The pain for the world's aircraft-makers and their suppliers is always delayed when airlines plunge into recession, but it is also unavoidable.

Boeing and Airbus, the US and European standard-bearers of the civil aircraft industry, will soon be under heavy pressure from many of the world's leading airlines, urgently seeking to review their fleet strategies and new order positions.

The share price of European Aeronautic Defence and Space company (EADS), which owns 80 per cent of Airbus, was already in modest decline during the summer, in response to the airlines' existing problems arising from the slowdown in the US economy.

But since last Tuesday its share price has followed the airlines in a downward spiral with a fall of about 35 per cent, including a drop of 9.6 per cent this Tuesday.

As the New York stock exchange reopened on Monday, Boeing also followed in the airlines' wake, with its share price dropping by 18 per cent.

In France, Snecma, the state-owned jet engine maker, has been forced to postpone its planned initial public offering from October, while in the US, United Technologies, parent company of the engine-maker Pratt & Whitney, issued a profit warning.

UTC said the impact of reduced airline traffic and grounded aircraft on the aerospace aftermarket could reduce operating profits by up to $250m in the fourth quarter.

Shares in Rolls-Royce, the UK jet engine maker, have also dropped sharply, gaining little credit for its defence, energy and marine operations.

In stark contrast, defence groups such as BAE Systems in the UK and Raytheon, Lockheed Martin and Northrop Grumman of the US have been star performers in the stock market mayhem of recent days.

The airlines fear they are entering a downturn in demand for air travel that will exceed even the decline after the Gulf war. All the leading US airlines, as well as Virgin Atlantic in the UK, have announced they are cutting capacity by 20 per cent with immediate effect.

The first move by the airlines was to ground unwanted aircraft, many of which will end up mothballed in the western deserts of the US. At the same time, airlines will take the opportunity to retire older aircraft from their fleets. But these moves will not be enough.

The next step will be the review of order positions, and as orders fall so will deliveries, with the biggest hits being taken in 2003 and 2004, when the aircraft-makers will no longer be able to draw on the comfortable cushion of their present order backlogs.

The airlines have "just gone from catching a cold to catching pneumonia", says Chris Avery, aviation analyst at JP Morgan, "and there is no way in which the aircraft manufacturers can avoid the inevitable industry downturn which is now coming."

The last airline crisis, in 1991-93, sparked by the Gulf war and recession, led to a 50 per cent decline from the peak to the trough of aircraft deliveries, and a significant recovery did not begin until 1997.

The aircraft-makers have been notably silent during the past week, as they watched the turmoil among the airlines, but Airbus at least will be forced to break cover tomorrow, when EADS presents its half-year results in Amsterdam.

Charles Burrows, aerospace analyst at HSBC, said on Tuesday that deliveries of aircraft of 100 seats and above were likely to drop to 670-680 in each of the years 2003 and 2004, from the near-800 being forecast before last Tuesday.

Originally, Airbus had planned to raise output from 311 aircraft last year to 450 in 2003, but it had already been forced in August to pare this target back to 400, as airlines cut their own growth targets.

HSBC estimates that the aim will now be even more modest, with output of only 345 aircraft next year and 340 in 2003.

Boeing, where production is running at a much higher level than Airbus, has a similar-size order backlog to its European rival, and is therefore likely to run into problems much more quickly. HSBC forecasts Boeing commercial aircraft output falling from 528 this year to 420 in 2002 and only 343 in 2003.

Airbus has a particular long-term vulnerability arising from the present crisis, however. It has only recently embarked on the most ambitious aircraft development programme ever launched in Europe, to produce the 555-seat A380 superjumbo, the biggest passenger aircraft ever planned.

The aircraft, which is being developed at a cost of more than $10.7bn, is not due to enter service until 2006, but the R&D spending is already placing a heavy burden on its financial performance. Noel Forgeard, Airbus chief executive, was confidently expecting orders for the giant aircraft to be well in excess of 100 by early next year, but airlines can hardly be expected to sign up for such a huge commitment while the outlook for air travel remains so uncertain.

In contrast with Boeing and Airbus, some aerospace analysts believe demand for regional and corporate jets from Canada's Bombardier and Brazil's Embraer could prove relatively resilient to the inevitable downturn in the industry, even though Montreal-based Bombardier's shares fell by 24 per cent last week alone.

The Canadian group also says it is receiving "tremendous interest" from companies over its Flexijet fractional ownership programme for corporate jets. Security concerns could prompt companies to acquire small executive jets, or partial ownership of such jets, to ensure safe transport for key personnel, said Ted Larkin of HSBC Securities.

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