The lingering supply-chain issues resulting from the Covid pandemic are still putting pressure on the aviation industry, according to speakers at last week's annual JetNet iQ Summit in New York. Yet while those constraints are acting as a drag on production in a period of strong OEM backlogs, some see that as a positive.
“A big issue for a lot of us right now is the supply chain,” explained David Rosenberg, Textron Aviation’s senior v-p and CFO. “We would all love to be building more airplanes right now, but the supply-chain constraints have resulted in a better equilibrium between supply and demand.”
“What that’s done is maintain price discipline, maintain supply growth, and maintain production levels so the industry stays healthy,” added Michael Amalfitano, president and CEO of Embraer Executive Aircraft. “That helps the new buyer and that helps the used buyer because they have a residual value to protect.”
Problems in the supply chain have had a cascading effect that extends all the way to the support network, according to GAMA president and CEO Pete Bunce. “An aircraft operator needs to be serviced and all of a sudden we get word that a first-tier supplier can’t provide an essential engine or avionics on time because they can’t get parts, so they may have to take parts off the production line and give them to the aftermarket line to be able to fix it.”
Delray Dobbins, head of sales and strategy for Pratt & Whitney Canada’s Eagle Service Plan, noted that the industry's repair capacity is not where it was pre-Covid. He said that normally if the company’s technicians couldn’t repair a part or component they would simply sell the customer a new part, which is now difficult with a reduced spare-parts inventory.
“The lack of repair capability has exacerbated the strain on new-parts supply,” he said. "This is a relationship-driven industry. How do you have a relationship when you don't have all the parts on your shelf that you need?" Dobbins asked rhetorically.
“Right now, every one of us—whether they will admit it or not—is calling customers saying your airplane is going to be delayed,” Amalfitano explained candidly. “We’re all doing it, some more so than others depending on the segment you are in—that’s reality.”
To help ease supply bottlenecks, he said, Embraer has more than 60 employees stationed with critical suppliers around the world, looking to boost their production levels. His company is also looking to see what outside production it can bring in-house to give more certainty and control to supply lines.
Thierry Betbeze, CEO of Dassault Falcon, said that rather than see its production lines hobbled by parts shortages, his company is sending factory workers out to bolster the production lines at some crucial small providers and has even acquired some of those companies whose owners are looking to exit the industry.
But it's more than just the finished products that are in short supply, noted Amalfitano, citing windshields as a pinch-point example in the manufacturing and repair sectors. “If you have a windshield, it has resins in it, and there’s a challenge with windshields all across the globe, so you don’t magically fix some of these things even at the raw-material level, whether it’s carbon fiber, aluminum, titanium, resins, [semiconductor] chips, there’s a lot of challenges in terms of this recovery.”
Juergen Wiese, chairman of the European Business Aviation Association and managing director of BWM’s corporate aviation operations, added that there is competition for these materials between aviation and his employer’s industry as well.
The parts shortage has even begun to affect pricing on the second-hand aircraft market, according to Emily Deaton, CEO of aircraft brokerage jetAviva. “I think what is most interesting is the impact that we are seeing in the bigger marketplace as it even pertains to values because of the supply chain,” she explained to the audience. “We are having to devalue aircraft that are coming up on a hot section because we’re proactively anticipating extended downtimes and a lack of rental engines despite their being on programs or not.”