Analysis: Climate and COVID cast shadow over jet demand outlook

A Southwest Airlines Boeing 737-800 plane is seen at Los Angeles International Airport (LAX) in the Greater Los Angeles Area, California, U.S., April 10, 2017. REUTERS/Lucy Nicholson/File Photo

Jetmakers see strong demand for airliners even as the industry braces for tough new environmental measures, but some financiers have raised doubts over forecasts that the $150 billion industry will return to pre-COVID growth in just a few years.

Lessors and underwriters of securities that finance aircraft purchases met in London this week to survey COVID damage and contemplate the impact of moves to combat climate change through regulation and new technology.

Some speculated that the industry’s deepest fear could come true: These trends might shorten the operational lifespan – and hurt the valuations – of even the most modern aircraft.

If confirmed, that could upend assumptions that have made the dollar-based jet industry an investor hot spot for a decade.

BOEING FORECAST

After trimming forecasts at the height of the pandemic, Boeing (BA.N) last week increased its 20-year demand forecast, citing the swift U.S. economic recovery. Once a pandemic travel slump disappears by around 2024, it said annual demand growth would resume a long-term trend of 4%-5%.

At a London conference of the leasing industry, which buys around 60% of global jet output, Boeing downplayed fears of a structural contraction of business and leisure travel.

“With business travel, I think it’s hard for me to believe that it won’t be back to where it was,” said Darren Hulst, Boeing vice president for commercial marketing.

Airbus, laying out its vision for more sustainable flying at a two-day company conference in Toulouse, was more cautious ahead of its own outlook update expected in November.

“We are still scratching our heads trying to best factor in all the things that have changed recently in the world and in our sector,” said Chief Executive Guillaume Faury.

Climate concerns will have “an impact, a significant impact, but the demand remains very strong and we have seen this all around the world,” he added.

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