Aircraft Production Increasing as Demand Increases

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Airbus C295 at the Wasaya Airways Hanger at Thunder Bay International Airport on Thursday June 23rd.
Airbus C295 at the Wasaya Airways Hanger at Thunder Bay International Airport on Thursday June 23rd.
Airbus C295 at the Wasaya Airways Hanger at Thunder Bay International Airport on Thursday June 23rd.
Airbus C295 at the Wasaya Airways Hanger at Thunder Bay International Airport on Thursday June 23rd.

THUNDER BAY – BUSINESS – According to a new Deloitte study, “Aircraft Order Backlog Analysis,” released today, there is minimal risk of erosion in aircraft production backlog due to a potential severe economic downturn. The study found that between 7.2 and 11.6 percent of the backlog value may be subject to deferral or cancellation in the event of a severe recession. By contrast, during the 2008 recession, there was only a 5.4 percent decrease in the backlog. If such an unlikely event were to recur, it could result in a backlog reduction to 8.4 years, a record level first achieved only in 2013. Furthermore, only 5.3 percent of the backlog has been ordered by airlines with a BB or lower credit rating, pointing to a more financially healthy customer base compared to previous years.

The study also found that the “new normal” of commercial aircraft production backlog has increased from three to five years during the 1998-2008 period, to six to 10 years in the 2009-2015 period. The study also found the 5.7 percent rate of net additions to global aircraft seating capacity has generally matched global revenue passenger kilometer growth at 5.3 percent.

“The analysis of the data illustrates that new aircraft are needed to service long-term growth in passenger travel demand as well as to replace obsolete equipment,” said Tom CaptainTom Captain, vice chairman, U.S. Aerospace and Defense leader at Deloitte LLP and Global Aerospace and Defense leader at Deloitte Touche Tohmatsu Limited. “The industry does not appear to be overproducing aircraft, as supply and demand seem to be in balance, especially when considering increasing load factors and oversold flight occurrences.”

The study analyzed the credit ratings and other factors for 215 airline customers of the five major OEMs producing aircraft, representing $1.9 trillion backlog value and 13,500 aircraft units.

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