Podcast: Why Workforce Is Aerospace’s New Year’s Hangover

An Aviation Week/Siemens survey uncovers some disturbing trends as big labor negotiations loom. Aviation Week editors are joined by special guest Todd Tuthill, vice president of aerospace and defense at Siemens Digital Industries Software.

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Rush Transcript 

Joe Anselmo:   

 Welcome to Aviation Week's Check 6 podcast. I'm Joe Anselmo, Editorial Director and Editor-in-Chief. As we head into 2024, the aerospace industry has largely put the COVID-19 pandemic in the rearview mirror. Airports are full, airlines all over the world are ordering scores of new airplanes, and the US economy is surprisingly resilient. But an enduring challenge is keeping the industry from declaring victory: a serious shortage of workers. From small component suppliers to aircraft maintenance shops, to top-secret military projects, there simply aren't enough skilled workers to meet demand.

Seven months ago, we discussed the challenge on this podcast with Aviation Week editors Michael Bruno and Lindsay Bjerregaard and special guest, Todd Tuthill, the Vice President of Aerospace and Defense at Siemens Digital Industries Software. Today, all three are back with us to talk about whether there has been any progress in solving this monumental challenge.

Todd, let's start with you. I remember last June you took a look at about seven or eight top defense contractors in the US and Europe and found 10,000 open engineering jobs. Where are we seven months on?

Todd Tuthill:             

 Some things have changed. One of the things that changed is we worked through the Aviation Week Network and conducted a survey and just asked several aerospace companies across the network where they're at and where they've kind of been and where they think they're going. I can start with some of that data and then we can maybe unpack the data and talk about other things that have changed.

 But I'll give you four things that came out of that survey of these different people, and they were surveyed across aerospace, different companies, also people at different levels within the company. A third of them, as they look back, said they lost revenue over the past two years due to workforce issues. 25% or a quarter of them said they thought they'd lose revenue in the next 12 months. But this next statistic really surprised me, said one in five, 20% of them said they're not even going to bid new contracts in the next year because they just don't have enough staff to do it. And all told, two-thirds of them said one way or another in the next three to five years, they're going to have issues with workforce. They're not going to have enough people to do the work they need to do.

So that's what the survey said, and we can unpack that. We can go different places and talk about other things that have changed, I guess later on in the podcast. Maybe we'll start there with some of those statistics from the survey we did over the summer since the last time we talked.

Joe Anselmo:            

Lindsay, you're our MRO specialist. At the beginning, I talked about COVID-19, but I mean workforce has been a challenge to MRO for at least a decade, right?

Lindsay Bjerregaard

Oh yeah, absolutely. And that certainly has not changed. We actually received the latest Aviation Technician Education Council Pipeline report right before the holidays. And so I thought I'd share just a couple statistics that they had in that report. And this relates specifically to the US, but these trends are being seen all over the world.

They estimated that commercial aviation in the US is going to be 31,000 mechanics short of its needs by 2031. So that's not far from now. And one of the issues that I think we brought up the last time we spoke was that the age of the mechanic population in the US is pretty old. It's near retirement. They said 40% of those workers are more than 60 years old. And so they're expecting one out of every three certificated mechanics to reach retirement age over the next decade. So that's more than 90,000 mechanics total. And if we're adding that to 31,000 mechanics short of the needs by 2031, that's a pretty big problem.

One of the other issues, one of the typical pipelines for recruiting mechanics is veterans. A lot of the veterans are coming out with experience working on aircraft, working on helicopters, but they estimate that less than 10% of veterans with aviation maintenance backgrounds are actually transitioning to similar civilian roles. So a lot of those people are going to other industries, they're getting poached because the skill set that they have is helpful in other industrial industries that tend to pay better, have better work schedules and that sort of thing.

And speaking of work schedules, I'll get into that a little bit afterwards when I talk about some of the things that have changed over the last year, but in terms of bright spots. And then one other issue that I've heard a lot about at our different Aviation Week events over the last year is training problems as well.

 ATAC's report noted that there's a shortage of qualified aviation maintenance instructors, which is exacerbating the problem. And a panelist at MRO Europe in October told me that a European airline had told him that they lose 80% of their technicians in training. That is 80% of their technicians that they are trying to train. And that echoes what I've been hearing from a lot of other MRO providers who they say they invest a lot of time, money, and effort in supporting upcoming mechanics through their training only for those people to not finish the program or quit soon after they're hired. So this is obviously a pretty big problem.

