In fixing one supply-chain problem, planemakers may be creating another
THE sky has never looked brighter for the world’s big planemakers. Airbus’s A320neo, a more efficient version of its most popular model, made its maiden flight on September 25th. Over 3,200 are on order and deliveries will start at the end of 2015. Airbus and Boeing have bulging order books, with a combined backlog of 10,000 aircraft worth nearly $1 trillion at list prices. The makers of engines, electronic systems and bits of airframe will also be rubbing their hands at the prospect of years of guaranteed business. But can suppliers cope with the ramp-up in production?
Deloitte, a consulting firm, reckons the aircraftmakers’ output will rise by a quarter in the next ten years. Steven Udvar-Hazy, the boss of Air Lease Corp, a giant leasing firm (and thus a big buyer of new planes), worries that although Airbus and Boeing will have the capacity to assemble the planes, their suppliers may struggle to deliver the parts.
To complicate matters, a variety of new planes, each with its own complex chain of component-makers, is set to roll out of the hangars, points out David Stewart of ICFI, another consultant. Having recently launched the 787 Dreamliner, Boeing is working on an updated 777 and on the 737 MAX, a revamped rival to the A320neo. Airbus’s all-new A350, a competitor for both the 777 and 787, won approval from European air-safety regulators this week.
There are likely to be “hiccups”, admits Airbus. But both firms have been spurred to act by the dreadful problems Boeing had in getting the 787 in the air and keeping it there, several of which were blamed on quality problems along the extended supply chain.
The two planemaking giants now watch the firms that provide components far more closely—including sending inspectors to their factories. They share more information with them, and press them to invest in new capacity. Both planemakers issue regular, detailed analyses of the state of global aviation markets, to reassure suppliers that all those extra planes really will be needed.
Consolidation among suppliers, at the encouragement of the planemakers, has made the supply chain more robust. Three of the biggest suppliers, UTC, Thales and Honeywell, have recently bought lower-tier firms that might have struggled to invest.
However, that is giving such super-suppliers more muscle as they arm-wrestle with Airbus and Boeing over how the profits of this exceptional boom in plane orders are shared out. Assembling giant jets may be more glamorous than making hydraulics and bits of electronic kit, but the partsmakers’ margins are already fatter, in many cases, than those of the planemakers.