Rates are being slashed as demand slumps - but this will provide crucial breathing space for stretched industry

While the stimulus is unsatisfactory, there is a silver lining to the otherwise bleak news that Airbus and Boeing are cutting back production of new aircraft in the wake of a collapse in demand.

How much output will be cut back is an imponderable at the moment, but prior to the pandemic the industry was expecting to deliver some 1,600 mainline jets this year – depending on the return to service of the 737 Max.

Airbus chief Guillaume Faury says the company’s 2020 delivery forecast now “is the most difficult part to predict” as the airframer undertakes “aircraft-by-aircraft, airline-by-airline” discussions.

A potential scenario painted by Ascend by Cirium of short-term demand makes grim reading. It sees traffic decline nearly 50% in 2020, which, even with a “numerically strong” traffic rebound in 2021, will be unlikely to recover next year to 2019 levels, assuming a deep recession in the second half of this year.

“Put simply, this would imply that two years of new aircraft deliveries are not required,” says Ascend. “In reality capacity will also be adjusted by increased removals from service, potentially lower aircraft productivity, and maybe the use of smaller aircraft.”

It is extraordinary to consider the desperate new short-term outlook, given that not long ago Airbus was preparing to take single-aisle output to 63 A320 family aircraft a month. Boeing similarly had been facing pressure to expedite deliveries of new and pre-completed 737 Max aircraft once the grounding was lifted, with potential monthly delivery scenarios as high as 70 aircraft.

But these rates came with health warnings, as Airbus continued to grapple with quality and scheduling problems on the A321neo while Boeing – along with its customers – faced a potentially horrendous task achieving the likely post-grounding shipment volume for Max aircraft.

Boeing chief executive Dave Calhoun told CNBC that the OEM has 450 737 Max aircraft “ready to be shipped”, but says due to the pandemic the delivery situation has “moved from a bit of a supply issue to what is now a demand issue”.

The coronavirus-driven hiatus at least provides breathing room for the OEMs – not to mention the stretched supply chain – to catch their breath and restore confidence in their abilities to deliver aircraft on time and on quality. It also gives Boeing the headroom to ensure that its execution of Max return is controlled and co-ordinated, minimising the risk of further damage to an already-embattled airliner programme.