The return of Chinese customers to the skies in 2023 resulted in the number of global air passengers in October surpassing its 2019 counterpart – the first time any monthly figure has bettered a 2019 rate since the onset of the pandemic.
Figures published by Airports Council International (ACI) World in September concur that the recovery is complete, as 2024 will set a new annual record with 9.4 billion passengers – 102.5 percent of 2019 levels (2023: 94.2 percent).
However, the MRO sector will need another year to exceed the record levels set in 2018 for air transport aircraft deliveries, according to Naveo’s monthly Air Transport Traffic, Fleet & MRO Update report for November 2023.
Next year, therefore, promises to be yet another in which the supply chain is held back by its challenges despite strong demand (19,445 aircraft orders and 21,581 forecasted new deliveries between now and 2032).
Here, in no particular order, are the seven biggest challenges facing the industry today:
The pandemic has left a huge dent in the supply chain’s labour pool. The exodus of talent in 2020, once their work dried up and redundancies followed, caused a severe shortage of engineers and mechanics.
Furthermore, the skilled workers departed with know-how that couldn’t be easily replaced.
When the time came to re-employ, many had found work in other industries. Their replacements, meanwhile, needed training and were less productive.
The supply chain could only hope that automation and AI-powered innovation would require fewer hands on deck, but now the recovery is close to being fully realised, will there be enough workers to fulfil the ever increasing demand?
Dr Michael Winters, Principal Fellow Advanced Technology at Pratt & Whitney, isn’t convinced, comparing the situation right now to a perfect storm:
“On the one side, we have large new fleets with new engines and aircraft introduced into the market, learning their way towards better dependability. At the same time, we're coming out of COVID and the workforce is limited in capacity and hence the supply chain is limited in capacity.”
The Global Services Forecast published by Airbus in October 2023 envisages the aviation industry will need 2 million more employees over the next 20 years – including 680,000 technicians.
So the drive to attain and retain top talents from increasingly diverse backgrounds, and also upskill existing employees, must start today. It is vital to the industry’s future.
David Stewart, Partner at Oliver Wyman, agrees that both recruitment and retention are major challenges to the aviation supply chain:
“There is a shortage of skilled labour wherever you are, whatever region you're in, to carry out the maintenance on the planes – for both the MROs and the airlines.”
One solution is using augmented reality (AR) to train personnel remotely. AR is credited with reducing downtime, making MRO processes more efficient and reducing the carbon footprint incurred by technicians travelling from airport to airport.
It is predicted 72 percent of all MRO operations will use AR in at least one application by 2030.
As things stand, 10 percent of the world’s commercial planes have been in storage for at least 90 days – a huge reduction on 2020, but three percentage points above 2019 figures. Storage costs are relatively cheap, and in times of uncertainty it can make good financial sense.
But with passenger numbers expected to soar past pre-pandemic rates in 2024, will there be enough planes to cope with the demands of peak travel periods, such as the European summer holiday season?
Vallejo from Iberia Maintenance fears a worst-case scenario coming true in 2024 – and he partly blames the supply chain for not having enough parts or parts suppliers.
“We're not building enough parts to satisfy the demand we can see around the world. I really hope for next year’s summer season we’ll have all aircraft in good shape and flying. But those living and breathing day-to-day in the supply chain are struggling, and they need some relief.”
Certainly, there is a global shortage of parts, which can be attributed to low post-pandemic retirement rates: 463 in 2021, 503 in 2022 and a similar number in 2023. In 2022, the retirements represented 1.7 percent of the global fleet, compared to an all-time average of 2.5 percent.
Additionally, the dismantling rate is rapidly decreasing as new plane purchases have been in freefall since the pandemic, which means Original Equipment Manufacturers (OEMs) are decreasing their output due to lower demand.
Some OEMs have few parts to spare outside the service contracts they make when they sell planes, so the number ending up on the aftermarket is limited.
