ITA’s ‘Virtual 2020’ Presentations Focus on Good, Bad, And Ugly of Global Aerospace in the Year of Covid-19

ITA’s ‘Virtual 2020’ Presentations Focus on OCTOBER 13 WWW.TITANIUMUSA.ORG • #ITATITANIUM

Good, Bad, And Ugly of Global Aerospace in the Year of Covid-19

By Michael C. Gabriele

The Titanium Virtual 2020 Conference and Expo, broadcasted online Oct. 1214, was unlike any business forum organized and sponsored by the International Titanium Association (ITA) during the last 35 years. The “virtual” element came out of necessity due to the concerns and travel restrictions from the Covid-19 global pandemic.

Even though this online program, by definition, meant “social isolation” and the lack of face-to-face interaction of an in-person event, the Zoom panelists rose to the occasion and delivered thoughtful, coherent, timely observations on current business trends and global market conditions that exist in the age of Covid-19.

By any measure, 2020 will go down as the worst year in history for the global aviation industry—a swift downturn that has rattled the titanium industry and the titanium global aerospace supply chain. This steep drop in the commercial aerospace industry has been documented by the International Air Transport Association (IATA), which reported that airlines are expected to lose $84 billion this year. Revenues in 2020 revenue would likely fall to $419 billion compared with $838 billion in 2019, which over 7 million flights were cancelled from January to July. The IATA (www.iata.org), with headquarters in Montreal, is the trade association for the world’s airlines, representing 290 airlines or 82 percent of total global air traffic. The dire assessment is shared by virtually every industry leader and observer in the commercial aerospace industry.

Given the negative impact on business conditions, the question now is: how will Covid-19 affect the titanium industry, which targets aerospace as its showcase market? Speakers on the ITA’s Zoom 2020 Aerospace and Defense panel addressed this question. There was three points of unanimity by the panelist on the current aerospace situation: current market conditions are historically bad; commercial aerospace won’t see a return to more normal market conditions until 2023/2024; and the military aerospace market is reasonably stable for titanium business.

Laurent Jara, vice president, metallic materials, Airbus S.A.S., began by first stating that Covid-19 is the most severe crisis every faced by

Boeing Titanium Market Outlook

Titanium Virtual 2020 Presentation by Jeff Carpenter, Boeing

the commercial aerospace market, but added that his main message of his presentation was “resilience,” and that the industry will bounce back. “We must find ways to mitigate and adapt,” to the crisis, Jara said. However, Jara didn’t mince words assessing the plight of the airline business in 2020: 14,000 aircraft have been grounded; there’s been a 90-95 percent drop in global flights; 80 percent of passenger traffic has been lost this year; there’s been a $31.4 billion loss of passenger revenue; and the global aerospace supply chain is “at risk.”

“We’ve managed to ramp down” business this year due to the slowdown, he said. “We now must manage to ramp up. Our supply chain is very complex. We’re trying to find a balance to see what the titanium supply chain is able to absorb.” Jara said titanium demand for Airbus’ A320neo single-aisle jets and A350 wide-body jets is likely to remain “ very low” during 2021 and 2022.

Jeffrey Carpenter, senior director, contracts and category leader/raw materials and standards, Boeing Co., provided a reality check on the informal surroundings for his Zoom talk, saying he’s working at home and hasn’t been to his office at Boeing since March 9. While confirming that Covid-19 has been an “unprecedented shock” to commercial aerospace, Carpenter noted that there has been a stable global demand for defense and space government services. He said there are also early signs that a recovery for commercial aerospace is starting slowly.

As for his outlook on the titanium aerospace supply chain, Carpenter said there have been “significant price declines” for titanium ingot, scrap and sponge, the titanium material categories used for airframes, engines and landing gear. For the near term, he observed that inventories across the titanium supply chain are high and titanium scrap is plentiful due to the weakness in consumption. From an internal perspective, Carpenter said that Boeing, as planned, has fully implemented its Boeing Raw Material Aggregation System as a means to improve data control, visibility and forecasting for materials (especially titanium and aluminum) in its supply

Fundamentals of air travel demand return market to trend growth

Titanium Virtual 2020 Presentation by Jeff Carpenter, Boeing

chain. “We will all be more efficient and production focused.”

Much like the Airbus and Boeing executives, Richard Aboulafia, the oft-quoted vice president of analysis at the TEAL Group, remains stunned by the scope of the Covid-19 impact on commercial aerospace. “I’ve never seen anything like this in my 33 years of looking at aircraft programs and markets.” He also recalled that his last plane flight in 2020 took place on March 9. “I remember it well,” he

Airbus, Boeing Jetliner Backlogs (July 1)

Titanium Virtual 2020 Presentation by Richard Aboulafia, TEAL Group

said, with a touch of melancholy in his voice.

The damage done by Covid-19 to the aerospace industry is “about as bad as we feared and maybe worse,” Aboulafia declared. However, he did say that military aerospace programs have held up better than expected in 2020. Prior to the coronavirus shock, he pointed out that the industry did see a bit of a slowdown in 2019, following the “super cycle” growth years of air travel between 2014 and 2018. He was hopefully that a recovery, approaching 2019 aerospace industry levels, would begin to emerge by 2023.

