Impact of COVID-19 on the Global More Electric Aircraft Market
The COVID-19 pandemic has forced several countries worldwide to declare either complete or partial lockdowns. The operations of many companies have been affected by the lockdown, particularly those categorized as non-essential, including the aviation & defense industry. The spread of COVID-19 and the response by the aviation industry has resulted in an unparalleled decline in global air traffic. The average number of flights per day in March 2020 was 145,000, which is 17.61% lower than that of 176,000 in March 2019. Moreover, after several governments around the world announced restrictions on air travel, commercial air traffic registered 41% below the 2019 levels in the last two weeks of March.
The figure below shows the decline in passengers carried by major European airlines in March 2020 compared to March 2019.
the decline in passengers carried by major European airlines (March 2019 And March 2020)
COVID-19 Impact on the More Electric Aircraft Industry
The defense industry, budgets allocated by governments are expected to safeguard the defense companies. Some defense companies in the US and the UK, such as Honeywell and QinetiQ, have announced fiscal measures, such as entering delayed draw term loan agreements and postponing dividend announcements to preserve capital to lower the COVID-19 impact. In addition, while the demand for the products offered by defense companies is protected by government contracts, they may experience supply chain disruptions due to financial impact on raw material suppliers, which may have to slow or halt production.
Defense companies are likely to determine immediate and conditional safety measures for their employees. It is also expected that a prolonged economic downturn may require staff reductions and related measures, which may reduce the production rate. Moreover, in 2020, a lower GDP of major economies, such as the US, China, the UK, France, Germany, India, Italy, Japan, Brazil, and Canada, anticipates a potential decrease in investments in the defense & aviation industry.
COVID-19 Impact on the More Electric Aircraft Market in Key Countries
US: The US economy shrunk by 4.8 % in the first quarter of 2020. This is the country's first contraction since 2014 and the biggest drop in over the past ten years. Consumer spending declined significantly in the first quarter, contributing -5.3% points to the first quarter’s contraction. Falling consumer spending has a significant effect on the overall GDP growth of the US as it accounts for nearly 68% of the GDP.
China: The economy in China contracted by a seasonally adjusted 9.8% on quarter in the three months to March 2020, following a 1.2% growth in the previous quarter and compared with market estimates of a 9.9% decrease, which was the first quarterly contraction on record, as the COVID-19 outbreak paralyzed production and activities.
Germany: Germany is the fifth-largest economy in the world and the largest in Europe. Germany is the second-largest exporter in the world, and exports account for more than one-third of the national output. Exports of high added value products have been the key driver of the growth of the country in recent years. The goods and services exports account for 46% of the GDP while imports account for 39%, adding 7% to the total GDP.
Italy: The GDP (Gross Domestic Product) in Italy was worth 2030 billion USD in 2019, which represents 1.68% of the world economy. Italy also entered a recession in the first quarter of 2020, with the GDP decreasing by 4.7% compared to the previous quarter. Due to the impact of COVID-19, the country's GDP had contracted for the first time since 2014. The country witnessed a contraction of 0.3% in the last three months of 2019.
The Road Ahead:
The demand for more electric aircraft is expected to decrease to some extent in the next few years. This is due to the drastic decrease in terrorist attacks after the COVID-19 outbreak globally that forced several countries to declare lockdowns. Moreover, with the increase in the infections, the lockdown period is expected to be extended in several regions. Even after the lockdown is lifted globally, it is expected that the defense expenditure of countries, such as the US, Russia, India, and the UK, might reduce due to decreased tax revenues. This is also expected to decrease the demand for many defense systems, including UAVs, in the upcoming years.
Similarly, investments in R&D and expansion in the aviation industry are expected to reduce due to a decrease in the revenue of airlines and a decrease in air passengers. This may also lead to a reduction in the demand for advanced more electric aircraft in the upcoming years.
Role of Market Research Future:
As a market research and consulting company, Market Research Future has been continuously monitoring and tracking the COVID-19 pandemic and its impact on various markets within the aerospace & defense industry. All our research studies have been updated to accommodate the impact of COVID-19 in the respective market to provide our customers with comprehensive market data along with present and future trends with macro and micro-level impact factors.
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*Note: The above mentioned datapoints will be provided on best effort basis.
Source: Company Websites