When is it going to end?

For airline leaders present at the 68th Association of Asia Pacific Airlines (AAPA) Assembly of Presidents in Brunei in November, front and centre on their minds were supply chain issues and delays – and when they are going to end? Associate editor and chief correspondent, Tom Ballantyne, reports.

December 1st 2024

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Association of Asia Pacific Airlines director general, Subhas Menon, is in no doubt about the most critical stumbling block members of the regional airline association face in accommodating forecast future air traffic growth. Read More » “The biggest threat to industry growth is ongoing supply chain interruptions,” he told airline leaders and industry delegates in his State of the Industry address at the gathering in Brunei.

“Aircraft engines are facing persistent issues. The push for environment friendly technology has led to teething problems. Relatively new engines are requiring inspections and repairs. Higher certification standards and more frequent failures of components have aggravated the chokes in the supply chain,” he said.

Menon added the global publicity attracted by the recent machinists strike at Boeing made matters worse and that the effects of the strike persist. Making matters more challenging, Menon said, are disruptions of flight schedules caused by all of the above problems that are pushing some regulators to mandate compensation for delays and cancellations.

“Already airlines are taking on significant costs by re-accommodating passengers, not to mention sourcing alternative aircraft at higher cost, to keep their schedules ticking over”, he said. “They will be even more out of pocket with onerous rules that attack the symptoms, rather than mitigate disruptions.”

The bottom line is there is no early end in sight to the problems of component shortages, increased hangar time and delayed new aircraft delivery schedules. Aerospace manufacturers are predicting it will take three years for aircraft supply chain distortions to ease. In the meantime, Asia-Pacific airlines must deal with the disruptions to their fleet planning when air passenger demand is experiencing a post-pandemic surge and is forecast to sustain its robust growth.

Delayed deliveries of aircraft, or aircraft groundings from engine problems, gives them no alternative but to fly older, less fuel-efficient aircraft to close capacity gaps at additional cost.

International Air Transport Association (IATA) data for October shows the region’s airlines recorded a 17.5% year-on-year increase in demand. Capacity also increased 17.2% year-on-year and passenger load factor was 82.9%, up 0.3ppt compared with a year ago.

AAPA statistics for the same month revealed international passenger numbers increased by 19% year-on-year to 31 million air travellers, 98.6% of the corresponding month in pre-COVID 2019.

At this rate of growth, no one is being spared from the supply chain issues. Leading global airline, All Nippon Airways (ANA), is grappling with engine-related aircraft availability issues as it looks to increase capacity to meet growing demand.

Its fleet has been affected by maintenance backlogs for the Rolls-Royce Trent 1000 engines that power many of its B787s causing some aircraft to be grounded, ANA executive vice president, Katsuya Goto, told Orient Aviation during a briefing at the AAPA November Assembly. ANA also has 12 Airbus narrow-bodies grounded because of long-running availability issues with the aircraft type’s Pratt & Whitney GTF engines. It will like take one to two years for the airline’s engine availability problem to be fully resolved, Goto said.

Air India CEO, Campbell Wilson said the carrier is dealing with delivery delays of 50 “white-tail” aircraft from Boeing scheduled to join the airline’s fleet this month, but now they will not arrive at the flag carrier until next year. “White-tail” refers to aircraft manufactured without a particular customer in mind.

Wilson also revealed the retrofit of legacy B787s and B777s scheduled for this year has been postponed and will now begin in 2025. Three to four of the aircraft will be retrofitted every month until all 40 of the flag carrier’s wide-bodies are done.

In Auckland, Air New Zealand (AirNZ) has announced it is downgrading its profit outlook for fiscal first half, largely because of supply chain issues. Up to four of its 14 B787s are grounded because of problems with their Rolls-Royce Trent 1000 engines. There also are problems with the Pratt & Whitney GTF (Geared Turbo Fan) engines that power new-generation A320neo and A321neo aircraft, potentially the most profitable in the Air NZ fleet.

The flag carrier has 12 A321neos with an average age of just four years, but durability issues with the engines have grounded to six of them.

Aircraft delivery delays also are impacting the fleet planning of several other airlines in the region. The B777X is a perfect example of the situation they are encountering. Originally planned for delivery in 2020 it will not start arriving in the fleets of its customers until at least 2026. Orders in the region for the type are Singapore Airlines (20), Cathay Pacific (21), ANA (20). Gulf operators are its major customers: Emirates (115), Qatar Airways (60) and Etihad Airways (25). All these carriers have had to readjust forward their fleet planning and overcome the challenges it entails.

Emirates Airline president, Tim Clark, has said the carrier is a “frustrated entity” because of a lack of planes and added it would now be operating 85 777-9X jets if Boeing had delivered them on time.

'We take the industry-wide issue that the aerospace supply chain is currently dealing with extremely seriously,” a Rolls-Royce spokesperson said. “We have introduced several initiatives to reduce its impact on our customers. Already, we introduced measures that allow us to respond more quickly to issues, such as integrating our Procurement and Supplier Management teams, sharing our own raw material stocks to tackle shortages and hiring people to work in supplier organisations. One of our most impacted suppliers has almost 50 Rolls-Royce supply chain staff dedicated to driving their recovery'

“We are expansionists, as you know. And we have had our wings clipped,” he told reporters at the delivery of the airline’s first A350 aircraft in late November. The Airbus wide-body also arrived later than scheduled with the Dubai-based carrier.