Surely, next year will be a crucial one for the supply chain, but if it can increase its transparency, flexibility and adaptability, explore alternative sourcing and logistics options, and promote the use of digital tools and technologies for better visibility, it can start to overcome them.
Furthermore, the chain would also benefit from long-term planning that accounts for potential future disruptions, investments in supply chain resilience, exploring new partnerships (see #7) and an overall diversification of suppliers.
David Stewart from Oliver Wyman would like to see the industry take a more innovation-based approach to solving the supply chain disruption:
“Whether that means better machine learning on-demand, parts forecasting, better supply chain management, or using technology to address those turn-times."
The supply chain is still a long way off fully embracing digitalisation despite the many benefits for both large and small businesses.
These include:
A better digital perspective could not come soon enough for Paul Lochab, CCO at Satair:
“From a digital perspective, we're probably a little weak in our industry. Artificial intelligence is starting to roll in. But if you look at the Silicon Valley in California, they're miles ahead of us.”
But there is a major obstacle: not enough data is being shared. Large amounts remain undigitalised, non-integrated or unobtainable – a lamentable situation according to Lochab:
“The information flow is critical: so we can help each other, and we can plan. It keeps the focus on driving this together, rather than ‘Here's my demand’. So when I talk about partnerships, it's also about having transparency, communication and sharing data.”
Satair can be proud of its efforts in the digital sphere, according to Tommy Hughes, President and CEO at VAS Aero Services:
“How do we get to more of an advanced efficiency associated with a digital imprint? Satair has been implemented a marketplace that can ultimately perfect and kind of get there eventually. But how do we get the rest of the industry to work towards that digital landscape?”
The potential of predictive maintenance – leveraging data from the performance of parts to forecast when a part needs to be replaced, thus enabling the USM supplier to have the right part in their inventory ahead of time – would appear to hold the most promise.
However, Hughes is not convinced AI is the best way forward … right now:
“You hear about AI and so on. We have to get to the next step before we get to AI: and that is providing visibility to the industry via a digital landscape. Certainly we have the technology and availability to do it.”
In the meantime, manual alternatives are still being preferred – a frustrating state of affairs in 2024 at a time when so many industries are being transformed by AI-powered data analytics, concedes Hughes:
“The reality with our industry is that it is still very manual. If you look at the USM side of the business today, there's material that is positioned and bought and sold – all via a manual element.”
Given the post-pandemic progress of the supply chain, we can expect sustainability efforts to continue in 2024. This is a journey, and the whole chain is onboard.
Ongoing efforts such as emission reductions and increasing awareness will continue, but ultimately the demands of airlines and governance must lead the way to enable the chain to fully adapt.
In early 2023, Denmark set a zero-emission target for all domestic flights by 2030, ten years earlier than Norway’s – but Vallejo from Iberia Maintenance still questions whether governments are taking aviation sustainability seriously enough:
“The capacity installed for producing sustainable aviation fuel is not enough at present. Government action is needed.”
Nevertheless, the example of the Nordic countries, along with the commitment of commercial aviation to become ‘Net Zero’ by 2050, bodes well for increased environmental responsibility in the future. The tech might not exist yet, but confidence is high that it is an achievable goal.
Many airlines are investing in zero-emission technologies, of which Dr Winters from Pratt & Whitney is an advocate of the gas turbine engine.
Powered by either SAF (sustainable aviation fuel) or hydrogen, he is confident it will be the industry’s game-changer:
“The gas turbine engine, when enhanced with hybrid electric, becomes an optimised cyber-physical machine and, even without batteries, brings value and greater fuel efficiency. They will burn sustainable aviation fuels when they become available en masse, as well as hydrogen when it's available on the flight line.”
As far as the supply chain is concerned, the pre-pandemic excitement generated by new-gen aircraft is already subsiding in an aftermarket now more preoccupied with sustainable options, and this point sustainability is no longer regarded as a mere trend but a moral and strategic imperative.
