Triumph Bullish On Narrowbody Recovery’s Prospects
Recovering passenger demand coupled with airlines’ push for more cost-efficient operations could soon drive narrowbody production rates past where they were before the 2020 downturn, Triumph Group President and CEO Dan Crowley said.
“Pre-COVID-19, we were talking about commercial narrowbody rates [going] much, much higher,” Crowley told analysts on the company’s May 20 earnings call. “I think very soon, this whole conversation around getting back to ‘19 is going to be overcome by events, and it’s going to be, how much higher than ‘19 are we going to go?”
Heading into 2019, Airbus and Boeing were on track to ramp up to producing more than 120 narrowbodies per month combined, led by the A320’s 60-per-month rate and Boeing’s planned ramp-up to 57 737s per month. But two fatal 737 MAX accidents and the model’s grounding led Boeing to reverse course on the 737, and the COVID-19 pandemic forced revisions for both manufacturers. Current production plans have Airbus and Boeing rolling out a combined 81 narrowbodies per month by mid-2022—45 A320s, five A220s, and 31 737s. Airbus, eyeing a possible jump in rates in the next few years, recently unveiled plans to re-start work on a new narrowbody final assembly line that will be open by 2023.
Crowley is convinced that expected passenger demand growth coming out of the pandemic-induced downturn, the cost advantages of the current-generation aircraft, and possible financial incentives to replace older, less-efficient aircraft with more environmentally friendly ones will feed demand for new deliveries. Already dominant narrowbodies will take even more market share as airlines look to fly point-to-point routes using aircraft such as the A321XLR. The result will be a steady rise in production rates.
“I’ve stayed in contact with the airline CEOs,” he said. “They’re looking at a much more fuel-efficient fleet, lower costs on the MRO side ... So if they can get a newer fleet, that’s a competitive advantage. And whether there’s government incentives for them to retire legacy aircraft, not just domestically but internationally ... tied to the environment, we’ll see. There’s a lot of economic incentives to [buy new aircraft].”
For suppliers such as Triumph, which supplies components for a variety of commercial programs and has a large aftermarket support business, the prospects of a rapid production-rate presents both opportunities and challenges. Like most suppliers, Triumph has scaled back to meet lower monthly production rates on key narrowbody and widebody programs. It now faces a delicate balance of ensuring its downstream suppliers are ready to scale back up quickly without committing too much capital on sheer speculation.
“That’s part of why we’re planning now for the ramp and making sure that all of the supply that we buy can support it,” Crowley said. “Now we’re not going to get ahead of the market and acquire inventory betting on [a rapid jump]. It’s contingency planning consistent with the rates that the [manufacturers] have published. But I think, 2019, we’re going to eventually blow through that, and we’ll be at higher rates than we were pre-COVID.”