As manufacturers report recoveries from Covid-19 impact in sight for many end markets in their second quarter 2020 financial results, outlook for the aerospace industry remains dim.
Pittsburgh-based Arconic Corp. reported second quarter sales of $1.2 billion, down 38% year over year, during the companys quarterly earnings call Tuesday. The company also reported a net loss of $92 million in the second quarter, compared to a net income of $5 million in the second quarter of 2019.
Pittsburgh-based Allegheny Technologies Inc. saw $770 million in sales in the second quarter of 2020, down from $1.1 billion in sales in the second quarter of 2019. The company also reported a net loss of $422 million, during its second quarter earning call Tuesday.
When it comes to aerospace specifically, Arconic saw sales drop 26% year over year, due to both the continued grounding of Boeings 737 MAX planes and a sharp decrease in demand due to Covid-19. ATI, for similar reasons, saw its high-performance materials and components segment sales drop 44% in the quarter and sales to the commercial aerospace market in particular drop 50%.
I think its really going to be somewhere well into 2021 before it improves, George Ferguson, Bloomberg analyst who follows the aerospace industry, said. We are still in the midst of a slow down for new builds I think this year is going to be really rough, because airlines are still in rough shape financially, and the travel recovery slowed down recently because of the outbreaks of coronavirus in the south of the U.S. and the west of the U.S. and now in Spain.
Boeing, which reported its second quarter results last week, had planned to get its 737 Max planes, grounded after two deadly crashes in recent years, back up to a production level of 31 planes per month for a good portion of 2021. However, the company already pushed that back, saying it would aim to get to that 31 number by the end of 2021, Ferguson said.
We could not have picked a more interesting or more challenging time to start our journey as an independent company, Arconic CEO Tim Myers, said, regarding the companys split from Arconic Inc. into Arconic Corp. and Howmet Aerospace in April.
Myers said he expects a roughly 50% drop in aerospace sales year over year for Arconics second half of 2020. ATI CEO Robert Wetherbee said he also expects the negative impact to last for a few more quarters due to the significant decline in aerospace end markets, especially for the air frame part of its business.
On the air frame side, because of the length of that supply chain, it has taken longer to understand when is the Max coming back and what are the implications of Covid on long term airplane deliveries, Wetherbee said, during the call Tuesday. It will be a quicker down and up for engines and slower down and up on the frames.
Arconic also had a tough quarter for ground transportation, reporting a 57% revenue decline year over year due primarily to halted production of automotive manufacturers. However, the company anticipates the second half of 2020 to approach the run rates it saw in the second half of 2019.
I just think ground transportation, they are not as affected by the coronavirus as the airplane business is because everyone is scared of being stuck in a tube in the sky with a bunch of people whos health conditions they dont know, Ferguson said.
Looking ahead, the companies aim to remain nimble in case a Covid-19 vaccine or treatment jumpstarts recovery in the aerospace industry.
[A vaccine] would give a lot of impetus to increase air travel which would lead to improvement on that side, Wetherbee said. We feel well positioned for the new builds. One thing we have seen across the aerospace industry is that the airlines are retiring the old stuff, which would position us well for faster recovery with a vaccine.
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Arconic, ATI struggle with sales in the aerospace industry - Pittsburgh Business Times