The lingering supply-chain issues resulting from the Covid pandemic are still putting pressure on the aviation industry, according to speakers at last month's annual JetNet iQ Summit in New York. 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, the president and CEO of Embraer Executive Jets. “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, noted General Aviation Manufacturers Association 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 [component] 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, the 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 noted 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, stated 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.”
Labor, or the lack thereof among suppliers, is a major contributor to supply-chain problems. “The same lingering issues that we’re facing in terms of bringing talent in and filling our staffing requirements, our suppliers are facing as well,” said Rosenberg.
The effects of Covid on lower-tier manufacturers in the supply chain still cast a large shadow, according to Embraer’s Amalfitano. As these companies either closed or laid off workers, that restricted the flow of parts as master craftsmen moved on to different employers.
“The people shortage happened in months, the supply recovery is years,” he said. “It takes a long time to recover that skillset across the supply chain.”
Particularly affected were those small companies that provided just a handful of crucial, specialized parts, such as forgings or castings. “When we look at our vendors, a lot of them are small vendors that maybe had one master technician taking care of that one part,” said Dobbins. “Post-Covid, that master technician is gone.”
The shortage of such talent comes as the industry looks to increase production in the face of strong demand for new aircraft. “When we had these types of backlogs, our industry has ramped up rapidly,” said Bunce.
“Then when something happens like a recession, all of a sudden we are looking at layoffs, and we have these big amplitudes,” he added. “A lot of these companies either went out of business or they are trying to ramp back up and they don’t have the labor out there.”
With the strict part tolerances demanded by aviation manufacturers, quality control has been another aspect of the loss of skilled labor. “Even when something is built and shipped and it shows up, if it doesn’t meet the standards, it goes back,” said Amalfitano. “That has happened in this timeframe much more than it ever has in the decades before.”