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Supplier Issues Loom over Industry Recovery

 - May 20, 2021, 9:00 AM
Pilatus is one of the numerous manufacturers that has struggled with supply chain issues during the pandemic.

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


As business optimism improves and business aviation prepares for a post-pandemic rebound, lingering issues surrounding supply chain threaten to slow progress and hamper a full recovery, industry leaders agree.

Business optimism has reached levels not seen since the 2003 to 2007 timeframe, according to Rolland Vincent, JetNet iQ creator/director and president of Rolland Vincent Associates. Speaking during a recent National Air Transportation Association webinar, he added that economic signs were very encouraging and some forecasts suggest “rocketship-like" acceleration.

Vincent also differentiated between this recovery and that of a decade ago with used aircraft transactions remaining strong and inventory low, and a return of interest in the light-jet sector. Even so, Vincent warned that it could take a few years before the OEMs return to pre-pandemic levels as supply chain constraints temper overall industry growth. He noted that most OEMs are forecasting flat growth at least for now.

General Aviation Manufacturers Association president and CEO Pete Bunce agrees with that sentiment. Bunce told AIN that while his “crystal ball is no better than the others, all the conditions are right with demand out there. With the backlog that we have, we could have a really good 2021 and 2022.”

The business and general aviation markets fared far better than the commercial sector during the pandemic, Bunce added. But he cautioned that supply chain issues remain an overarching concern for both corners of the market, noting that suppliers are intertwined in both markets.

Bunce first sounded the alarm about supply chain vulnerabilities right after global shutdowns began to roll in from the Covid-19 pandemic.  A number of smaller suppliers were forced to halt operations in the face of positive Covid-19 tests or regional restrictions.

This has been particularly critical since the industry had transitioned to a just-in-time approach toward managing its production flow. This marked a change from the days of stockpiling parts for production predictability. Logistics had advanced to the point where ordering parts on-demand still provided predictability, even with a global base of suppliers.

Bunce warned early in the pandemic that the “supply chain becomes very critical to what the course will be as we go through the rest of the year.”

A year into the pandemic, some of the dynamics have changed but many of the same concerns linger. “It’s a combination of a lot of things,” Bunce said. Rolling shutdowns have continued globally and without predictability, preventing or stalling transport of parts, he noted. Some local restrictions have shut down factories, backlogging work.

Airlines often will carry parts in their cargo belly space, but many routes have been curtailed, shrinking that capacity. During the pandemic, a significant amount of commerce moved online, requiring shipping “that is filling up all of the traditional cargo aircraft,” Bunce said.

In addition, some small shops have struggled to remain open as they have had outbreaks or faced financial difficulties. In other cases, companies have had to lay off workers, eroding the talent base with expertise that is hard to replace, he said.

Explaining the global nature of the supply base to a U.S. congressional panel in March, Bunce stressed, “our supply chain is very fragile….[manufacturers] have had to stretch out delivery times because the supply chain is very disrupted.”

An Across-the-board Issue

During GAMA’s State of the Industry annual press conference in February, Bunce noted this was a topic throughout his membership. “It’s across the board,” he said. In fact, a GAMA survey of its members earlier this year found that 70 percent of the respondents reported experiencing supply chain issues that had slowed production and deliveries. Meanwhile, 50 percent had noted that they had to either limit or shut down operations due to national, regional, state, or local decisions or for economic reasons.

Numerous manufacturers and other aviation businesses have publicly referenced those issues. GAMA chairman Nicolas Chabbert, senior v-p of Daher’s Aircraft division and CEO of Daher Aircraft and Kodiak Aircraft, called it one of the top issues for the association, adding that “the industry has had to adjust and mitigate so we can continue production.”

He noted his company has faced these issues. “We see the demand. My concern is supply.”

Jet Aviation president Dave Paddock agreed. “We are facing new constraints,” he said during GAMA’s State of the Industry event. These constraints are particularly noted on the completions side, Paddock said. But maintenance activities also have experienced disruptions as it has been difficult to move parts and materials around the globe.

In its year-end results released in April, Pilatus Aircraft echoed those sentiments: “The biggest challenge was not only dealing with the pandemic itself but, in particular, finding answers to disrupted supply chains and the threat of production delays.”

Bombardier president and CEO Eric Martel said supply chain was an area where the company is constantly monitoring—“We’re talking about it every week.” He praised his team for managing issues that cropped up, particularly with companies that might be in a country struggling with the pandemic or where transportation issues may be a bit more complex. However, he did say the company was watching the pricing of commodities as a result.

Many manufacturers have had to work with their suppliers to ensure a continued flow. 

During the release of Spirit AeroSystems’s year-end results, president and CEO Tom Gentile outlined measures his company took to ensure a stable supply flow. “In the last 12 months, we have provided assistance to hundreds of suppliers. This support includes contract extensions, purchases of finished goods and raw materials, and vendor financing,” he said. “Our suppliers are critical partners to our success and this level of support is important as we work to secure our supply chain as production rates recover over the next few years."

UK-based Ontic, which specializes in specialty legacy parts, has faced a similar situation. CEO Gareth Hall told AIN that the company had also reached out to its suppliers early on as concerns about their continued viability intensified, he said. Ontic even offered to pay for some of its parts up front to secure the future of its vendors, he said. While most declined, it was a necessary move for some and even with that offer, one small long-time business could not survive.

JetNet iQ's Vincent noted that with the thousands of small companies aerospace manufacturers rely upon, it would take only a few to disrupt an entire production line.

Labor Pool Another Concern

Vincent and Bunce also raised concerns about a key issue moving forward: the labor pool.  With the downsizing that occurred over the last year, the fear is that labor—and along with it, expertise—is lost.

During the NATA webinar, Vincent emphasized that point. The industry slowed down so quickly that it rapidly shed its talent and disrupted the supply chain, he added. “We need to bring people back into our industry who have either been scared off or fired off. We also need to find younger talent.”

Bunce expressed concern that even if the supplier is a sixth or seventh tier, it might require specific expertise that could be lost to unemployment and then lured into another industry. “All of a sudden they get a brighter offer from some other industry that loves that expertise because these are highly skilled technicians,” Bunce said. “If they get sucked off to another industry, that really debilitates us and hampers our ability to rebuild that expertise.”

To help buffer that trend, U.S. Congress in the $1.9 trillion American Rescue Plan included a cost-sharing program to help aerospace manufacturers and maintenance organizations to retain or recall workers. Bunce, who strongly backed that measure, said, “This program will help strengthen our fragile supply chain, keep highly skilled workers in the industry, as well as support some of the smaller companies that need assistance to maintain operations.”