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Narrowbody boom could put pressure on used parts market

The global supply chain crisis and aviation’s long-running labour shortage have put immense pressure on the aftermarket. Will planned production increases from Airbus and Boeing make it even worse?

With long lead times and shortages of much-needed components, electronics and raw materials, there are concerns that the global supply chain crisis will stop the aviation industry’s recovery in its tracks. The aviation aftermarket is particularly vulnerable, given that the industry’s long-standing labour issues were intensified by the pandemic downturn and there are now fewer skilled workers to produce, install and maintain aircraft parts.

For the time being, the maintenance, repair and overhaul sector is on something of a high after two-plus years of deferred maintenance and airlines’ cutting back on MRO spending. A March 2022 report from RBC Capital Markets predicted that MRO spending is now set to see 20 percent growth in 2022 as airlines play catch-up on maintenance and repairs that were put on hold.

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Can suppliers keep up with higher production rates?

Despite the promising signs, however, there are concerns that the aftermarket may soon be thrown right back into a full-blown crisis. Many parts distributors and MRO shops that let staff go during the crisis are now unprepared to deal with the demand surge from the industry’s faster-than-expected recovery.

News that the industry’s two major aircraft manufacturers plan to significantly ramp up their narrowbody production has many suppliers and analysts wondering whether the aftermarket, already struggling to meet current demand, will be able to keep pace.

Airbus announced in May that it would increase its production of the A320 family of aircraft over the next three years, eventually cranking out 75 of the narrowbodies per month by 2025. Its primary competitor Boeing has not officially announced production increases but is expected by many analysts to ramp up the production of its 737 narrowbody line over a similar timeframe.

With the aftermarket already fighting against the supply chain crisis and inadequate manpower to keep up with current production, there are concerns that the two OEMs’ plans may put too much strain on the entire system.

While some industry analysts have wondered whether the supply chain will be able to keep up, Airbus CEO Guillaume Faury said that its production ramp-up plans were predicated on feedback from suppliers.

André Loenker, director of solutions sales and consulting at Satair, told the Knowledge Hub that aircraft manufacturers are responding to the demands of their customers and wouldn’t commit to production increases if they weren’t sure they could deliver.

“If the market wasn’t asking for more aircraft, neither Airbus nor Boeing would be ramping up production,” he said. “No one is going to ramp up just for the sake of producing new aircraft. There are customers in the market, especially on the single-aisle aircraft side, saying they want more.”

Conflict between new production and spare parts

While Loenker thinks that any production rate increases are likely to be met, he said that an uptick in new production could make spare parts even harder to come by. Some customers are already expressing concerns.

“A customer may have an operational but non-grounding issue and the part they need might take several days or weeks to be delivered,” he said. “Meanwhile, many of those same parts are being produced for new aircraft, so it could be quite a while before the customer gets the one they need to get their issue fixed."

Loenker said that there is a natural conflict between getting parts for the aircraft already in operation and keeping a stable production flow going for new parts. This can create problems for operators who have failed to properly forecast their needs.

“In the aftermarket, when you need a part you need it like yesterday,” he said.

Potential bright side

Despite the conflicting needs of the aftermarket and new production, the OEMs’ ramp-ups could also trigger those widespread aircraft retirements that were expected during COVID-19. If that’s the case, more part-outs would send more used serviceable material (USM) out into the market.

Until then, his advice for suppliers and customers alike is to get better at forecasting needs, not just for production but also for spares. He said that the biggest complaint he hears from customers is that lead times for some parts are not only incredibly long but that the quoted lead times can’t always be counted on.

“It doesn’t help to get quoted a short lead time if it’s not reliable,” he said. “Most customers would rather know from the beginning that there is a long lead time because that allows them to plan better. Right now, all of the instability in the market makes it difficult to implement forecast models and replenishment models.”

The Satair Takeaway

The aviation aftermarket is under pressure. We can hear it in the concerns of our customers and we can feel it in our own supply chain. The ramp-up in narrowbody production is a good sign for the overall health of the industry, but we shouldn’t shy away from admitting that it can also put further strain on a system that is already stretched thin. The entire supply chain, from the smallest supplier of components to the airframers themselves, needs to find a way to ensure that our industry doesn’t find itself grappling with new challenges just as we got past the last ones.

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About this blog

This blog is driven by Satair Marketing & Communication with input from both internal and external contributors.