When it comes to the flight operations and ground operations at the heart of aviation, the complexities of the supply chain stem deep within — and have been increasingly tense in recent years. We sat down with experts to unpack the issues in the latest in our series on aviation’s often complicated supply chain.
Montserrat Barriga, director general of ERA, the European Regions Airline Association, sets the scene for our discussions, telling us that, “with air travel due to recover to 2019 levels this year, several critical issues continue to impact the aviation supply chain. The biggest concern currently seems to focus on component and parts shortages. These shortages have caused major disruption to maintenance and repair organisations, which in turn has placed considerable additional pressure on airlines and seen inventory costs spiral significantly. It has also increased the risk of counterfeit parts entering the system.”
As a result, Barriga tells us, “Aircraft production and delivery schedules have of course been impacted, which has caused additional operational complexity and sharp increases in operational costs. In many cases these shortfalls and disruptions have resulted in a reduction of service quality with several flight cancellations required to mitigate the shortfall in planned capacity.”
Within the industry, the variety of issues mean that there are few patterns that might be identified — and thus resolved — specifically.
“Airlines are telling us that they are experiencing difficulties across all areas, avionics, airframe and powerplant, with all manufacturers appearing to struggle in different areas,” Barriga says. “Labour shortages, raw material availability and the ever-evolving geopolitical situation are the main factors at play, with demand far outstripping supply as European regional aviation — which was the strongest performing market segment during the pandemic — recovered faster than many other parts of the aviation ecosystem.”
Delving deeper into the operational supply chain, we spoke with Stephen Rose, head of business services at air traffic management service provider NATS.
“Since the end of the pandemic shutdown, volatility and the potential for supply chain disruption has been noticeably higher,” Rose tells us. “In the months following shutdown we had two large challenges, high inflation, and the cost of living crisis — which manifested itself in the early days as higher energy costs and shortages of semi-conductors, leading to increased delivery times on items such as phones and laptops.”
Knock-on effects at third or fourth remove through digital technology and the chip shortage even affected industry operations in ways that might have not been foreseen: reduced automobile production leading to a drop in the availability of rental cars, for example.
When it comes to ground operations, vehicle shortages have been a problem too. Newbow Aerospace in the UK’s West Midlands region is a major producer, and we spoke with sales director Marc Green.
“Increasing lead-time and a lack of availability of components have been by far the biggest issues that we have faced as a fast moving manufacturer of ground support equipment, which we sell to customers worldwide,” Green tells us. “As well as dealing with the consequences of the pandemic, international conflicts and subsequent economic disruption has also had a significant negative impact on supply chain integrity. This situation has forced Newbow Aerospace to dual source on some key components, simply due to increasing lead-times, months in some cases, which does not fit our business model.”
Problems often arise in the most unexpected of places
As an example, Green says, “pre-pandemic, one of our long standing suppliers of pressure valves would typically supply us products within 6 to 8 weeks, which accommodated our production schedule nicely. Post-pandemic, their lead-time jumped to around 16 weeks, which caused our business some serious issues, as it had a major knock-on effect to the availability of Newbow’s products for its customers. Within the aviation industry, such lengthy lead-times have massive ramifications, so there was no choice but to seek a new supplier of pressure valves, which we managed to secure.”
Local sourcing and re-shoring of the supply chain is one way to reduce some of the effects the externalities have on aviation.
“We anticipate that pressure will remain on supply chains throughout 2024,” Green says, “so wherever possible we endeavour to source items in the UK. A number of suppliers are already based in the West Midlands, which is an important area for manufacturing.”
Substantial supplier volatility is widespread, and effects include some suppliers to aviation — rarely the highest volume customer in many cases — refocussing their activities on other core business. Regulatory changes, including around Brexit, continue to affect supply chains crossing the UK border, and here the additional regulatory time and effort can dissuade suppliers from small volume orders.
More widely, qualification criteria are changing, including as part of sustainability initiatives.
“Like a lot of other companies,” says NATS’ Rose, “a potential supplier’s commitment to emissions reduction forms part of our pre-qualification assessment, and criteria by which tenders are assessed include marks for how green the company and its products are. Where we choose to work with suppliers who have more to do, reporting emissions to us, publishing an emissions reduction plan in line with the latest climate science, and having that plan independently assessed by the Science Based Targets initiative may well be an obligation we agree within the contract.”
Indeed, Rose notes, “with our suppliers accounting for 60% of our overall emissions, and with varying degrees of commitment amongst our established supply chain, we realised we needed to take a cohesive set of actions to prioritise emissions reduction. On the strategic issue of engaging suppliers with our corporate objective of reducing emissions, our experience has been more varied. Some of our suppliers are further along their sustainability journey than we are and have been happy to help us. Others have been less engaged and we have experienced a lack of congruence and even some resistance. Our supply chain makes up more than half of our emissions so this is a key priority for us.”
These issues need attention for aviation’s sustainable future to be realised
The prognosis for the near and medium term remains one of volatility, including around legislative and regulatory requirements, including on sustainability.
“One of the biggest challenges facing us is obtaining and managing meaningful data around a supplier organisation’s emissions,” Rose says. “The issue is not because there is a lack of tools available in the marketplace, but rather the converse in that there are too many players seeing this as a growth market, and a lack of standardisation means there is a lot of data but all in service of different vendor applications. Our suppliers often find themselves having to sign up to different schemes because different customers have opted for different solutions.”
Here, improving the quality, transparency and commonality of data sources will be critical.
“Short term,” Rose concludes, NATS’ plan is “keeping an eye on supplier volatility and ensuring that we are as best prepared as possible, with back-up plans high on our agenda, and actively preparing for changes in the legislative and regulatory environments. Longer term, while short-term challenges will continue to come and go, I can see action on the impact that industry and individual organisations have on the environment will be a persistent and increasing priority.”
Author: John Walton
Published: 5th September 2024
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