Magellan Aerospace earns $458,000 in Q3 2021 Magellan Aerospace Corp. results for the third quarter of 2021. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as shown in the attached table.
Results of Operations
A discussion of Magellan's operating results for the third quarter ended September 30, 2021
The corporation reported revenue in the third quarter of 2021 of $166.4 million, a $3.0 million increase from the third quarter of 2020 revenue of $163.4 million. Gross profit and net income for the third quarter of 2021 were $10.6 million and $0.5 million, respectively, in comparison to a $22.7 million gross profit and breakeven net income for the third quarter of 2020.
Revenue in Canada decreased 5.6% in the third quarter of 2021 compared with the corresponding period in 2020 mainly due to production recovery from work stoppage at the corporation's Haley facility, volume decrease for wide-body aircrafts and proprietary products, production delays and unfavourable foreign exchange impact driven by the weakening of the United States dollar relative to the Canadian dollar. On a currency neutral basis, Canadian revenues in the third quarter of 2021 decreased by 2.4% over the same period of 2020.
Revenue in the United States in the third quarter of 2021 remained consistent with the third quarter of 2020. On a currency neutral basis, revenues in the United States increased 5.6% in the third quarter of 2021 over the same period in 2020 mainly driven by volume increases for single aisle aircraft, specifically the Boeing 737 MAX as aircraft build rates increased.
European revenue in the third quarter of 2021 increased 17.9% compared with the corresponding period in 2020 primarily driven by build rate recovery for single aisle aircraft, offset partially by the weakening of the United States dollar relative to the British pound. On a currency neutral basis, European revenues in the third quarter of 2021 increased by 21.1% when compared with the same period in 2020.
Outlook
The outlook for Magellan's business in 2021
According to the International Air Transport Association (IATA), global revenue passenger kilometres (RPK's) will be 40% of pre-crisis levels in 2021 and reach 61% in 2022. Although domestic travel experienced a setback in the third quarter of 2021 due to the escalating spread of the COVID-19 Delta variant in certain regions, RPK's recovered to 68% of pre-crisis levels. A general improvement was also experienced in international air travel in the third quarter of 2021 facilitated by growing vaccination rates and lessening international travel restrictions. However, international travel lags domestic travel with RPK's at around 31% of pre-COVID levels. Experts agree that the pace of vaccine rollout and government policies will determine the course of international traffic recovery.
Boeing said in its 20-year Commercial Market Outlook 2021 update, that "while the disruption to the world and our industry from COVID-19 has been massive, long-term demand drivers remain fundamentally unchanged", concluding that commercial air travel will recover quickly when restrictions are lifted, as evidenced in China and the U.S. The outlook is materially unchanged from a year earlier with a forecasted 20-year demand for 43,610 new aircraft including 32,660 single-aisle aircraft. Regionally, North America, Europe and China are each expected to comprise approximately 20% of the total demand for new aircraft.
Airbus delivered 127 new aircraft during the third quarter of 2021. Airbus recorded gross orders of 105 aircraft, and cancellations of 10 aircraft, resulting in an order backlog of 6,893 aircraft as of September 30, 2021. Boeing delivered 85 aircraft in the same period, received gross orders for 111 aircraft and cancellations of 52 aircraft. Boeing's order backlog was 5,058 aircraft at the end of the third quarter of 2021, excluding accounting adjustments.
Airbus build rates remain as previously reported. A320 production rates increase to 45 aircraft per month in October 2021, then 49 aircraft per month by January 2022, 55 aircraft per month by mid-2022 and 61 aircraft per month by January 2023. In 2023, the rate is to increase from 61 aircraft to 67 aircraft per month. Airbus is exploring a rate of up to 75 aircraft per month by 2025. The A330 build rate remains at 2 aircraft per month, while the A350 build rate continues at 5 aircraft per month until the latter part of 2022 when 6 aircraft per month is planned. Airbus' A220 rate will reach 5 aircraft per month in 2021, 6 aircraft per month in 2022 and 2023 and ramp up to 14 aircraft per month by 2026.
Boeing's 737 production rates are expected to go from 17 aircraft to 24 aircraft per month by January 2022, then 31 aircraft per month by July 2022, and reach 52 aircraft per month by the second half of 2023. Boeing's 777 aircraft build rate remains at 2 aircraft per month and is planned to increase to 3 aircraft per month by 2023 and then 3.5 aircraft by the fourth quarter of 2023. The 787 production and delivery pause is extended to the end of 2021 due to various quality issues encountered with the aircraft.
In defence markets, industry experts believe that the U.S. may be entering a new spending phase that counter balances China's defense spending, implying that U.S. defense spending is likely to continue to grow. The F-35 Joint Program Office (JPO) and the Lockheed Martin industry team agreed on an F-35 production rebaseline to ensure "predictability and stability" in the production process while recovering the aircraft production shortfall realized over the last year during the COVID-19 pandemic. Under this agreement, Lockheed plans to deliver 133 to 139 aircraft in 2021, 151 to 153 aircraft in 2022 and 156 aircraft annually beginning in 2023. Lockheed delivered 120 F-35 aircraft in 2020.