Moody's Investors Service changed its global aerospace and defence sector outlook from "negative" to "stable," projecting a slow recovery from the very weak Q2 over the next 12 to 18 months.

In a statement, Moody's said the commercial aviation segment will remain "very challenged" as a result of the impact of the coronavirus pandemic on aviation.

"Boeing and Airbus have lowered aircraft production rates and Moody's believes the commercial aviation sector will continue to operate at these lower levels for several years," it said. 

Moody's noted that large commercial aircraft production is forecast to be around 30% to 40% lower than 2019 levels in 2021 and that new aircraft build rates will partially depend on the resumption of 737 MAX production, with manufacturing volumes for other aircraft remaining flat or even declining.

The coronavirus pandemic will also drive multi-year weakness in the aftermarket, regional, business jet and rotorcraft segments, albeit partially mitigated by demand for services to bring parked aircraft back into operation.

"The outlook could change back to negative due to a number of factors, including if airline passenger volumes do not improve, commercial aircraft deliveries decline, annual defence spending falls by more than 2% or operating profits decline sequentially," the credit rater added.

Meanwhile, Moody's said the outlook could turn positive if the coronavirus outbreak is brought under control, leading to a substantial improvement in airline passenger volumes; aircraft deliveries rise by 10%; defence spending goes up by at least 4% or operating profit increases sequentially at mid-single-digit percentage rates.