(MENAFN– Gulf Hours)
Aerospace has turned the page on an unprecedented pandemic demand shock with dozens of new orders at its biggest air show in three years – to cope with growing worries about supply chains and reminders that its future depends on decarbonization.
From rural Farnborough to nearby Heathrow, this week has brought stark evidence of the supply shortage now affecting manufacturers and airlines, with labor and parts shortages.
It comes as airlines – whose expansion had propelled the industry to record profits over the past decade, only to slump during the pandemic – are desperate to cash in on a nascent recovery in international travel.
Even the Farnborough Airshow has struggled to find enough hospitality staff despite downsizing from a seven-day aviation festival to a five-day aerobatic-free weekend trade show.
“We have to accept that a lot of people have left the aviation and aerospace industry in 2020 and it is difficult to bring them back,” Emirates chairman Tim Clark told delegates after clashing with Heathrow over the capacity restrictions.
Attendees departing from Farnborough got a personal taste of the resulting travel chaos after discussing their own labor, parts and material shortages at the aerospace event from 18-22 July.
Long queues formed at UK airports, the Eurostar rail terminal and the port of Dover yesterday – the start of the busiest travel weekend since 2019.
For years, the Farnborough and Paris airshows fueled a rapidly growing ecosystem as airlines dished out new orders to manufacturers, who responded in part to this demand by encouraging their supply chains to move into buyer countries.
Posters this week continued the theme of a connected, cleaner world as suppliers pushed for emissions targets, but campaigners said they hadn’t gone far enough. Now global supply chains need fixing, and Western factories and the airlines they serve are also plagued with problems.
Longer term, analysts say supply chains are likely to get shorter.
“It’s not a good year to say ‘you need a new supplier, have you thought about locating here,'” a senior aerospace executive said. Industry pulls back this week; there’s not a lot of discussion with cutting-edge players or new entrants.
Airbus, in particular, is grappling with delays as it tries to ramp up production in anticipation of higher demand.
This is partly due to engine shortages, which in some cases have been attributed to problems at small suppliers, executives said.
Despite the summer rebound – airline bookings from the UK, for example, are at 88% of pre-pandemic levels, according to ForwardKeys – there were warnings that inflation could slow the rebound in air traffic which ultimately supports the jets claim. Boeing cut its jet demand forecast this week, but said it remained flat after adjusting for war-sanctioned Russia.
“Population growth indicates that travel will continue to be strong, so production rates are based on strong fundamentals,” said Stephen Timm, president of Collins Aerospace.
“The question is, will the economy in the near term change the slope of the curve? That’s the question we’re all asking,” he told Reuters, while adding that the Raytheon unit would operate to support aircraft manufacturers’ ramp-up plans.
Boeing has sought to answer that question and ease concerns about the future of its 737 MAX cash cow, with a flurry of announcements that translated into gains in its stock price.
The future of the MAX, following two fatal crashes, a two-year grounding and ongoing regulatory issues, is critical to the aerospace industry and airlines that have invested hundreds of billions of dollars in manufacturing or the purchase of medium-haul aircraft.
“Airlines want to back Boeing because they recognize that if they don’t, the competitive balance is damaged beyond repair and with it any attempt to get discounts,” said Sash Tusa, an analyst at Agency Partners.
Airline industry boss Willie Walsh also this week reiterated warnings of becoming too dependent on Europe’s Airbus in the $150 billion transatlantic jet market duopoly.
Sitting on a sizable order book, Airbus had a quiet week after a recent massive order from China, allowing it to focus instead on drawing up decarbonisation plans in Britain’s record heat, while leaving the Farnborough stage to compete with Boeing.
“That doesn’t mean we’re any less committed to taking orders and growing the business,” chief executive Guillaume Faury told Reuters. “It’s probably just that demand is less in sync (with the airshow) and supply chain issues are more (squeezing) than in the past. — Reuters
The Boeing 737 MAX plane is on display at the Farnborough International Airshow in Britain.
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