Joe Anselmo:       

 Michael, you just heard Todd and Lindsay throw out some pretty depressing statistics. Anything you can add to this to cheer us up a little bit?

Michael Bruno:    

 Well, let's be clear. First of all, they're not giving us the depressing statistics because they're depressing people. We've all been spending the past year or two or several actually covering this issue. And I think that's the point, is this is the biggest issue to come out of COVID-19 that just isn't going away.

The one thing I want to hit on, Todd and Lindsay talked about it, the great survey Todd's group did with us, and Lindsay's been covering the MRO, this ghost workforce issue for a very long time. And there have been concerns that were emerging before the pandemic, but now we are starting to see what I call the institutional reaction to this change in the workforce.

 We've gone through the past several years of individual workers. We've all heard stories, and Lindsay and I have been reporting about companies having difficulty hiring people and retaining people, and just watching institutional knowledge go out the door and that kind of thing. Now we are talking about major labor unions and how they're negotiating with these major manufacturers.

 Just recently, here we are in January, just a couple of weeks ago in December, there was yet another strike in the aerospace and defense world. There was a small group of workers at Howmet Aerospace in Kingston, New York, about 70 workers there who are part of the International Association of Machinists and Aerospace Workers are better known as IAM. They went on strike for about 43 days. You wouldn't think that 70 people could really wrangle that much in concessions out of a company, but they got a 13.5% wage increase over three years. They got the company to agree to a 5% cap on medical cost increases. They got better pension payments. They got additional sick time. They got Howmet to agree that the company couldn't set the overtime compensation. I mean, the list of concessions that organized labor is winning these days is rather remarkable.

 And of course, this all comes after the big one-week strike that happened at Spirit AeroSystems in Wichita last summer, right around the Paris Air Show time, middle of the year. It was really kind of the damper that kind of, I think everybody at the Air Show, Joe, you remember this. There was a lot of enthusiasm that we were getting over the pandemic. And the news of this Spirit strike hit basically in the last 24 hours, and everybody just kind of went away depressed. And they came away with a 34% combined wage increase over four years.

 All of this sets the stage for some of the biggest negotiations that are coming up this year. Boeing in Seattle has a major negotiation with IAM. The contract runs out, I think it's September 2024, and there's a huge percentage of the Boeing workforce that are covered by this contract. And actually about a third of Boeing's workforce altogether are covered by unions one way or another.

And as we go through these renegotiations of things they're coming up against, you only see more difficulty for the manufacturers when it comes to concessions they have to make and the demands that the workers are going to make and basically get relief from for the first time in decades. So it's a really trying time.

Todd Tuthill:        

I can amplify something that Michael said relative to the relationship of small companies and large companies. It reminds me of some stories, conversations I had at the Paris Air Show last summer. I made it a point to go talk to several small businesses and I said, "Talk to me about what you're struggling with." And they talked about a trend that I hadn't really thought about that this has caused. They said what they see is the large OEMs are struggling to staff and they're increasing signing bonuses, increasing all these things, and they're taking staff away from the small companies. And they said, ‘This is really becoming a crisis Todd, that the workforce is shifting.’ Because the OEMs are more attractive. They have more financial resources. They can take these workers away from the tier twos and in some cases the tier ones and the tier threes as well.

But really a most disturbing trend to me, which is just going to make, we talk about the people, we talk about the parts too, will make the parts problem even worse. In a lot of cases, I think what we're seeing is that these OEMs are taking staff away from the smaller companies and then having to send them right back to manage their supply chain because they can't get the parts. And that's certainly a trend that I'm seeing over the summer and since then as well.

Lindsay Bjerregaard

Todd, that is a great point, and that's something we're hearing in the aftermarket as well. One, that supply chain workforce shortages are having impacts all across the aviation industry. But also when you talk about smaller shops having problems because these big OEMs are hiring all of the new workers, that's actually something we're seeing in MRO as well.

