Airbus jet production ramp-up tests health of tight supply chain

0

Airbus’ decision to ramp up jet production is one of the strongest signals yet that the aviation industry is recovering from the pandemic – but it will be a key test for the health of its Supply Chain.

For an industry still recovering from the Covid-19 crisis, China’s lockdown disrupting the supply of goods and materials, and inflationary pressures driving up costs, ramping up production comes at a time. critical.

It is also an important industrial and logistical challenge. Each Airbus aircraft is made up of around 3 million parts and the company receives more than 1.7 million every day in its factories around the world from around 3,000 suppliers for all of its civil programs.

But the European manufacturer, whose A320 family of aircraft dominates the single-aisle market, is confident it can deliver on its bold commitment to increase production by 50% to 75 planes per month by 2025 and move to a rate of 65 by the next. summer.

You see a snapshot of an interactive chart. This is probably because you are offline or JavaScript is disabled in your browser.

It says there is demand for new narrow-body jets as airlines renew their fleets after the pandemic and that it will be able to meet higher fares by adding production capacity at its sites. existing industrial facilities, including the construction of a second final assembly line at its US operations in Mobile.

Increasing production will require a careful balance between meeting growing demand for new, more energy-efficient aircraft from airlines under pressure to reduce carbon emissions, while ensuring that thousands of suppliers can deliver after the cuts during the crisis.

In addition, concerns about the availability of raw materials such as aluminum and titanium after the war in Ukraine and the shortage of skilled workers are likely to heighten tensions.

Dominik Asam, CFO of Airbus, admits that “at the moment there is huge pressure on the supply chain. Everything is tight.”

An Airbus A320neo aircraft. The company uses a “supplier watchtower” to anticipate bottlenecks in the supply chain © Guillaume Horcajuelo/EPA-EFE

Concerns over the bold production targets have already been raised, with aircraft lessors warning the supply chain was fragile as they opposed the higher rates when Airbus first launched them l ‘last year.

Although the company secured an extension of vital engine supply contracts last month, that was only until 2024. Some industry executives fear risks remain.

John Plueger, chief executive of aircraft lessor Air Lease and one of Airbus’ biggest customers, told the Financial Times in a recent interview that he thought there was “significant risk in going 75 per month despite the demand”.

“All of our A321 and A320neo single-aisle aircraft this year are already delayed by one to four months. In addition to supply and labor constraints…we still remain focused on quality in the production process and the reception.

Airbus said it had made “some adjustments given the current environment for various reasons”, but added that it was “still working towards” its previous forecast to deliver 720 aircraft by the end of the year.

“Demand is not an issue,” said Rob Morris, head of consulting at Ascend by Cirium. But there are “great challenges”, especially to get “engine suppliers” on board.

Morris says CFM International, the joint venture between Safran and GE Aviation, supplies engines both for Airbus’ A320 program and to Boeing for its 737 Max family.

Boeing is making progress at a slower pace as it still tries to clear its backlog of stored jets after two fatal Max crashes, but that could change in the coming months, adding further strains to the industry’s supply chain.

“If Airbus does [increase its] rate at 75, given CFM’s lead on the A320 program, they will make more than that rate, given that they also supply engines to Boeing,” Morris said.

Asam said the company has been in talks with engine suppliers and “the tone has changed for six months” when they initially warned against ramping up. “I’m confident as we move forward and demonstrate strong customer demand. . . I’m pretty confident that there will be support from them.

Most aircraft parts are gradually assembled by suppliers in the various links in the supply chain before arriving on the group’s final assembly lines around the world, from Toulouse to Mobile in Alabama.

The company uses what it calls a “supplier watchtower” initiative to anticipate and help mitigate bottlenecks and other risks that may arise among its more than 12,000 direct commercial aircraft suppliers. The initiative does not specifically track vendors but risks such geopolitical issues.

According to Philippe Mhun, executive vice president of programs and services at Airbus, it is essential to facilitate the rise that the company has given visibility to suppliers.

“We have open-book discussions with our suppliers,” he said, adding that Airbus has given companies “confidence that what we order is firm.”

It also buys raw materials, including aluminum and titanium, from certain suppliers to help them source and set prices.

The aerospace industry has relied heavily on titanium produced in Russia, but Airbus and Boeing have said in recent months that they are looking to find alternative supplies. Airbus has previously said it has enough titanium stored to last in the short to medium term.

You see a snapshot of an interactive chart. This is probably because you are offline or JavaScript is disabled in your browser.


One uncertainty is China and lockdowns in the country which have complicated the logistical challenge, especially in terms of aircraft deliveries to airline customers. Around 20% of Airbus’ annual deliveries are on average destined for China.

“About 50% of delivery commitments in China go through leasing companies. This mitigates the impact of the slowdown,” Mhun said.

Some Chinese customers of the European company are still able to send people to Toulouse to take delivery of the planes, according to sources familiar with the matter.

Airbus has also managed to deliver some aircraft using “e-delivery”, which simplifies the contract transaction process.

An inescapable reality of today’s environment is cost inflation in the aerospace industry.

Christian Scherer, chief commercial officer of Airbus, said the company was able to maintain prices during the pandemic, but admits that price pressures due to inflation are a “cause of concern for us as industrial enterprise “.

“These inflationary pressures are a reality that the ecosystem will have to absorb,” he said.

Despite the various challenges, Scherer insists that the 75 rate is the right one. “What we’ve dialed in here is a good level of flight for a sustained period of time.”


Source link

Share.

Comments are closed.