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July 19, 2024
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Airlines are waiting for aircraft to be delivered, and aircraft OEMs are waiting for suppliers to increase production so they can raise output themselves. But all it takes is one missing part to ground an airliner or stop a production line. Witness the Boeing 787, for which the production rate is falling in 2024 because Boeing can’t obtain an adequate supply of heat exchangers until the end of the year.

Despite the pandemic “ending” a couple of years ago, we’re still at the center of supply chain shortages impacting the delivery of new aircraft.  The shortfalls have become critical in airline seats, preventing new aircraft deliveries and refurbishing older aircraft to continue to fly because new aircraft aren’t available.  While economy seats are not a significant problem, the shortfalls are more prominent in high-end first and business-class seats, many of which have integrated in-flight entertainment systems that must be incorporated into the seats and certified or TSO’ed by the seat OEM.

Several factors contribute to the problem.

  1. One is the global computer chip shortage, which also impacts the automobile industry.  While things are slowly improving, we still see lots of new vehicles awaiting chips near our Detroit office, and while the “Chip Act” was passed by Congress, new facilities with trained employees don’t come online overnight.  When they come online, they will probably focus on high-volume markets such as automobiles rather than the specialized aviation market.  It might take another two years for the industry to return to pre-pandemic levels in the production of chips, bringing lead times and availability back to “normal” levels.
  2. Second is the “great retirement” that resulted in losing talent across the supply chain.  Many older and the most experienced employees took buyouts as companies dealt with cash flow issues during the pandemic.  Unfortunately, many of the jobs these people performed were highly skilled, requiring 2-4 years of essentially apprenticing before a new employee is up to speed enough to work unsupervised.  Moreover, the people training apprentices were the older and most experienced employees who were bought out, leaving fewer trainers to supervise many more employees to train them and make them independently productive on the shop floor.  This is a problem for multiple players in the industry, including Boeing and Airbus, who are having difficulty expanding their workforces.
  3. Third is raw material shortages, particularly when sourced from China.  Isolationist policies in the United States have not been well received in Beijing, and politics provides another source of potential volatility for the supply chain.  The shortfalls impact lower-tier suppliers and seat manufacturers, with variable lead times impacting seat OEMs, who need much higher inventories to compensate for potential shortages.

The demand continues to grow.  Although the lower production rate ramp-up from aircraft OEMs should help alleviate the problem, airlines will typically choose to refurbish their existing fleets, increasing demand when aircraft are deferred.  Emirates, for example, with very late deliveries of the still uncertified 777-9, is spending $2 billion in refurbishing the interiors of existing 777-300ER models.

Seat OEMs have had mixed results in early 2024. Safran, one of the largest seat suppliers, indicated that business class seat deliveries fell 25% in the first quarter of 2024, with some scheduled deliveries shifted into the second quarter. Their CEO, Olivier Andriès, indicated that regulators’ certification rules are now much more demanding and impacting the entire aircraft interior industry. An important statistic is that there are only ~200 seat certification engineers worldwide. Every seat OEM is chasing them.

Premium seats are evolving, and airlines are upgrading business and first-class seats into mini-suites, including privacy doors and dividers.  These seats have become more complex and difficult to engineer than the prior generation of lie-flat seats.  A particular issue with the next generation of seats is the in-flight entertainment systems, which are evolving with larger screens and broadband satellite connectivity.

Because premium seating is a differentiator between airlines, airlines like to roll out a new interior design across a fleet as rapidly as possible to maintain consistency in service levels; a shortfall in seat capacity during the rollout of a new interior design is disruptive. Lufthansa revealed its new business-class product earlier this year after being delayed by supply shortfalls.

Seats have been an issue for both Boeing and Airbus this year, two years after the end of the pandemic.  Seats are an issue for the Boeing 787.  Even though seats are Buyer Furnished Equipment (“BFE”) at Boeing, the lack of availability holds up deliveries.  While this is not the primary issue on 787s, it does present logistical problems as airlines cannot take delivery of new aircraft without seats.  The result is added cost for Boeing as it stores airplanes at its facilities awaiting delivery of the BFE items, over which Boeing has no control.

Airbus suffered because Europe’s supply chain hasn’t bounced back as fast as suppliers in the US post-pandemic. Airbus continues to struggle with cabin equipment, including seats and other items, and the supply of aerostructures from the supply chain. Shortfalls, from raw materials to sub-tiers to tier-one suppliers, cause difficulties throughout the supply chain, particularly regarding component lead times. The industry, in general, is facing aircraft shortages and higher fares for consumers as supply and demand economics react to the shortage.

At least fourteen airlines are introducing new business class seats in 2024, some of which have been delayed and others that may have a longer installation schedule than the airline would like.  Having a mixed fleet of aircraft, some with old and some with new seating, is something airlines want to minimize.  The airlines include:

  • JAL business class suites
  • Etihad Airways business class suites
  • LOT Polish Airlines business class suites
  • Cathay Pacific’s Aria business class suite
  • Qantas “Project Sunrise” business class suite
  • Hawaiian Airlines Leih?k? suites
  • Swiss International “Swiss Senses” first and business suites
  • Lufthansa Allegris first and business-class suites
  • Air New Zealand premium business suites
  • Air India business class suites,
  • American Airlines flagship suites
  • Emirates 777 and A380 business class
  • Saudia A321XLR business class suites
  • Air France la Première First Class

The Bottom Line

With the Me Too airline industry changing to business class suites, the rush is on for new seats just as seat manufacturers are having difficulty ramping up demand after the pandemic. Several projects are behind schedule as seat manufacturers struggle to meet demand as carriers undergo fleet refurbishments. From a customer perspective, the improvements can’t come quickly enough.

author avatar
Ernest Arvai
President AirInsight Group LLC

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