The Coronavirus’ Impact on Aerospace Manufacturing

The Coronavirus’ Impact on Aerospace Manufacturing

March 20, 2020  | Karen Price, Mary E. Peters and Robert Puentes

The COVID-19 crisis brought into sharp relief the critical importance of aviation and aerospace to the American economy. Travel restrictions and general health concerns means travel is down sharply and airlines could slash capacity by 75 and 30% for international and domestic travel, respectively. Significant disruptions are likely in the months to come. It means planes normally in the air will be parked well into summer. Comparing the current situation to both post-9/11 and the Great Recession, the head of the industry group Airlines for America said the COVID-19 emergency is the worst his business has faced.

While the travel disruptions related to passenger demand are central in the discussion today, the economic pain will go well beyond aircraft groundings to include halting delivery of the planes they are building. For the aerospace manufacturing industry, the impact is bound to be severe.

Today, aerospace and defense systems represent $143 billion in exports annually. Moreover, its $86 billion trade surplus is the largest of any U.S. industry. By any measure it is an economic powerhouse and one that keeps this nation globally competitive. Yet, as manufacturing operations are suspended, bankruptcies and employee layoffs would likely follow.

This could affect as many as 2.5 million jobs nationwide, according to the Aerospace Industries Association. That’s about 20 percent of the nation’s manufacturing workforce. In response to the COVID-19 pandemic, the U.S. Department of Homeland Security called on state and local officials to recognize them as “Essential Critical Infrastructure Workers” that are necessary to continued operations in this time of crisis.

In this way, the disruption associated with the coronavirus goes far beyond the capacity of the private financial community. As policymakers in Washington consider an unprecedented financial strategy to stave off economic catastrophe, aerospace manufacturing needs to be an important part of the discussion.

According to manufacturing giant Boeing, the aviation manufacturing companies, including those that make engines, avionics, composite structures, and most everything else that goes into an airplane, need access to liquidity of at least $60 billion in the form of grants, loans, and loan guarantees to compensate for reduced cash flow. They maintain that proposed financial support will position the industry to ramp back into full production quickly once the public health crisis passes. In the meantime, manufacturers will be able to continue buying parts from suppliers to support the broader aviation industry as travel resumes and passenger demand recovers.

The problems facing the aviation industry today are complex and widespread. As legislation is proposed and support is debated, the economic importance of aerospace manufacturing to the nation should be fully recognized.

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