Introduction

Airbus is a European aerospace firm engaged in the production and manufacture of passenger and military aircraft.

Political environment

Trade War threat

Free and open trade is very important for the aerospace industry considering that most components are imported. The current tariffs on Chinese goods as well as steel and aluminum from Europe highly threaten the revenue and profit of Airbus and competitors because they make it expensive to manufacture and sell a plane (Lineberger 2019).

Economic environment

Impact of coronavirus on Airbus

Many analysts believe that coronavirus represents the biggest macro shock the aerospace industry has faced in its history. Following the outbreak of corvid-19, Airbus profits fell by close to 50% in the first quarter of 2020 while revenues also declined by €2bn or 15% to €10.6bn. Many passenger-jet makers like Airbus were so heavily impacted by the coronavirus pandemic that halted air travel across the entire globe that Airbus for instance was bailed out to the tune of $17 billion by the French government while Boeing was offered $60billion in financial aid from the US government, which it rejected (Laurent 2020; Hemmerdinger 2020).

The short-term impact of coronavirus led to more than 3,000 workers being furloughed in the UK in April 2020 immediately following the coronavirus outbreak with more significant layoffs expected globally over the next 3-5 years, which is the anticipated recovery period. The airplane maker also slushed production rates by a third due to low demand from customers including British Airways and many others that are fighting for survival (Buyck2020; BBC 2020; Jolly 2020).

Low demand and production supply

Post corvid, one of the major issues likely to threaten this growth is the weak supply chain. Before corvid-19, the two major suppliers Airbus and Boeing were sold out on single aisle planes until the middle of the coming decade, and were already struggling to keep up with the growing demand (Josephs 2019). But due to corvid-19, customers of Airbus including British Airways, Jet Blue and Lufthansa have been negatively impacted by the adverse impact on air travel demand resulting in low demand which has forced Airbus and Boeing to cut back on production rates.

Growing aircraft demand

After a slowed growth in 2017, the aerospace and defense industry experienced solid growth in 2018 as a result of passenger travel demand as well as increased global military expenditure (Deloitte 2018; Lineberger 2019; Airbus 2019). As noted by several analysts, the order backlog of the commercial aerospace sector, aircraft is at an all-time high boosted by demand for next-generation, fuel-efficient aircraft as oil prices continue to surge (Josephs 2019; Lineberger 2019). Boosted by demand in Asia Pacific, Latin America and Middle East regions, the world’s passenger and freighter aircraft fleet is forecast to surge from nearly 23,000 currently to at least 48,000 by 2038 with traffic at a 4.3% annual growth. This is a major growth opportunity for Airbus considering that it is planning to ramp up its jetliner production in China, strengthening its position in what is forecast to be the biggest aviation market globally (Katz and Cameron 2019).

Declining demand for wide body jets

According to Ajmera (2019), demand for the high-priced wide body jets is forecast to experience the highest decline since the 2008 financial crisis. In fact, orders for Boeing and Airbus wide-body jets fell by 56.4% to 105 planes between January and September 2019 as a result of growing demand for fuel saving planes (Ajmera 2019; Josephs 2019). Considering the fact that wide body jets contribute the most to the revenue of Airbus, this decline is likely to negatively impact the revenue and profit of Airbus, thus a threat.

Social environment

Impact of corvid-19 on Airbus

Many analysts believe that coronavirus represents the biggest macro shock the aerospace industry has faced in its history. Following the outbreak of corvid-19, Airbus profits fell by close to 50% in the first quarter of 2020 while revenues also declined by €2bn or 15% to €10.6bn. Many passenger-jet makers like Airbus were so heavily impacted by the coronavirus pandemic that halted air travel across the entire globe that Airbus for instance was bailed out to the tune of $17 billion by the French government while Boeing was offered $60billion in financial aid from the US government, which it rejected (Laurent 2020; Hemmerdinger 2020).

