As the global aviation industry recovers from the COVID-19 pandemic, there is optimism that better times are ahead. But there is a big caveat. Supply chains are reeling, and suppliers to aerospace manufacturers face a host of uncertainties that make finding a solution problematic, especially in the near term.
“I think we’re going to continue to be unstable at least through next year,” David Wireman, global co-head of the aerospace, defense and aviation practice at AlixPartners, told Avionics International. “There are waves of [supply-chain] issues.”
The two companies putting the most pressure on the aviation supply chain are Airbus and Boeing. And each presents a particular challenge to parts suppliers, many of which feed both companies’ manufacturing lines.
Airbus is planning to ramp up its A320 family aircraft production rate from 45 per month in the 2021 fourth quarter to 65 per month by the middle of 2023, and is considering going all the way to 70-75 per month by 2024. This is a steep slope for the company’s supply chain.
“We see some concern with the idea that we’re going to have significant production rate increases,” Glenn McDonald, a senior associate at AeroDynamic Advisory, said in an interview. “It’s harder to ramp up than ramp down–there is a lot of preparation needed.”
Wireman noted: “Airbus is projecting ramp rates they’ve never achieved before in terms of slope.”
Airbus is aware of the supply-chain challenges, but ramping up narrowbody aircraft production is at “the heart of our priorities,” Airbus CEO Guillaume Faury told reporters at a February press briefing.
He conceded that raising production rates will be a “complex” challenge for suppliers. “We see difficulties with raw materials, with logistics, with cost of energy and also with hiring people back across the globe,” Faury said.
Airbus is committed to moving to a monthly A320 production rate of 65 next year, but has not yet decided about going higher. “We need to look at the balance between demand and supply and the ability of the supply chain to accelerate at a certain pace,” Faury said. “We’re still discussing 70, 75 [per month], but we want to look at the stability of the [supply-chain] system.”
The uncertainties bedeviling supply chains are not easy to solve because there are so many issues to contend with, he added. “In terms of resources, it depends on each and every supplier,” Faury said. “The bottlenecks and the challenges are not the same by commodity, by region, by type of equipment, systems and parts we are buying.”
While suppliers are facing a myriad of snags, it is widely agreed that finding enough skilled labor is the most significant obstacle to overcome. “Labor is the big one,” McDonald said.
“Everybody down-sized labor pretty dramatically and now has to decide when to hire and how to find and train workers,” Wireman said. “There’s still a degree of craftsmanship in aircraft manufacturing, so filing a spot doesn’t mean you have expertise. There’s a whole learning curve, sometimes taking years.”
Faury agreed that the labor shortage is serious. “More than the rest [of the supply-chain problems], the ability to find … the human resources in quantity and quality” is critical, he said, adding: “We need the right skills at the right place at the right moment. This is an area where many companies are struggling around the globe. So, we need to factor this in when we define the ramp up plans because we need to be able to execute the ramp up plans.”
But at least Airbus is providing clarity for suppliers. They know the ramp up is coming and when.
Boeing, on the other hand, has had well documented difficulties with its 737 MAX and 787 programs. The MAX reentered service last year after two fatal accidents led to a lengthy grounding, but new 787 deliveries remain suspended, though hundreds of previously delivered 787s are in service with airlines around the world. Further complicating the return of 787 deliveries was the FAA’s announcement in February that the agency–not Boeing–will clear each new 787 before it is delivered.
Long delays in 737 and 787 production present two main challenges for suppliers: Boeing has a huge overhang of already-built parts in inventory and, particularly with the 787, there remains a lack of certainty around future production.
In part because of the inventory overhang, “supply constraints to date have not constrained us,” Boeing CEO Dave Calhoun said in a February conference call with analysts. “On the other hand, I think in the medium- to long-term future, it’s something we all have to plan for. I’ve always viewed the unfortunate means by which we got here and the buildup of finished goods inventory, both with respect to the MAX and the 787, as sort of a double-edged sword. I hate that we have a lot of inventory.”
Wireman believes suppliers “are more likely to invest in Airbus because there is just more clarity” regarding future production. He added: “Boeing is doing everything they can to provide clarity, but every supplier interprets the outlook of [the 737 and 787] programs and the veracity of the signals Boeing is sending differently. Nobody has a clear picture of what their inventory overhang is. Resynchronizing the Boeing supply chain is going to be a challenge and not everyone is going to get it right.”
McDonald noted that Boeing “has a more measured production ramp up”–seeking to go from a MAX production rate of 19 per month in 2021 to 31 per month this year–that alleviates some pressure.
“With our production at relatively low rates and higher-than-normal inventory levels, the supply chain is currently not a constraint,” Boeing CFO Brian West said. “However, as we look forward to the industry recovering and future production rate increases, our supply chain remains a key watch item due to raw material and labor availability as well as logistical challenges.”
Of course, it is not just Airbus and Boeing that are dealing with supply-chain concerns. The problems cascade throughout the aerospace industry, hitting companies such as single-engine light aircraft manufacturer Cirrus Aircraft.
“We’ve had a quick pivot to a high-demand scenario,” Cirrus President-Innovation & Operations Patrick Waddick told Avionics. “Labor availability has had one of the greatest impacts. Workforce issues have really hampered supply chains.”
As a result, lead times on electrical components, for example, have “expanded significantly,” he said, explaining that the typical lead time has grown from 18 weeks to 30 weeks.
Cirrus is also being heavily affected by the congestion at ports. “We export airplanes by container ship to China,” Waddick said. “We’ve had aircraft in shipping containers sitting on boats for months. This is just a perfect storm. It’s as challenging a situation as I’ve seen in my career. It’s going to take some time for these issues to stabilize. We’re talking about building highly technical systems that require significant investment and lead time.”
There is generally hope that aerospace supply chain bottlenecks will begin to alleviate next year. “You can see your way to brighter times in ‘23 or ‘24 without any major new hiccups,” Wireman said. “It’s really an interesting time because there are some significant unknowns.”
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