Coatings World - August 2009

The airline industry has had a difficult history in the last decade with 9/11, fuel
cost escalation and now, the recession. Confident business will turn around,
coatings manufacturers are helping airlines reduce costs while innovating more
environmentally-friendly coatings.
BY TIM WRIGHT

EDITOR

The skies have been anything but friendly for U.S. airlines during the recession. The Air Transport Association of America said airline revenue plunged 26% in June. That’s the eighth straight month of losses. The group also reported that the number of passengers traveling on U.S. airlines in June fell 6.5%, while the average price to fly one mile—called passenger unit revenue—fell 20.7% compared with June 2008.

Such declines do not bode well for the coatings manufacturers supplying the airlines, who have naturally felt their own pressure from revenue and profit losses.

“The recession and escalation in fuel costs have forced airlines to review their airplane purchases and make adjustments,” said Chris Athanasopoulos, international marketing director, Deft Aerospace Coatings. “A reduction in new airplanes or delaying delivery has reduced the need for coatings.

“With airline revenues tumbling airlines in return are delaying repainting,” said Athanasopoulos. “Reduction in paint needs affect income and in turn margins.”

The commercial airline industry operates in a very competitive environment where margins are razor thin. Any significant fluctuations in costs or revenues can have severe impacts on profitability.

“In down times, airlines will often postpone non-critical operations, such as repainting aircraft,” said John Griffin, general manager for the Americas, AkzoNobel Aerospace Coatings. “However, a significant amount of paint

Passenger revenue fell 26% on U.S. airlines in June compared with a year earlier, the eighth consecutive month of declines, according to the Air Transport Association of America. Airlines also saw air freight shipments drop 20%—the tenth consecutive month of decline.

is used during required maintenance operations, and airlines will repaint aircraft as part of a rebranding effort to improve the airline’s image, which often takes place during difficult times.

“Volumes are lower than in previous years, but our airline customers still need our products and services to operate,” Griffin said.

All segments of the aerospace market are facing similar challenges with some worse off than others. “The corporate and general aviation segment is the hardest hit because the costs associated with private aircraft are discretionary and often the first to be cut in a recession,” said Griffin. “Commercial manufacturing is relatively strong by historic standards, but this sector will feel the impact of fewer new orders, and increased cancellations as they work-off their production backlogs.”

The defense segment is less volatile due to aircraft maintenance requirements and long term funding plans for new programs.

“The military segment is in better condition due to the manufacture of several new airplanes including the F-35, F- 22, C-17, F- 18, F- 16, F- 15, C-130 and the refurbishment of older models,” said Athanasopoulos. “Cargo carriers and private jets are facing the same problems faced by commercial airlines with the recession and reduction in business.”

MEETING CUSTOMER DEMANDS

Coatings manufacturers continue to support the needs of their customers by looking for ways to improve service, efficiency and reduce costs wherever possible.