Aero Supply Chain Key Concern As Covid Crisis Drags On

 - April 7, 2020, 4:43 PM

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

While measures were implemented early on that have enabled aircraft manufacturing to continue during the Covid-19 crisis, supply chain issues are growing and might play a significant role in the speed of recovery once the pandemic eases, warned General Aviation Manufacturers Association president and CEO Pete Bunce.

Speaking during an AIN-hosted webinar on Tuesday, Bunce said a decision by the Department of Homeland security to recognize aircraft manufacturing and maintenance essential activity has helped companies continue to operate and added that the industry has been able “to do the best we could with the circumstances that have evolved.”

While some manufacturers have disrupted production lines, many companies have had to adjust workflows and shift schedules, as well as implement other measures, to ensure the health and safety of their workforces.

But as the crisis has continued, a number of smaller suppliers have had to halt operations in the face of positive Covid-19 tests or regional restrictions. This has become particularly important because, with the efficiency of transportation and delivery models, OEMs have over time increasingly turned to a just-in-time parts model rather than maintain large warehouses with components, Bunce said. This has made the manufacturers particularly dependent on suppliers, he said, adding it is an issue globally. “The supply chain becomes very critical to what the course will be as we go through the rest of the year.”

As manufacturers grapple with supply chain issues, they have turned to other work to assist in Covid relief efforts, including switching lines and retooling to produce personal protective gear and other medical equipment, Bunce noted.

Bunce could not speak to what ultimately it means for delivery schedules, deferring to the manufacturers themselves. “If a factory has closed down, obviously it will have an impact” with a ripple effect. But OEMs are still making deliveries, he said, adding some customers have asked for an acceleration of their scheduled delivery.

Bunce praised the efforts of FAA and European Union Aviation Safety Agency regulators in playing a role to ensure the system continues to operate. “They have accepted routine calls, meetings and bent over backward to make accommodations to be able to keep their oversight function working,” he said, citing as examples working virtually, using videoconferencing, and accepting documentation digitally rather than requiring on-site inspections. “Without that cooperation, things would be totally shuttered. The regulators have done a great job.”

During Tuesday’s AIN webinar, European Business Aviation Association secretary-general Athar Husain Khan agreed that the regulators have been responsive to industry, noting the agreement to defer air traffic control charges at a cost of €1.1 billion over the next couple of months.

European regulators have been particularly focused on preparing for a return to service, Khan added, noting EASA has invited EBAA and other stakeholders to collaborate on that eventuality. Regulators further have provided extensions for licensing and airworthiness certificates to facilitate this, and EBAA on Tuesday participated in a call with the European Commission to discuss how regulators and industry can maximize recovery. “There is quite a lot going on,” he said, adding he has seen an appreciation for business aviation.

This is key because EBAA has urged regulators and politicians to fully coordinate with industry and “more importantly, to ensure that there is basic operational continuity for business aviation operators, services providers, manufacturers, and others in the supply chain.” This is critical to maintaining essential operations such as medical flights, as well as cargo and repatriation efforts, among others. Measures must ensure that business aviation can resume normal activities as soon as possible, he added, because with its agility and adaptability, “business aviation is one of the key elements of recovery of economic activity of society. I’m reasonability enthusiastic and optimistic that this is appreciated at the regulatory level.”

However, in the short term, the industry has been severely impacted, he said, pointing to a 72 percent decrease in operations in the last week in March in Europe. “The 374,000 people who work in the European business aviation sector to date face very uncertain and unclear times.”

He noted an EBAA survey of its members that revealed that one-third of the European operators have halted operations altogether. Financial losses, meanwhile, are estimated to range anywhere between 50 percent and 90 percent and as many as half the companies have had to put staff on leave, he said.

The three most pressing financial issues that have surfaced are staffing, fixed location costs, and taxes, Khan said, and added liquidity and cash flow have become causes of serious concern.

“We’re working to alleviate the crisis as much as we can,” he said, pointing to the launch of EBAA’s Covid-19 resource page and its open letter sent jointly with GAMA to European institutions outlining a plan of action to protect the continuity and survival of the industry.