The entire world has united to fight one common enemy- the COVID-19. It seems like a war that we are fighting but against an unknown enemy without being equipped with any arms and ammunitions. Here, absolutely no barriers or boundaries can stop this enemy and it has affected more or less intensely to almost all the countries globally. And all the industries have somehow been affected because of the lockdown. Trade and communication have absolutely come to a standstill.

The once flourishing aerospace industry is no exception either. The outbreak of COVID-19 pandemic has pushed the global airline industry into an unpredicted crisis as airline bookings have become almost zero in response to governmental regulations, and business restrictions on travel increase. To safeguard the consumers and workforce health is presently the greatest priority among businesses and governments. To enforce the same aim, continued reduction in air travel will most likely (and necessarily) persist for a prolonged period.

Global Aerospace and Defence Industry Reports

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With international and domestic flights being banned in the wake of the COVID-19 outbreak, the global aerospace industry has been suffering huge losses. While some flights are flying under special considerations and emergency situations, inter and intra country transport has been completely stopped. The sudden ban in the flight services and shutting down of manufacturing units of the industry has led to a huge dip in the production graph. Indeed, the airlines and aircraft manufacturers will likely require apt governmental support. A nosedive in revenue and cash flow seems imminent for most airlines as well as for original equipment manufacturers (OEMs) and their suppliers in the aircraft production ecosystem globally. According to the International Air Transport Association (IATA) estimates, the global aerospace industry will require a cash infusion of up to USD 200 billion apart from loan guarantees to balance out the economic buffeting. Furthermore, a reduction in commercial aircraft orders (especially widebody aircraft that service Asian hubs) is a likely knock-on effect of the global pandemic. 

One severe backlash of the disruptions in the working of the companies is that there are high chances of employees being laid off under the ongoing situations as it is increasingly becoming burdensome for the companies to pay their employees. This will further worsen the employment rate in the global economy. The factory workers in the manufacturing units are in the most vulnerable position as they will be the first ones to be laid off and most of them work on a contractual basis as well which means they have no formal source of income or security insurances thus leaving them completely helpless.  As mentioned before, airlines are anticipated face cash-flow liquidity challenges and difficulty managing debt obligations due to declining cash flow. Some airlines may struggle to recover or even declare bankruptcy, depending on the effectiveness of government intervention and the duration of COVID-19 crisis lasts. The tumult in the commercial airline industry may well have secondary and negative effects on producers of aircraft via a decrease in new aircraft orders — or cancelled existing ones. Reduced demand for materials and components will likely affect not only the OEMs, but also likely to create ripple throughout the supply chain to suppliers.

Commercial aircraft producers are also likely to expect continued weakening links in their supply chain, given some vendors and suppliers will be facing operational or financial struggles of their own. The global airline industry has to expect for continued supply chain bottlenecks, both nationally and internationally.

However, the aerospace sector would likely witness a boost in ticket sales, where demand will be created the moment lockdown starts getting lifted up. There are people stuck in various countries and in various places within countries as well. Moreover, all stagnant business and tourism travels would pick up. The moment normalcy returns it would create excessively high demand for flights. So even though the industry is right now facing an extremely unfavorable demand graph and some relief is soon expected.

Another industry that has been the affected has been the global defence industry. On the defence side of the industry, the situation appears less dire as compared to the aerospace industry. This is due to the demand protected by budgeted government spending and a supply chain with minimal exposure to hard-hit jurisdictions, such as, Asia. Supply side shocks are perhaps some of the most obvious shocks resulting from the pandemic.

For instance, Fincantieri in Italy which builds warships of complex design, has currently suspended its ship building due to the pandemic. The company was likely to deliver ships to Qatar Navy. But deliveries would postpone. Similarly, with Covid-19 cases on the rise in the Western Europe, operations of many other defence firms in Europe may be affected by partial or complete shutdowns or regulated functioning, thereby production queues and deliveries. However, with the US being the country with the most affected by the virus are affecting the US defence industry, as some US military partner nations may experience challenges in military readiness and ability to maintain equipment. Additionally, some defence companies may be financially weakened. However, due to existing regulations and controls, US defence companies can expect their supply chains to be less vulnerable to global disruptions compared to producers of commercial aircraft. On the other hand, the global firearms market is projected to grow a significant CAGR% from 2020 to 2026.

In case of the defence industry, technological factors and manufacturing paradigms could play a part in understanding the level of impact of the pandemic. Defence firms with highly automated plants are likely to be less affected by social distancing due to their need for lesser workforce.

Although the defence industry is currently not affected as much as many other industries, one needs to keep in mind that defence contracts are very high-value contracts. Thus, a potential loss of business due to a Covid-19-related worst-case scenario could mean that companies lose out on anticipated sales worth hundreds of millions of dollars. Additionally, maintaining all assembly lines and an active workforce at the time of reduced sales is a challenging situation defence companies could face. Global defence companies must work on future-proofing themselves and must be prepared with answers to such questions in order to deal with the uncertainties stemming from shocks caused by the pandemic.

The world is practically somehow trying to survive right now and absolutely no sane country would want to spend on defence because right now what is more important than fighting with each other is fighting together against the virus to save humanity. Above all enmity is humanity and that is what we are trying to save.

Browse through the report @: Global Coronavirus (Covid-19) Market - Guidance for Executives, Management Consultants and Investment Advisors