Airbus, the European aerospace giant, is witnessing a gradual recovery in its global supply chain, a critical development for an aviation industry struggling with severe bottlenecks. However, these persistent disruptions continue to impose massive costs on airlines worldwide, exceeding $11 billion this year alone.
Ripple Effects of Supply Chain Disruptions
The aviation supply chain, hit hard by the pandemic and subsequent geopolitical tensions, is causing significant operational headaches. These bottlenecks are leading to delayed aircraft deliveries, extended maintenance times for existing fleets, and acute shortages of spare parts. This comes at a particularly challenging moment when airlines are aggressively trying to expand their fleets to meet the soaring demand for air travel.
Sharing insights on the situation, Anand Stanley, President of Airbus Asia Pacific, explained that the core issue stems from the massive disruption COVID-19 caused to the supplier ecosystem. "The focus post-pandemic has been to ramp up, grow and stabilise the production of the suppliers," he stated during an interaction in Bangkok last month.
Airbus's 'Watchtower' Strategy for Supplier Support
To navigate this complex crisis, Airbus has implemented a proactive monitoring system internally called "watchtowers." This process is designed to continuously evaluate the company's vast network of suppliers. "The idea of watchtowers is something that we have especially been using to address issues since the pandemic," Stanley noted.
The system helps Airbus identify which suppliers are facing difficulties and allows the company to intervene with necessary support. This support can be multifaceted. "We look at placing experts from our company at the suppliers to support them," Stanley said, adding that in some cases, Airbus also discusses financial support mechanisms to help stabilise critical partners.
Stanley expressed cautious optimism, stating, "With reference to 2025, we are seeing improvements in our supply chain. This year, we are seeing improvements at every level." He reaffirmed Airbus's commitment to restoring the planned ramp-up in commercial aircraft production.
The Multi-Billion Dollar Toll on Airlines
The financial impact of these supply chain woes on airlines is staggering. A recent study by the International Air Transport Association (IATA) and consultancy Oliver Wyman quantified the damage. It estimated that supply chain bottlenecks will cost the global airline industry more than USD 11 billion in 2024.
This colossal sum is driven by four primary factors:
- Excess fuel costs from operating less efficient, older aircraft due to delivery delays.
- Additional maintenance expenses for extending the service of existing fleets.
- Increased engine leasing costs.
- Surplus inventory holding expenses as airlines stockpile parts to avoid shortages.
In a sobering long-term forecast, IATA warned earlier this month that the industry's supply chain challenges are likely to persist for up to eight more years. The association highlighted an existing delivery shortfall of at least 5,300 aircraft, with costs for airlines continuing to escalate. While Airbus's efforts signal a path toward normalization, the journey to a fully healed aviation supply chain remains long and costly for all players involved.
