However, orderbook unchanged driven by liquidation happening among incumbent suppliers in Europe and America

By RAHIMI YUNUS / Pic MUHD AMIN NAHARUL

THE Malaysian aerospace industry saw volume dropped by 40% last year as airlines around the world were slower to take delivery of aircraft to survive the Covid-19- induced crisis.

Malaysia Airlines Bhd’s (MAB) creditors, for instance, are set to meet today to decide on the fate of the cash-strapped national airline’s restructuring plan.

The lessors are among 40 creditors set to vote to decide if MAB would continue to fly in the future, in which it needs approval from lessors holding at least 75% of the RM16 billion.

With the aviation industry in such turbulent times, Malaysian Aerospace Industry Association (MAIA) president Datuk Naguib Mohd Nor said most of the affected delivery rate involved single-aisle aircraft, such as Airbus A320 and Boeing 737, at the original equipment manufacturers’ (OEMs) level and thus trickled down to parts and components suppliers in Malaysia.

Before the Covid-19 pandemic, he said OEMs, which are Airbus SE and Boeing Co, delivered between 60 and 65 units of aircraft a month. At present, he said the volume stands at 40 to 45 units a month.

Despite the decline in delivery, he said the orderbook stayed and interestingly, there was an increase in requests for quotations (RFQs).

“I believe this is driven by liquidation happening among incumbent suppliers in Europe and America. The OEMs are looking at opportunities during this difficult time to diversify supply chain towards low risk,” Naguib said in a webinar organised by MAIA yesterday.

With that, he said many Malaysian aerospace parts manufacturers have explored new products to be put on the shop floor to make up for the reduced delivery of the current products.

The local aerospace industry is looking at a potential upturn in 2022 and 2023 when global players are expected to begin recovering towards the 2019 levels, on the back of the return of air travel and increased in the RFQs.

On the air travel front, Sobie Aviation Pte Ltd analyst and consultant Brendan Sobie said domestic market conditions should start improving again in the second quarter of 2021 (2Q21), but domestic revenues will not be sufficient to support an overall recovery.

He said international travel recovery is not likely to start until late 2021 at the earliest.

For cargo, he said it has been a bright spot but is relatively small and not sufficient to offset weakness on the passenger side.

PricewaterhouseCoopers’ Strategy & partner Edward Clayton said airports have suffered from “diseconomies of scale” due to exponentially increasing size-driven complexity.

Based on its analysis, he said airports beyond seven million capacity will see steady increases in unit cost as the airport size increases.

Non-aeronautical revenue for airports with a size from 25 to 40 million passengers is the most efficient.

“Most major hubs in South-East Asia already have to manage diseconomies of scale and are in danger of moving further into this zone as they grow,” Clayton said in the webinar.

He said some strategies that could be considered are to increase passenger charges, rethink terminal layouts and provide capacity via nearby airports.