Aboulafia said expects to see a steep 63-percent decline in global RPK (revenue passenger kilometers) for 2020, “which reflects the terrible reality of the pandemic.” He offered a one-page chart for his global aircraft market in 2020. The total aerospace industry (civilian and military) will decline 30 percent compared with 2019. The categories for that overall number include a 36.5-percent

decline in single-aisle aircraft; a near 43-percent decline in twin-aisle aircraft; and a 20-percent decline in business aircraft. He did warn that the situation might get worse in the near term, before it gets better. “There’s no doubt that we will get back to ‘normal’, but the next few years will hurt.”

Henry Seiner, vice president, business strategy, Timet, and a former president of the ITA executive board, participated as a speaker for the World Titanium Industry Demand Trends Zoom panel. He did, however, provide aerospace insights with his presentation on the “Military Market in a COVID World.” Like the other speakers, Seiner observed that the global pandemic has driven the commercial aerospace market “over the cliff” in 2020, but said that military aerospace business has been relatively stable. “But the military business can’t come close to absorbing commercial losses” for the titanium industry, he said.

Citing a chart from Aviation Week and Space Technology magazine, Seiner said that, for near-term

Titanium Virtual 2020 Presentation by Richard Aboulafia, TEAL Group

Titanium Virtual 2020 Presentation by Henry S. Seiner, TIMET

military programs, 2,100 aircraft are expected to be delivered during the next five years. About 50 percent of that aircraft total will be going to Asian/Pacific defense customers, with 40 percent earmarked for North American and European defense customers. Seiner pointed out that this 2,100 aircraft total doesn’t include the production of the new U.S. military B21 Raider Stealth Bomber, being built by Northrup-Grumman, which is designed to complement or partially replace the military’s current fleet of B1 and B2 bombers. According to online press reports, the B-21 Raider is expected to begin test flights in 2022.

Even though he remains optimistic, Seiner said that the overall aerospace recovery from Covid-19 is likely to be uneven during the next few years. He ended his remarks by saying: “may 2021 allow us to reduce our Zoom dependency and move back toward normal and allow us to meet face to face in San Diego next October,” referring to the planned TITANIUM 2021 North American conference.

Donald B. Simmons, III, the director of operations at CWTI, Crossworks Technologies Inc.

(CWTI), delivered an uplifting message against the backdrop of Covid-19-related turmoil in the aerospace industry. Simmons’ presentation, titled “Changing the Culture of an Organization to Improve Performance,” provided a story of how focused, positive leadership can turn around a moribund, discouraged work environment. Thought it might not have been his original intention, Simmons program could serve as an inspirational tale of hope for titanium and aerospace companies reeling from the global pandemic fallout.

Simmons said that, in December 2019, he retired as a captain in the navy after 30 years of service, most of which dealt with aviation maintenance, repair and overhaul (MRO) and logistics. He joined CWIT, based in Orlando, FL, and became the director of operations, a position that led him to being selected as the commanding officer at the Naval Air Station’s Fleet Readiness Center, a facility of 100 buildings (many over 100 years old) located at North Island, CA. Among its various work assignments, the center performs MRO work on the military’s F18 Hornet aircraft.

Upon his arrival at the Fleet Readiness Center, he quickly realized that he was walking into a difficult situation. The sprawling facility had a reputation for poor performance and strained labor relations, with a “culture of complacency” among its employees and managers. There were dusty posters of slogans and goals hung throughout the walls of the installation. “None of (the goals) were being met,” Simmons said. Taking stock of the gloomy environment, he recalled the phrase “actions express priorities,” a quote from Mahatma Gandhi, India’s iconic anti-colonialist leader and non-violent protestor from the early years of the 20th century. “It’s not what is said; it’s what you do that shows priorities,” he said,

Titanium Virtual 2020 Presentation by Donald B. Simmons, III, the director of operations at CWTI, Crossworks Technologies Inc.

F/A-18 Hornet

Titanium Virtual 2020 Presentation by Donald B. Simmons, III, the director of operations at CWTI, Crossworks Technologies Inc.

emphasizing the word “do.”

He took action. Simmons quickly removed individuals at the center who had violated OSHA regulations, which sent “shock waves throughout the workforce.” He got rid of the trite posters of slogans and instituted two mottos for the center. The first: “compliance and deliver to promise— no exceptions.” He empowered the workforce and held individuals accountable. Inspections would be taken seriously. He established a dialogue among the five union stewards at the center, and partnered with Navy and Boeing engineers.

His second motto: “Three and Thirty,” meaning the delivery of three F18 Hornet aircraft, with approved MRO work, in 30 days.

Simmons made himself visible, walking through the production areas of the center every morning. “I was supportive of the staff. We met eye to eye. The workforce started to believe. The ‘helplessness’ of the past started to fade. The culture started to change. We celebrated victories, big and small.”

The center achieved the three and thirty goal and went on to set even more ambitious goals, all of which were met. After one year the facility completed MRO on 38 F18 aircraft. The Fleet Readiness Center garnered awards for its performance. Simmons outlined five key points in the turnaround: focus on compliance; deliver on promises; set and achieve incremental goals, partner with others; and celebrate every victory. “We changed the organization’s culture and, in the process, became the best MRO command in the Department of Defense,” he said, concluding his program.