Will supply chain crisis stop aviation industry recovery in its tracks?

Industry trends, Supply chain | Jun 03, 2022 | By Satair | 4 min read

After two-plus years of historically rough headwinds, the aviation industry is recovering much faster than expected.

Traffic growth in some markets is so strong that the International Air Transport Association (IATA), the industry’s largest trade body, now expects a return to pre-pandemic levels by 2023, a full year earlier than it, and most other industry analysts, previously predicted.

The industry’s rapid global recovery, particularly in the narrowbody segment, has OEMs planning to significantly ramp up their production, with Airbus having committed to increasing its A320 production rates and Boeing expected by many analysts to similarly boost its 737 output.

Shortage of parts and manpower

Beneath the rising tide of optimism, however, are growing concerns that global supply chain challenges will undermine the aviation industry’s recovery.

The aerospace supply chain has been severely disrupted by the COVID-19 pandemic and its after-effects. Two years of lockdowns, travel restrictions and shifts in consumer behaviour have snarled supply routes and slowed delivery times.

Narrowbody boom could put pressure on used parts market

It’s a global crisis affecting nearly all sectors of business. Aviation is no exception. If anything, it may be one of the most affected industries.

“The supply chain crisis is a global issue but what may be specific to aviation is the severity of the impact,” André Loenker, director of solutions sales and consulting at Satair, told the Knowledge Hub. “Many aviation companies had to reduce costs to survive the crisis, and for good reason. But I think the industry was somewhat caught off guard by how things have ramped back up and that has created a human resources shortage on top of a parts shortage.”

Ramp-down was quick, ramp-up is slow

Pre-existing labour shortages at airlines, MROs and suppliers were made even worse by job cuts and early retirements spurred by the industry downturn. Although the larger issue predates the pandemic, these workforce reductions have left many manufacturers and suppliers ill-prepared to meet the rapidly-rebounding travel demand.

“My impression is that a lot of us were a bit surprised by how the demand has recovered,” Loenker said. “The ramp-down during the pandemic was quick but the process of ramping back is slow.”

The lack of skilled aviation technicians is compounding, and in some cases directly contributing to, the global supply chain crisis. The result is a scarcity of vital aviation parts and logistical challenges that have seen lead times for some components explode. In some cases, wait times are exceeding a year. As a result, airlines, suppliers and MROs are now forced to rethink their supply chain strategies.

One significant change, as Satair’s director of commercial strategic programmes Allan Uldahl Riis recently told the Knowledge Hub, is that the parts pipeline has had to become “a lot more responsive.”

“A lot of the buffers have been removed across the entire chain because no one is really holding stock anymore, or at least not like they used to,” he said.

The reduced inventory stockpiles create something of a vicious cycle, Loenker said.

“Buffers have been reduced, so that means you now need new parts. But to produce new parts, you need raw materials. Those raw materials are often in short supply and transporting them is also difficult, so you’re always running up against the same problem if you’re not forecasting well” he said.

Engine components and raw materials

Engine manufacturers are particularly feeling the crunch, with shortages of cast and forged components leaving major players like Pratt & Whitney unable to deliver engines as planned.

The difficulties in obtaining components are in large part down to several smaller suppliers of engine components going bankrupt during the downturn, while others shifted to producing components for other sectors. Kevin Michaels, an aerospace consultant at AeroDynamic Advisory, said that other suppliers are likely to face the same fate.

“You will see more failures in the next 18 months than you saw in the previous 18 months,” he told Flight Global in March 2022. “It is harder to ramp up than to ramp down.”

It’s not just engine components. Boeing has said that its 737 Max production has been hampered by wire component shortages, while Raytheon pointed to shortages of electronics and raw materials like aluminium and titanium as part of the reason its subsidiary P&W fell short of its first-quarter engine delivery target.

Nor is the problem contained to new parts. Used parts are also harder to come by, presenting a whole host of problems for the aftermarket.

Is 'local for local' the answer?

And that’s just the current situation. Not only will the OEM’s production ramp-ups put additional pressure on an already stressed aviation supply chain, but current geopolitical events threaten to make an already strained global supply chain much worse.

The conflict in Ukraine is affecting the supply of necessary materials like titanium, while the closed trade routes and air space over Russia and Ukraine, as well as periodic lockdowns resulting from China’s zero-COVID policy, are complicating the delivery of many needed goods and materials.

The interconnectivity of today’s global supply chain makes it inevitable that aerospace companies will feel the effects of these, and any future, events. That’s why there is a growing chorus of voices calling the whole system broken – sometimes in more colourful language – and suggesting that global supply chains should be replaced by “local for local” models that rely on regional suppliers closer to production facilities.

The Satair Takeaway

The supply chain crisis isn’t specific to aerospace and even if aviation companies shift to a more local model, our industry will most likely never be immune to problems that arise within the incredibly complex and interconnected system that moves parts and components from point A to point B. While we’re not quite ready to go as far as those who say “globalization as we know it may be coming to its end,” there is no doubt that the events of recent years have laid bare the risks of today’s current system.