What's Happening?
A joint study by consulting firm Oliver Wyman and the International Air Transport Association (IATA) projects that supply chain issues could cost global airlines over $11 billion by 2025. The report highlights
significant delays in the production of new aircraft and parts, with a commercial backlog reaching over 17,000 aircraft in 2024. Factors contributing to these delays include geopolitical instability, raw material shortages, and labor shortages. As a result, airlines are forced to keep older models in operation, leading to increased fuel and maintenance costs. The study suggests several actions to mitigate these issues, such as enhancing supply chain visibility and adopting advanced manufacturing techniques.
Why It's Important?
The projected $11 billion cost due to supply chain disruptions poses a significant challenge for the airline industry, impacting operational efficiency and profitability. Airlines are struggling to meet rising passenger demand, which increased by 10.4% in 2024, while capacity expansion lagged at 8.7%. The inability to deploy sufficient vehicles to meet demand could lead to higher ticket prices and reduced service quality. The industry must address these supply chain bottlenecks to maintain competitiveness and ensure sustainable growth. The report's recommendations, if implemented, could help airlines optimize their operations and reduce dependency on OEM-driven models.
What's Next?
The aerospace industry is encouraged to take proactive steps to address supply chain challenges. This includes supporting maintenance, repair, and operations (MROs) firms, enhancing supply chain visibility, and expanding repair and parts capacity. Airlines may also seek greater transparency and access to parts and services to plan around blockages. These measures could provide relief and help airlines manage the growing demand effectively. Stakeholders in the industry are likely to monitor these developments closely and adjust their strategies to mitigate the impact of supply chain disruptions.