ARLINGTON, TEXAS — Ongoing supply chain disruptions during the third quarter continue to hinder aircraft production and deliveries. Although shortages of parts and workers had “modestly improved, it still seems that most companies will continue to see delayed deliveries and higher costs, according to industry analysts.
Boeing’s top executives told investors last week that a paucity of engines was the main thing preventing it from delivering much more than 20 of its 737 Max planes each month — even though airlines are clamoring for them. At an investor day on Wednesday, the company forecasted it would deliver between 400 and 450 Maxes next year and between 70 and 80 of the wide-body 787 Dreamliner.
Chief financial officer Brian West said the company is aiming to raise monthly Max deliveries from the “low 30s” in the first half of 2023 to the “low 40s” by the second half. Commercial plane deliveries would help to generate free cash — a crucial metric for investors — in the range of $3bn-$5bn for 2023, Boeing said.
Stan Deal, head of Boeing’s commercial planes division, said the company needed to “reinvest” in the supply chain and, at times, had deployed its own employees to distressed suppliers. “The path to normalization is largely built around things we control,” said chief executive David Calhoun. “And I do suggest we control the supply chain.”
The situation at Airbus has improved since the summer when chief executive Guillaume Faury said the company still had 26 gliders” newly built planes without engines. Now the number sits at fewer than 10. But Faury said he expected the supply chain bottlenecks, which forced Airbus to scale back plans to increase production of the A320 family, to last well into next year. Deliveries of Leap engines made by CFM International, a joint venture between France’s Safran and the US’s GE Aviation, are still behind schedule, executives said last month. The Leap engine powers Boeing’s 737 Max and is also an option for Airbus’s A320neo jets.
Shipments rose to 347 in the third quarter, up 54 percent on the previous three-month period but still lower than originally planned. CFM had not yet made up for delays and was still “struggling on castings, especially in the US, said Safran’s chief executive Olivier Andriès.
Castings are made by pouring molten metal into molds to form parts such as engine blades and “structural” elements that hold an engine together. The process is difficult to master. Even experienced workers can be forced to throw away 5 percent of a production run, and for newer products, the proportion can be as much as half. Indy Rattu, vice president for European operations at UK-based Doncasters, said the high levels of qualification and certification needed in the industry were a challenge.
The high-precision manufacturer, which traces its roots to the city of Sheffield in 1778, makes blades and structural castings for engine makers. But it has found that some of its suppliers either did not survive the pandemic or are struggling to source materials and parts. Although the number of suppliers that folded was relatively small, Rattu said that “many are qualified for very specific products, so when they disappear . . . it makes the job of finding an alternative extremely challenging”. On an earnings call last week, Greg Hayes, chief executive of Raytheon, which owns engine maker Pratt & Whitney, said the lack of castings stemmed from labor shortages.
Ron Epstein, an analyst at Bank of America, said: “Aerospace has had, on average, an older workforce. If you accelerated your retirement because of Covid, a lot of those folks are just gone. And it’s highly skilled labor. You can’t just take someone off the street and have someone do this.” Companies are also reluctant to start making castings and forgings because the list of potential customers is limited, added Epstein, unlike, for instance, the auto industry. The next six months will be critical as the industry navigates the recovery at a time of persistently high inflation. A push by Boeing and Airbus to boost production will continue to strain the inherently tricky relationship with their suppliers. There is always “tension” between the two, said Nick Cunningham, an analyst at Agency Partners in London.
“The airframers can probably often add more capacity by hiring some more assembly labor and working more shifts, but the suppliers may need to add hard tooling and skilled people and don’t want to invest big dollars in meeting a brief peak in demand.” Frank Perryman, chief executive of a privately held titanium mill in Pittsburgh that sells metal products to parts makers, said aerospace suppliers had reduced headcount and needed to see more orders before stepping up recruitment. “You can’t slow the world down and expect it to speed back overnight.”