Boeing’s well publicized problems apart, there is little doubt the pandemic essentially shattered the aviation supply chain. Like airlines, suppliers lost key staff and their operations have often descended into chaos.

The aviation supply chain was complicated enough without this industry crisis. But its complexity was essentially of major manufacturers own making.

Building a single modern jet is almost miraculous. An example is the A350. It has around 2.5 million individual parts and a significant proportion of them come from hundreds of contracted suppliers in dozens of countries around the world. A problem with a single supplier can cause a major problem on the production line. And it is no different at Boeing or Embraer.

What are the manufacturers doing to resolve supply chain issues? At Boeing, output was virtually frozen during the recent 54-day machinist strike. It has been resolved, but analysts forecast the recovery could stretch to two years or longer given there are no more disruptions.

Airbus Asia-Pacific president, Anand Stanley, said the company’s post pandemic work force has been increased and that it had provided assistance to suppliers, including finance, to keep them afloat. At September 30 this year, Airbus had 156,569 employees on its payroll, 6% more than 147,893 employees in December last year.

At the November AAPA Assembly, Stanley said it’s a journey of ramp up. “It’s not a single state. “We are definitely through that journey, putting a lot of effort into working with our suppliers, working internally, staffing up.

“Today we have more employees at Airbus than we had pre-COVID. We are monitoring our supply chain and working with them. We have watchtowers. We have suppliers working in-house. We have Airbus experts working in the supply chain.”

Skyrocketing demand for new aircraft after the end of the pandemic has resulted in some suppliers being unable to cope. “The rate of demand was so fast post-COVID-19 that the supply has not been able to catch up,” Stanley said.

There have always been bumps from time to time. Synchronisation is not perfect, but we are working on it.”

Airbus plans to increase output of its A320 family aircraft from the present rate of mid-40s per month to 75 a month by 2027 and build A220 completions to 14 a month by 2026, the A330 to four per month from 1.5 and A350 output to 12 a month in 2028 from four monthly at present.

Airbus forecasts 42,430 new aircraft will enter the market in the next two decades of which 19,500 will be operating in the Asia-Pacific driven by fleet expansion and replacements.

The OEM hopes to deliver 770 commercial aircraft this year, but it appears unlikely it will hit its target. Airbus CEO, Guillaume Faury, has acknowledged the pressures, telling delegates at a recent conference in Brussels “we have more demand for our products than we can deliver”.

Delivery delays continue to affect customers. AerCap, the world’s largest aircraft lessor, said it has pushed the delivery of 15 A320neo jets out of 2025 and into 2026.

The third major Western aircraft manufacturer, Brazil’s Embraer, has revised down its expected commercial aircraft deliveries in 2024 to 70-73 aircraft from an earlier forecast of 80 jets. Embraer CEO, Francisco Gomes Neto, has called out continued “obstacles” to production in the global supply chain.

In November, Embraer finalized the implementation of its ONEChain Program, an initiative to support the company growth’s strategy leveraging digital transformation to improve the management of its supply chain.

It is designed to simplify and digitalize supply chain operations by fostering greater transparency, agility and collaboration in an integrated process that benefits Embraer and its suppliers worldwide.

“In addition to achieving enhanced operational efficiency, we have integrated all operations with our suppliers and partners in a single platform, making it possible to manage operations in real-time”, Embraer’s executive vice president global procurement and supply, Roberto Chaves, said. “This guarantees a more levelled and uniform production of our products, a reduction in fixed and variable costs and more agile decision-making processes.”

Engine manufacturers are facing similar challenges. Rolls-Royce is struggling with persistent supply chain issues that are impacting its engine production and maintenance schedules. Customer, British Airways (BA) has been forced to cancel flights on one of its most popular trans-Atlantic routes. Starting this month, it suspended all flights between London Gatwick and New York’s JFK Airport until next March as a result of engine shortages. The airline cited logistical bottlenecks within Rolls-Royce’s supply chain as a key factor driving its decision.

'There are just too few competent suppliers in the aviation industry today,” he said. “Experienced workers are hard to find. If you add in air space closures due to the Ukraine and the Middle East conflicts, it is a real wonder industry growth is as enduring as it is today'

Subhas Menon AAPA director general

The engine supply chain problems are a combination of raw material shortages, logistics challenges and delays in the global delivery of components. Rolls-Royce has not been able to meet increasing demand for its engines as a result of constraints in sourcing critical materials such as titanium and also specialized electronic components. The disruptions are affecting its ability to deliver new engines and complete necessary maintenance on existing ones.

The engine OEM has expressed regret about its failure to meet the aero engine requirements of its customers. It is committed to minimizing potential disruptions in its wider network as it works to resolve engine shortfalls, it said.

“These changes are having a positive impact. So far this year, we have increased Trent 1000 supply chain output by a third, making more components available and minimising the time engines spend in our MRO centres. We are confident these bold changes coupled with our long-term investment plans will provide continuous improvement for our customers.”

For airlines, however, there is little doubt the disruption will continue for some time. Late deliveries or reduced capacity because of aircraft grounded by engine problems is forcing them to adjust fleet planning, even make network and frequency alterations, not to mention flying older aircraft that are more expensive to operate.