April 1, 2024

Hi, everyone. My name’s Taylor St. Germain, with ITR Economics. Welcome to this episode of TrendsTalk. We at ITR Economics are your unbiased and apolitical source of economic intelligence. Today I wanted to discuss aircraft, Boeing, especially given what’s been going on in the news lately related to Boeing. As a frequent flyer on Boeing airplanes, I’ve been paying attention very closely, but also because we forecast the aerospace and aircraft market here at ITR Economics, so let me set up our conversation today.

We’ve been discussing in the past an economic downturn in 2024, particularly related to the manufacturing and industrial production segments of the economy here in the U.S. When we take apart all of the different manufacturing subsectors, U.S. civilian aircraft equipment production is one of those data series that we forecast. It’s available in the Trends Report for the Trends Report subscribers, and we forecast this data set out three years.

Now, the reason I bring up the 2024 downturn is because we’re often looking for markets in ’24 that will perform better during a manufacturing downturn in the U.S. than others. Aircraft production is one of those data sets that we expect to grow in 2024 when most other subsegments of the U.S. economy will be down year over year. If we look at civilian aircraft equipment production, which is the data series I’m referencing here, currently we’re about flat year over year in terms of the annual growth rate, down about 0.1%.

As we continue to progress through 2024, we expect accelerating growth to take hold in the annual growth rate for the aircraft equipment production market, finishing the year, according to our forecast as of now, up about 4.8% in 2024 compared to 2023. If your footprint includes servicing the aircraft and industry, this is a real area of opportunity in 2024 when other markets will be down.

Now, one of the reasons that we see aircraft being up this year is there’s typically a lag time associated with aircraft production, as it relates to its relationship with the U.S. economy. To give you some perspective, one of the other aircraft data sets that we look at is aerospace products and parts production. That has about a one-month lag time to the overall U.S. economy, when you’re looking at the data in terms of 12-month moving averages. There is a little bit of a lag we typically get out of the aircraft sector when comparing to the overall economy.

Now, when we see growth in 2024, a lot of that has to do with the large backlogs that these airlines have, especially as we look at Boeing and Airbus typically dealing with significant backlogs. Orders trends are up and improving, It’s always a question of can the production from Boeing and the deliveries from Boeing and Airbus continue to keep up with the level of demand. Historically speaking, they haven’t been able to keep up with this demand, and that’s the reason that they have significantly higher backlogs.

If we look at the data for Boeing and the aircraft industry overall as we sit here today, here’s a few data points for you. As we look at aerospace products and parts production, the index value is about 87.9. Now, anything below a value of 100 signals contraction compared to the base year. When we look at the aircraft market as we sit here today in terms of products and parts, we’re still down compared to that 100 value or that base year, but we are seeing that 12-month moving average improving.

If we look back to the previous low, which was in January of 2021 for the production series for aerospace products and parts, the value was about 70.6, and today we’re at 87.9. We’re improving when you look at that 12-month moving average, but we’re still well below where we were in terms of that 100 value or that previous base year.

Now, Boeing deliveries often tend to correlate very well with this trend. If we look at Boeing deliveries back in December of 2018, Boeing deliveries were at about 806 … and this is publicly reported data from Boeing … in terms of the aircraft that they delivered on a 12-month moving total. Then the pandemic happened and we saw the cratering in Boeing’s deliveries, to where we went from a 12-month moving total at the end of December ’18 of 806 to a 12-month moving total at the end of December 2020 at 157. Imagine that. In just a two-year period of time, the number of aircraft you’re delivering, as a result of that downturn from the pandemic, goes from 806 to 157. That’s a pretty massive drop in terms of deliveries.

Boeing has been building momentum ever since, despite some of these challenges that have been in the media as of late, to where their current delivery number on a 12-month moving total is at 528. They’ve clearly rebound off of that delivery low, and we’ve seen significant improvement in terms of those numbers of deliveries on a 12-month moving total.

Now, what’s really interesting about this whole trend with Boeing is, despite deliveries correlating with the market and seeing this massive drop in deliveries and significant recovery, as we sit here today, the orders trend for Boeing essentially never contracted. We saw a little bit of a dip back in that 2020 timeframe in Boeing orders, but nothing like what we saw in deliveries.

To sum this all up, when we look at the aircraft market as we sit here today, we’re starting to see Boeing and Airbus deliver more planes, as in coming out of this downturn that we saw stimulated by the pandemic, but the orders trend really never saw the same downturn or at least the same magnitude of downturn. What that’s done is really exacerbated the backlog for Boeing, which is again a really interesting trend, as Boeing has always struggled to keep up with their level of backlog in terms of what they’re able to deliver.

Now, I want to come back to our forecast, though. Now we understand some of these trends with Boeing where, yes, they felt the market headwinds from the pandemic, they saw deliveries drop, deliveries have recovered, but orders have continued to expand, generally speaking. As we come back to our forecast, it seems very plausible, based on all the information that I’ve just shared with you, that we would see an increase in aircraft equipment production this year, especially given these large backlogs, and the data is telling us that’s still the case.

However, given all the recent safety concerns with Boeing which have really headlined the news over the last three weeks, there is potential for canceled orders with Boeing as we move forward, and there’s potential for delays as we move forward, as in certain cases, the FAA has been requiring Boeing to re-inspect or re-certify a lot of these planes that have been highlighted having some safety challenges or concerns.

All in all, large backlogs for the major aircraft producers, a significant number of orders that are driving that, and despite some of the production challenges over the last few years, we have been seeing Boeing, and the aircraft market as a whole, continue to recover as we sit here today.

There’s still some question marks moving forward that we at ITR Economics will be following very closely in terms of do we see future cancellations in orders, are there going to be production challenges with these safety concerns. It’s something we will watch closely. We’ll update you here, we’ll update you in the Trends Report, but so far in ’24, aircraft production, despite all the headlines in the news, seems like a real area of opportunity to offset decline in a lot of these other manufacturing markets.

I hope you enjoyed this episode of Trends Talk and found this information useful. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcasts, and we look forward to seeing you all on the next one. Thanks so much, and we’ll be talking to you soon.