Please register here: http://www.research.gabellisecurities.com/conferences/1/register
“Hi, I’m Tony Bancroft, the Aerospace and Defense analyst at GAMCO Investors. Today, I’d like to discuss our upcoming Twenty-Sixth Annual Gabelli Virtual Aerospace & Defense Symposium on Thursday, September 10th. To register please click the link below in the description. This year’s presenting companies are AAR, Aerojet Rocketdyne, AeroVironment, Astronics, Avio, CPI Aerostructures, Crane, Ducommun, Elbit Systems, HEICO, Kaman, Kratos, Mercury Systems, Moog, Park Aerospace, Textron, and Woodward, while GE will hold small group meetings.
The commercial aerospace industry is experiencing an ongoing substantial decline in demand resulting from a significant number of aircraft in the global fleet grounded. The International Air Transport Association or IATA, sees global traffic taking about 3 years to return to 2019 levels. Boeing sees about 2,500 planes that are 20-plus years old that were in active service before the CoVID-19 crisis. As of now, about 30 airlines have announced nearly 1,000 early aircraft retirements.
However, over the long term, newer aircraft are 25 to 40 percent more fuel-efficient than what they’re replacing; making the economics for a new airplane compelling. Boeing expects to produce the 737 at low rates for the remainder of 2020 and gradually increase the rate to 31 by the beginning of 2022, with further gradual increases that correspond with market demand. Boeing assumes timing of regulatory approvals will enable the 737 MAX deliveries to resume during the fourth quarter of 2020.
We expect the US Defense Budget to remain flat for fiscal year 2021 after a post-sequestration growth period. We are encouraged by the bipartisan support in advancing the fiscal year 2021 National Defense Authorization Act through the House and Senate and believe the heightened threat environment will drive the trajectory of US Military spending regardless of the election outcome.
The Senate and House passed their versions of the budget in July. The bills both support defense funding of $740 billion, which is in line with the Pentagon’s request and an increase from $738 billion in fiscal year 2020. We expect to start fiscal year 2021 with a continuing resolution, given delays to the appropriations process and August recess. For fiscal year 2022, the Pentagon will likely plan for a flat defense budget.
Overall, long-term fundamentals that have driven air travel for the past five decades and doubled air traffic over the past two decades remain intact, while defense spending has provided a healthy market with solid demand for major platforms and programs. Again, please click the link below if you’re interested in joining and we look forward to having you.”
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