Supply Chain Matters highlights the most recent developments concerning leading commercial aircraft producer Airbus and efforts to meet its 2022 aircraft delivery commitments.

This week, the manufacturer alerted customers and investors that it will not be able to make its adjusted 2022 aircraft delivery goal because of ongoing supply network challenges.

 

Background

In October of 2021, we highlighted for readers indications from the CEO of Airbus that the subsequent 12 to 18 months will be the most difficult part of what this aircraft manufacturer would have to achieve to really recover from the Covid 19 impacts on airline travel and on the aerospace industry as whole. Recall that at the height of the Covid-19 pandemic in 2020, Airbus elected to keep its aircraft assembly facilities operating at reduced manpower levels despite many challenges, in an effort to maintain some sense of momentum and support for workers and suppliers. Faury warned in April of 2020 at the height of the pandemic that “The survival of Airbus is in question if we don’t act now.”

In an interview with Bloomberg News last year, CEO Guillaume Faury expressed confidence that the Airbus supply network would be able overcome the pandemic induced demand contractions that occurred, despite key supplier concerns. He further reaffirmed existing planning related to being able to boost the monthly production rates of the widely popular A320 single-aisle aircraft once again. The plan was to be able to boost output from the existing level of 40 per month, ramping to a rate of 64 A320 aircraft per month by 2023. There was mention of potential interest in boosting monthly production to 75 aircraft per month around the mid-decade, which was noted as an unprecedented monthly output number for the industry as a whole. Even in good times.

In order to achieve these levels, especially after the severe shocks that the commercial aircraft industry endured as a result of airlines postponing or canceling existing orders, supply agreements for aircraft engines and major air frame components were considered crucial and subsequently renegotiated. Since that time, Airbus teams have been constantly meeting with suppliers to ascertain their readiness to support required aircraft delivery needs.

Airbus rival Boeing’s production and supply chain capabilities were impacted as well, not only be the pandemic, but also the aftereffects of the massive multi-year grounding of the 737 MAX aircraft.

 

Latest Developments

A week ago, CEO Faury acknowledged to industry and business media that ongoing supply constraints will likely extend into the end of 2023, despite the aircraft manufacturer’s best efforts. At an industry conference held in Europe, he indicated that raw material shortages, the ongoing disruption of parts suppliers residing in China amid continued Covid-19 related facility lockdowns, along with soaring inflation were headwinds that have added to ongoing supply disruptions. He revealed to media reporters: “The supply chain crisis is going to be longer than we thought a couple of months ago, more challenging and more difficult.” He further pointed to raw material shortages impacting supply needs in areas such as wing and air frame producers to suppliers of brackets. Electronic component shortages in the lower tiers of the manufacturer’s supplier networks, which are essential for a variety of cockpit and on-board equipment were mentioned as well.

Yesterday, The Wall Street Journal (Paid subscription required) and aircraft industry media reported that Airbus formally warned investors and customers that it would not be able to meet its revised aircraft delivery target this year of 700 commercial aircraft deliveries, that this target was now out of reach. The acknowledgement came after the company reportedly delivered 68 aircraft to customers in November and having another 135 aircraft remaining to be delivered to meet the end of year goal of 700 deliveries.

Further noted by media reports was that the original 2022 delivery target was 720 aircraft deliveries, but that was revised downward at the start of this year. However, Airbus reiterated that it still expects to meet its adjusted profitability and free cash targets for this year.

The manufacturer also communicated that the ongoing supply challenges would likely be a setback to prior plans to ramp-up production of the highly successful A320 aircraft family, a direct competitor to the Boeing 737 MAX.

In its reporting, the Journal was quick to point out that Boeing has its own set of ongoing supply chain challenges in meeting aircraft delivery commitments for its 737 MAX models. Thus, the annual contest judging which manufacturer will be crowned for making the most annual aircraft deliveries is rather mute because the industry as a whole is dealing with supply and other delivery focused challenges.

 

Added Perspectives

We elected to highlight the above development not only for our aerospace and manufacturing industry focused readers, but also as backdrop to out upcoming annual report of 2023 industry and global supply chain predictions.

While there may have been some anticipation that industry supply chain challenges and supply network disruptions would moderate in the coming year, the reality is that for many industries, the challenges remain. That remains for the global automotive industry, machinery, drugs and pharmaceuticals, and other industries.

The commercial aircraft industry has traditionally been a catalyst for robust global trade and supply network presence. Amid continued collaboration and readiness assessment exercises among its industry suppliers focused on needs to once again ramp-up monthly production and aircraft deliveries, multi-tiered raw material, component and labor shortages continue, and 2023 will be another challenging year.

 

 

Bob Ferrari

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