The short-term impact of coronavirus led to more than 3,000 workers being furloughed in the UK in April 2020 immediately following the coronavirus outbreak with more significant layoffs expected globally over the next 3-5 years, which is the anticipated recovery period. The airplane maker also slushed production rates by a third due to low demand from customers including British Airways and many others that are fighting for survival (Buyck2020; BBC 2020; Jolly 2020).

Technological environment

Digital marketing is essential in today’s competitive business world as customers continue to gain more power over business. Airbus has built its brand with digital experience in order to create greater collaboration, become more efficient and expand how it delivers digital experiences to partners and customers. Airbus has created a direct-to-consumer campaign by building a website dubbed iflyA380.com the world’s first aircraft-specific booking assistant (Adobe blog 2018).

Legal environment

In its US market, the government announced 10% tariffs on Airbus planes after winning the World Trade Organization issues in October 2019, over subsidies received by the aircraft manufacturers. According to Josephs (2019a), these tariffs are as a result of the dispute between US and Europe over government subsidies paid to aircraft manufacturers. This is a major threat to the airline as it will increase costs, impacting the U.S. commercial aviation industry as well as the overall economy at large (Josephs 2019 a). On top of this, the Aerospace giant will also be impacted by the $7.5 billion worth tariffs placed on all European imports since its wide body planes and single aisle are made in Europe (Josephs 2019a).

Environmental issues

 The aviation industry contributes up to 4.9% of greenhouse emissions including carbon dioxide emissions which are highly contributing to global climate change. According to Abudalla (2018), kerosene, a fuel that is used to power aircraft engines which other than being a rare resource emits carbon dioxide, majorly contributes to global warming. However, companies have started using electric engines, promoting the widespread use of aviation biofuels as well as new engines which use less fuel.

References

Abdalla Nahda (2018) “What effect is global aviation having on the environment?” Phys.org [Online] at https://phys.org/news/2018-08-effect-global-aviation-environment.html

Adobe Blog (2018) “Build Sky-High Product Demand with Direct-to-Consumer Digital Experiences” [Online] at https://theblog.adobe.com/airbus-delivers-direct-consumer-digital-experiences-iflya380-com/

BBC News (2020) “Coronavirus: Plane-maker Airbus furloughs 3,200 staff” [Online] at https://www.bbc.com/news/business-52436741

Buyck, Cathy (2020) “Airbus Taking ‘Schizophrenic’ Approach To Coronavirus Crisis, CEO Says” Forbes [Online] at https://www.forbes.com/sites/cathybuyck/2020/04/29/airbus-has-schizophrenic-approach-to-covid-19-crisis-european-planemaker-ceo-says/#23af210a2e6c

Jolly, Jasper (2020) “Airlines may not recover from Covid-19 crisis for five years, says Airbus” The Guardian [Online] at https://www.theguardian.com/business/2020/apr/29/airlines-may-not-recover-from-covid-19-crisis-for-five-years-says-airbus

Josephs Leslie (2019) “The boom in airplane orders is over for Boeing and Airbus” CNBC [Online] at https://www.cnbc.com/2019/12/15/the-boom-in-airplane-orders-is-over-for-boeing-and-airbus.html

Josephs Leslie (2019a) “ US to issue tariffs on Airbus planes — and travelers will pay” CNBC [Online] at https://www.cnbc.com/2019/10/02/us-to-issue-tariffs-on-airbus-planes-but-travelers-will-pay.html

Katz Benjamin and Cameron Doug (2019) “Airbus to Expand Production in China, Putting Further Pressure on Boeing” The Wall Street Journal [Online] at https://www.wsj.com/articles/airbus-to-ramp-up-production-in-china-11573037151

Laurent, Lionel (2020) “New measures from Emmanuel Macron may not be enough to offset the impact of the crisis on aerospace firms” Bloomberg [Online] at https://www.bloomberg.com/opinion/articles/2020-06-10/macron-needs-more-than-17-billion-to-save-airbus

Lineberger Robin (2019) “2019 global aerospace and defense industry outlook” Deloitte [Online] at https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Manufacturing/gx-eri-2019-global-a-and-d-sector-outlook.pdf