 The ATAC report noted that major passenger airlines for the first time in 2023 surpassed repair stations and regional airlines to become the largest employer of aviation maintenance graduates. So they hired about 28% of graduates in the US in 2022. And one of the MROs that I've spoken to about workforce issues, AAR, said that this is actually causing a lot of problems for third party MRO providers because they're doing maintenance for these big airlines, but they cannot keep their lines staffed enough.

 The person that I spoke to actually kind of compared these repair stations as the minor leagues of baseball for maintenance workers. And normally the way that it's always worked, new grads get hired, they go work at these repair stations, they get experience, and then they get to go on and work at the airlines, which kind of are more glamorous. They tend to have better pay and that sort of thing. But now these new graduates are being poached right out of school to go work directly at big airlines, and that's a big shift for how things have previously been.

Joe Anselmo:            

  Todd, Michael and Lindsay both mentioned pay. I've heard people say that aerospace could compete better for engineering talent if it simply paid more vis-a-vis other industries. Isn't inevitable that companies are going to have to pay more in this industry?

Todd Tuthill:          

 It is inevitable, I think. You talked about, and Michael talked about the example of the strike, an increase in pay, and certainly that's going to happen. But it's been my experience that more pay is a short-term fix. Companies can afford to offer a bonus, offer a pay incentive for a few years, but they can't continue that. They can't afford to do that. It takes more than pay. There's got to be other reasons and other things that companies can do to attract more people I think, and I talked about this on the previous podcast.

 We want people in aerospace that love aerospace, that think aircraft and spacecraft and designing rockets and jets are really cool. And we've got to use that as well as the work environment and look at ways to improve the work environment to make aerospace more appealing and more attractive. It's not just pay. Pay's important, but there are several other things we need to do too to make aerospace more attractive to students right out of school as well as retaining.

I think Lindsay talked about retaining talent and the problem of doing that, and the thing that we see across aerospace is that a lot of other sectors are pulling engineers away, and we need to find ways to retain, ways to attract new people, ways to make aerospace more attractive.

Michael Bruno:     

II just want to foot stomp on what Todd just said there. I think in particular, and he mentioned this talking about his discussions at the air show and all year long. Lindsay mentioned this too. It's the little shops. It's the small and mid-size enterprises where the lack of labor is really hurting. I think Todd talked about the survey results where people are talking increasingly about no bid. They're just not going to go out looking for the work if they can't fulfill the contracts they already have. And that's got, of course, long-term implications. It's going to be harder to manage supply chains when you don't realize that your supplier may not be as healthy because they're not bringing in new revenue. And it comes back to they just can't get workers in the door.

I talked about these strikes. These are big headaches for big companies like Boeing and Spirit AeroSystems and Howmet Aerospace, but they will get through it. They have the wherewithal and most importantly, they have the ability to go tap the capital markets to get debt and sell stock and whatever else they need to do to raise funds to get through this sort of midterm bridge when it comes to unsettled labor relations.

 It's the small shops where they can't recruit people, they can't keep them, and they're going right to the big companies as Lindsay talked about. And that has got, I think, real implications for this industry about a couple of years down the line, five years down the line, seven years, 10 years, the skilled workforce, if you just don't have it in the small shops and the machining, does this mean, does everything go in-house with the big companies again? Do they increase digital investment even more? There are all kinds of ramifications here that the workforce issues are leading to. We haven't even really gotten into yet what all the implications are.

Lindsay Bjerregegaard

Michael, it's interesting you bring up the digital thing too, because that's kind of been talked about a lot in MRO as a way to, one, attract younger workers who are expecting to be working with digital tools as they get into their careers, but also as a way to potentially offer more career flexibility.

One of the topics that I think has happened in every industry is that people have more expectation of flexibility, being able to work remotely sometimes and that sort of thing. And obviously that's hard to do when you are fixing airplanes. But one of the things that has been discussed a little bit at our events is could we use some of these tools for digital inspections of aircraft? We could have somebody working from home reviewing those results remotely and that sort of thing.

And kind of going back a little bit to the discussion about whether pay increases is going to be the thing to attract more people. I've heard other viewpoints that kind of echo what Todd said, it's a temporary fix, but it's not the long-term fix. You need to offer better incentives.

And one of the interesting things that I saw pretty recently was that AAR again was seeing such high demand from workers to want to have time off on weekends. People were leaving the company. People were taking pay decreases to get weekends off. So they actually have reworked their scheduling approach, at least at some of their locations, to allow workers to have at least one weekend off a month.

