Airbus CEO Sees Ongoing Supply Chain Pressure For Aerospace

 - November 30, 2022, 7:13 AM
Airbus and other European aerospace manufacturers are set to endure ongoing supply chain difficulties that could continue to constrain aircraft manufacturing. (Image: Airbus)

The European civil aeronautics industry has demonstrated its resilience during Covid-19, but the post-pandemic production ramp-up is proving more difficult than anticipated due to persisting supply chain issues, according to Airbus CEO Guillaume Faury. “We are operating in this [supply] constraint and complex environment while demand is very strong,” he commented during a media briefing on Tuesday organized by ASD Europe, the Brussels-based trade group of the European aerospace, security, and defense industries.  

“We believe that we will be operating in this supply constraint environment for at least a year,” he added. But, in his view, this supply constraint environment is not exclusive to the aerospace industry. 

Airlines are facing the same environment in which demand is higher than supply. “They have to deal with a shortage of labor, a shortage of labor at airports, a shortage of planes,” Faury remarked, while cautioning that the disruptions airlines and passengers faced this summer will most likely continue. “The good news is that demand for air travel is there and that pent-up demand will continue,” he stated.

The Airbus leader acknowledged that the supply chain crisis will stretch out longer in time than projected a couple of months ago. “It's more challenging and a more difficult environment as we speak,” Faury said, although he remained ambiguous on a question asked whether the supply chain situation is deteriorating or improving. “I do not think it will get better. I do not think it will get worse either in the short term, that is to get worse either going to get better in the short term, in the next six months,” he responded.

Faury insisted he would refrain from “naming and shaming” specific suppliers. “It comes from everywhere, from small suppliers to large tier-one suppliers. It is not linked to one country or one commodity,” he asserted. 

The supply constraints stretch out over “many perspectives,” Faury explained, from raw materials to micro-electronic parts and chips, to a shortage of skilled labor.”  They stem from the Covid pandemic and also from the complexities coming from the ripple effect of Russia’s invasion of Ukraine, especially on the energy price, interest rates, and inflation. Additionally, China’s continued strict Covid rules are hampering the production ramp-up and a return to normal. “There is no brand-new event situation. The environment remains very complex and is really the main challenge we have to face,” Faury commented.

Faury’s concerns over supply chain difficulties echoed comments made on the same day by Kevin Craven, CEO of the UK industry group Aerospace, Defence, Security and Space (ADS). He told a Royal Aeronautical Society conference in London that sourcing materials and rising costs for items such as fuel are proving to be increasingly painful for his member companies.

Without dismissing the greater level of tension between the West and China, Faury dismissed recent predictions by some analysts that this could lead to a decoupling of major economies. “I do not believe in decoupling given de depth of the depth of the economic and industrial interdependencies of the supply chain of the West and China,” he said while acknowledging Airbus “would have to look at the risks [associated with having part of its supply chain in China].”  

Faury declined to comment on whether Airbus would meet its commercial delivery target of “around 700 aircraft” this year, saying only that he would have a clearer picture by the end of December. According to Airbus’ most recent delivery and order data, the company delivered 497 commercial jets to 72 customers in the first 10 months of the year.

Asked by AIN whether he shares the concerns regularly expressed by the chief executives of Europe’s airlines that the multitude of legislative proposals aimed at decarbonizing the European Union (EU) economy and aviation will hamper their growth, international competitiveness, and financial capacity to invest in new technologies and aircraft, Faury responded: “The EU has a very strong commitment to the green agenda, and we share that commitment. On the other hand, it is important that the regulation [such as Fit for 55 and ReFuelEU] maintains the competitiveness vis-à-vis the rest of the world and keeps a level playing field.”

The EU’s reduce aviation's environmental impact, “should not burden the industry with additional layers of regulation and taxes,” Faury stressed. “This is where we as an industry and an association [ASD Europe] play a role to explain, to convince, to share data to show what the consequence will be of this or that proposed legislation. Overall, we are supportive [of the EU’s current wave of proposals that drive decarbonization of aviation] but we see that in other parts of the world they chose a path of incentives.”

ASD Europe secretary general Jan Pie said all the trade body’s members are committed to  achieving net zero carbon dioxide (CO2) emissions in aviation by 2050 while noting that the impact of the aerospace and defense industries on Europe’s gross domestic product (GDP) and employment, “is often overlooked and underestimated” when assessing their “important contribution to Europe’s prosperity.”

The total GDP supported by the European aerospace and defense industry was €240 billion ($247 billion) in 2021, which positions the sector at the median GDP level among European countries. Revenues for Europe’s aerospace and defense industries reached €238 billion in 2021, an increase of 10 percent over 2020—but still slightly under the record 2019 level.   The civil aeronautics sector accounted for 45 percent of total revenues for ASD members in 2021, with this increasing by more than 30 percent over 2020 to €106.4 billion.