Furthermore, the major players know their customers increasingly want sustainably-acquired products with transparent footprints, according to Hughes from VAS Aero Services:
“Today we're being asked more and more what our sustainability, recycling and environmental support plans are. Our customers have their own and want us to be aligned with that type of disposition.”
The key is remembering there is always room for improvement, contends Vallejo – and to never tire of asking questions:
“How are we going to be able to repair parts that in the past were not repaired and replaced? How are we going to make sure that fuel emissions are decreased? How can we operate aircraft in a different way?”
Stalling digitalisation efforts are also detrimental to enabling parts traceability, concurred the experts at MRO Europe 2023.
While an increasing number of parts come with digital records compared to a decade ago, many still only have paperwork – at best.
Often the relevant details are simply lost or loaded onto an errant file, and nobody wants a part without knowing its life-cycle details, reasons Hughes:
“What's been done with them, how they've been operated, how they've been treated, and where they were repaired – did all of this meet the quality and reliability requirements to install and run an aircraft?”
Stewart from Oliver Wyman goes as far as saying the issue is the most pressing challenge facing the supply chain:
“I would say it's very vital for the industry to maintain traceability of parts because the DNA of aviation is safety and safety equals traceable parts, so it's 100 percent one of the most vital things we do – along with having well-qualified pilots.”
Jasper van den Boogaard, VP Airframe Acquisition & Trading at APOC Aviation, agrees that is essential:
“Traceability is absolutely essential. We have to work with very high levels of certification and quality, and if something happens, you cannot afford not to have good traceability of each part – all in accordance with the high standards of the industry.”
Until the industry comes together to ensure all parts traceability information is shared – blockchain is an obvious solution, but it has been for over a decade. Still, Hughes has not given up hope yet:
“It's becoming more and more critical that there's a fundamental understanding or a database associated with the following and tracking of the movement of those parts so we know where they originated.”
Spare parts prices have steadied since soaring 40 percent after the outbreak of the War in Ukraine in February 2022.
In most cases, their increase has been in line with high inflation rates, although the price of cheaper parts are more likely to have risen more than parts costing in excess of $5,000.
The aviation supply chain needs to ensure that repairs remain a viable option for airlines, according to Vallejo from Iberia Maintenance:
“We need to make sure that the repair cost of engines to keep them serviceable is as low as possible, whilst ensuring we are not replacing parts that could be repaired. Because that's sustainable from a logistical perspective, from a material usage perspective, and even from a recycling perspective.”
But as things stand, too many MROs are being priced out of the market, according to Jasper van den Boogaard, VP Airframe Acquisition & Trading at APOC Aviation:
“The manufacturers aren’t getting new aircraft into the market and it's difficult for part-out companies to buy aircraft at the moment because the prices are really up.”
Perhaps the most popular suggestion put forward to solve supply chain issues by those in attendance at MRO Europe 2023 was more collaboration – not just the sharing of data, but the MRO work itself.
It is clearly a worry that some OEMs do not grant licences to MROs to carry out repairs, instead increasing their own capacity to complement the existing capacity they have in their own supplier portfolio.
Such a diversification, along with an increase in partnerships, would increase overall capacity, contends Lochab at Satair:
“If we all work in isolation, it's not going to help the industry. Instead we require a lot of planning, conversations and partnerships. And the partnerships can’t be a one-way street. It's going to take both and all of us to work together to drive this momentum in a positive direction.
Collaboration enables different players to share knowledge and learn from one another, and they need not be restricted to within the sector, contends Dimitry Los, Co-founder & CEO at Fourel Aviation Solutions:
“The aviation industry pools experience and solutions from all other niches in the world – like banking, ecommerce, MarTech and so on. But we need to start adopting earlier.”
Vallejo from Iberia Maintenance envisages an effort not too dissimilar to the one that gave the world Concorde:
“I think the industry needs to come together like it did when we wanted to fly supersonic. A lot of bright people from different countries were put together to develop the Concorde. And that was a great achievement for humanity and for the industry. I think we need to do that today in a similar way.”