(Bloomberg) -- Exasperation trumped exuberance at aviation’s largest annual trade expo, as airline executives lamented a shortage of Boeing Co. and Airbus SE aircraft that’s shown no signs of letting up.
The planemaking duopoly is still struggling to recover from a Covid-19 pandemic that ripped through the supply chain, forcing suppliers to shed workers with decades of experience.
Airbus has put the brakes on an ambitious production ramp-up, while an in-flight fuselage blowout on a 737 Max in January tipped Boeing into a crisis that’s sapped output.
Airlines eager to grow are instead having to pare back.
“This is a moment of pure frustration,” FlyDubai Chief Executive Officer Ghaith Al Ghaith said at the Farnborough Airshow outside of London.
The budget carrier has received just four of the more than 10 Max aircraft that were scheduled to arrive in 2024, and was told last week that no more are coming for the rest of this year. Deliveries for 2025 are unclear.
“Whatever patience we had, this was too much,” Al Ghaith said. “This will have a major effect on operations.”
In conversations with airline customers, “top of mind remains getting aircraft,” said John Plueger, the veteran CEO of Air Lease Corp., a major aircraft lessor. “Not getting them on time, but just getting them.”
Delivery Contest
The gloom even filtered onto the podium at the event’s marquee deal, a 50-jet commitment from Korean Air Lines Co. for Boeing’s two largest passenger models. The airline had ordered Airbus’s A350-1000 earlier in the year, setting up a competition of sorts over which planemaker can deliver first.
“Whichever comes on time will be our flagship,” said the airline’s chairman and CEO, Walter Cho.
Order activity has been subdued at Farnborough after last year’s frenzy of post-Covid business. Backlogs for the best-selling Airbus A320neo and Boeing’s 737 Max families now stretch to nearly 10 years of production at current rates, estimates George Ferguson of Bloomberg Intelligence.
As of Wednesday, Boeing led this week’s competition with 76 firm orders and 22 options — some $13.7 billion worth of business altogether, based on market-value estimates from aviation consultant Ishka. Airbus logged an estimated $8.7 billion, including deals with Japan Airlines Co. and Virgin Atlantic Airways.
Orders for long-haul jets dominated, after airlines prioritized their pipelines of workhorse narrowbody aircraft ffor the last decade.
For attendees, the focus has been on the topsy-turvy market where new and used airliners are increasingly scarce and suppliers are still struggling to deliver parts.
Gliders, airline parlance for new airplanes that lack engines, are stacking up with turbine supplies a major bottleneck. For the second time this year, General Electric Co., known as GE Aerospace, cut its outlook for output of Leap narrowbody engines used on both Boeing and Airbus jets.
“We’re trying to make progress every week but it’s a multi-year issue,” GE CEO Larry Culp told Bloomberg TV in an interview.
Some 400 recent Airbus models using a different engine from RTX Corp.’s Pratt & Whitney are grounded as well, further squeezing availability as they await inspections for possible defects.
Both Boeing and Airbus are helping suppliers through labor, training and capital constraints. The worst snarls have involved parts that require the “highest degree of artisanship or craftsmanship,” said Boeing Senior Vice President Ihssane Mounir, who oversees the planemaker’s sprawling supplier network.
Steel Supplies
One of the newer trouble spots involves disruptions to some grades of steel used in bearings and engines, said Kevin Michaels, a managing director with consultant AeroDynamic Advisory. Some second-tier suppliers in Europe also have Covid-era loan payments coming due, limiting their ability to invest in stocking up on parts and raw goods to support a manufacturing ramp-up, he said.
“This isn’t an 18- or 24-month fix,” Michaels said. “I think you’re looking at the late 2020s. It’s just going to take time.”
The issues are complex and were years in the making. For Boeing, they were exacerbated by strategic decisions like pressuring suppliers into aggressive discounts and shifting 787 Dreamliner manufacturing to a non-union state.
Boeing slowed work in its factories to a crawl earlier this year to try to cut down on a chronic problem: manufacturing that’s done out of sequence due to late-arriving or defective parts.
US regulators have capped 737 output until they’re satisfied Boeing has a stable, healthy production system. Boeing’s Mounir maintains the crisis hasn’t gone to waste: The planemaker has used the time to put the fundamentals in place to bolster quality, and add digital tools to provide early warning of emerging problems deep in its supply chain.
Hard at Work
“Boeing is working on this harder than I think I’ve ever seen them work on anything before,” said Air Leases’s Plueger.
The delays mean that some airlines are having trouble planning their route networks, or what sort of interiors the planes should get. Emirates, the biggest buyer of Boeing widebody aircraft, had to throw out all the cabin designs it had envisioned for the 777X model because the aircraft is at least five years late, President Tim Clark said.
“We’ve had to junk it all, the entertainment system, the seats,” Clark said. “It’s all been trashed, and we start again.”
Airbus is in better shape than Boeing, but the European planemaker has had to turn away customers because it doesn’t have any production slots available, according to CEO Guillaume Faury.
As so-called revenge travel eases, any potential slowdown in demand will provide the world’s biggest planemaker with some breathing room to address backups.
“In the near term, a little relief would actually be welcome,” said Airbus commercial chief Christian Scherer. “If there was some weakening of the backlog, it will help us shorten the delays.”
--With assistance from Siddharth Philip, Brad Skillman and Guy Johnson.
©2024 Bloomberg L.P.
