Deloitte study: Global commercial aircraft backlog remains strong
NEW YORK, July 5, 2016—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 Captain, vice chairman, US 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 original equipment manufacturers (OEMs) producing aircraft, representing $1.9 trillion backlog value and 13,500 aircraft units.
About Deloitte’s Aerospace and Defense Group
Deloitte's Aerospace and Defense sector focuses on the top issues facing the industry. Deloitte A&D practitioners have deep industry experience and are actively involved in various segments of the industry, including: M&A, advanced technology programs, airplane program launches, and acquisition reform and economic assistance packages. For more information about Deloitte’s aerospace and defense practice, please visit: www.deloitte.com/us/aerospace.
As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.