In First Appearance Since Ukraine, Airbus, Boeing Maintain Rate Optimism
LOS ANGELES—Executives from Boeing and Airbus stood firm on their companies’ planned airliner production rate ramps on March 1 in separate speeches to the Aviation Week Raw Materials and Manufacturers Supply Chain Conference in Los Angeles, despite Russia’s invasion of Ukraine adding to a panoply of issues facing the aerospace industry.
“The global consumer recovery is on solid footing,” said Jeffrey Carpenter, Boeing’s senior director of contracts, sourcing and category management for raw materials and standards.
“We need you to follow,” Olivier Dreier, Airbus SVP for materials and parts procurement and chairman of the Airbus Material Board, told the ballroom full of suppliers, imploring them to have faith in the rate increases. “We count on you not to second-guess.”
Both OEM representatives reiterated company lines about how the supply chain must be ready for increased production, and how their companies are ready to help suppliers. Still, the Airbus and Boeing executives also emphasized notably different messages when it came to other issues impacting suppliers.
Airbus has launched a competitiveness project that includes targeting 15% procurement cost cuts by 2025. “You can argue that’s a lot,” Dreier acknowledged. “In times where we speak about inflation, uncertainty and labor scarcity, I still can believe we can take costs out.”
“It is not a pure margin-targeting program,” Dreier added, saying that digitalization of operations and other advances can help Airbus reach the goal. The whole industry faced a list of should-do improvements before the COVID-19 crisis began but it did not tackle them because everyone already was pressed to meet historically high production rates and the industry was financially healthy. Now, OEMs and suppliers alike must make the necessary changes, he said.
Perhaps the other big change coming for Airbus suppliers is the importance of driving toward environmental sustainability goals, and how expectations there will become a requirement for doing business with the European OEM. “I do believe it is more important than ever,” Dreier said. “We don’t want to be seen as a problem to sustainability in the end, we want to be seen as a driver for the industry to ensure we have a solution to the problem.”
Airbus will be incorporating sustainability assessments as part of its supplier contracting regime. Reviews will be led by Intertek Group, a British assurance, inspection, product testing and certification company. The assessments complement a more general move to sign more long-term agreements with “partners,” Dreier told Aviation Week.
Carpenter from Boeing implored suppliers to meet delivery obligations and to reach out to him for help addressing business problems. “Shortages will not be tolerated,” he said. “Ask for help ... flow this down to your teams,” Carpenter told the audience. He repeatedly noted his email and phone number on his presentation slides.
Asked when the U.S. OEM’s build and deliver rates on the 737 MAX may finally get realigned, Carpenter acknowledged that would probably not come until 2023.
The Aviation Week conference was the first appearance for representatives from both OEMs since Russia’s invasion of Ukraine began Feb. 24. A consensus across the daylong event was that it was still too soon for the aerospace industry to glean effects from the war, but it was easy to imagine consequences such as sanctions on raw materials that would only make business more difficult. Nevertheless, OEMS and top-tier suppliers are believed to have stockpiled reserves or alternative sourcing for titanium and critical metals to meet midterm needs.
Still, potential threats to raw material supplies from Russia, Ukraine and even China have become just the latest challenge facing aerospace’s post-pandemic recovery. Worker recruitment, training and retention issues, general inflation and logistics issues, widebody airliner woes and uneven vaccination rates against COVID-19 worldwide were all cited repeatedly as top concerns by suppliers and consultants.
“We are expecting 2022 to be better and the recovery to continue,” Peter Zimm, principal of Charles Edwards Management Consulting, said in his keynote address. But the speech was titled “Back on Track?”
The consultancy forecasts 16% growth in aircraft production value this year over 2021, rising to $131 billion from $113 billion. That is far above the $108 billion in 2020 but far from the $186 billion in 2019.
Looking out five years, the industry should see a compound annual growth rate of 10%, achieving $194 billion a year in 2026, the forecast says.