 And I'm going to be curious to see if that's something that we'll see trending in the maintenance segment or in other aviation segments as well that don't traditionally offer that kind of work schedule.

Todd Tuthill:      

  If I could go back, Joe, to things that both Lindsay and Michael said, and notice that the Siemens guy talked about digital transformation third. I always seem to be the first one to bring it up. But I do think that's very key because I look at where aerospace is at, and the reality I think in the next few years that the companies have to deal with is that they're not going to find the workers that they need. So they have no choice but to find better, more efficient ways to multiply the impact of the workers they have.

And I think digital transformation offers that. And it's happening at the larger OEMs now. We see that they're really leading in the digital transformation area because they have the resources to do it, but that digital transformation needs to be pushed down further into the supply chain to help them do that. And the digital transformations we have need to become more mature.

 And I see that as absolutely essential digital transformation, automation in doing things that we just don't have physical people to do anymore with real products. But that to me is at the heart of what we'll need to do to solve this problem.

Michael Bruno:          

 Todd, I want to put you on the spot real quick and just ask you, how do you sell that message, especially to SMEs, small and mid-size enterprises? We all know the big companies, Boeing and Spirit and whoever, they've been adopting digital for many, many years now. We can debate about how well they're doing it and implementing it. But going down into the supply chain, how do you get suppliers to understand that digital is a necessity?

Todd Tuthill:    

 Well, it's understanding digital's a necessity, and I think it's enabling them. Again, conversations I had in Paris with other smaller companies, one of the key problems they struggle with is a lot of these small businesses don't have large IT departments. They don't have people to install software, maintain software, do these things. And they say, "How can we do that?"

 And the really good news about that is this idea of cloud. We need to offer more cloud solutions, more turnkey ready solutions that are integrated, that these small businesses can use and just plug in and just implement. Because a lot of these small businesses, the IT department is the guy I hired yesterday and this SSD he plugged into his laptop, that's the IT department. And we need to show them that there really is a true benefit.

While there is certainly some initial cost upfront in the infrastructure and the training, but once you do that, there's just a world of improvement you can make by configuring what you do, by controlling what you do, by doing it in a digital fashion rather than working in paper. And we'll need to do that.

 Another thing we need to think about, I think as part of this, because I still see across a large portion of the aerospace industry, is that while the design portion has gone digital with models, the manufacturer, and especially in the commercial world, the certification is still largely a paper-based exercise. And we need to move that into the digital realm, and that's another area ripe for digital transformation. So there's just all kinds of opportunities there to transform and automate the things that we do.

Joe Anselmo:         

 Unfortunately, we are running short on time, but at the beginning, Lindsay promised us some positive news. So Lindsay, why don't you end it with the positive news.

Lindsay Bjerregaard

 Sure. So there were two little bullet points I was hoping to bring up. One good thing from the ATAC report was that we're actually seeing more women enter the aviation maintenance industry. So over the last couple of decades, the population of female mechanics in the US has hovered pretty steadily between 2 to 3%. But they said in 2022, women made up 11% of aviation maintenance students, and it grew by 40% more over the previous year, in 2023. So that is good progress.

 And then the other thing that we're seeing are a lot of efforts by airlines and companies to launch aviation maintenance training programs and recruitment efforts. One of them that really surprised me last year, 2023, was that Amazon launched an aviation maintenance training program to help boost their technician workforce in Florida.

 So under that program, they're offering opportunities for workers across different parts of their business to go train to become an aviation mechanic. And they said that there's a long wait list of employees signing up for the next classes there. So it's really great that a big e-commerce giant like that is recognizing the problem and putting efforts in to help cover tuition costs and get more people interested in those types of careers. So I think that's a really good sign.

Joe Anselmo:         

 Well, let's end on the good sign. Lindsay, Michael Todd, thanks as always for your insights. We'll all have to come back again in a few months and see where we are on this story. It's certainly not going away. But for now, that is a wrap for this week's Check 6 podcast. A special thanks to our guests and to our podcast editor in my home state of Ohio, Andrea Copley-Smith. Join us again next week for another Check 6. Until then, have a great week and thank you for listening.