturing segment.

The sector has been reporting a steady growth since the past decade and now employs 24,500 highly skilled workers.

According to Malaysian Aerospace Industry Blueprint 2015-2030, the employment rate is expected to increase to 32,000, generating some RM55.2 billion revenue by 2030.

Source: The Malaysian Reserve 

Posted on : 20 February 2020
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Last Updated : Thursday 21st May 2020