The supply chain issues from which the commercial engine makers are suffering will likely extend well into 2023 and could even last until the end of next year. This warning comes on July 28 from Safran, the aerospace giant that partly owns CFM International. Earlier this week, Raytheon said that there is no quick fix to the supply issues at its subsidiary Pratt & Whitney. Engine makers have no quick fix for supply chain issues The comments from both engine makers confirm why Airbus has no option but to delay the ramp-up of the A320neo to 65 aircraft per month by some six months from mid-2023 to early 2024, as the airframer announced on Wednesday. Boeing CEO David Calhoun said the same day that a rate increase on the MAX beyond the current 31 per month is out of the question, as long as CFM can’t deliver the numbers. Airbus colleague Guillaume Faury told media on Wednesday that supply chain problems and production rates had been the topic of extensive discussions with all engine makers at last week’s Farnborough Airshow. All said that there is no quick solution, as was confirmed by Safran Group's Olivier Andries in an earnings call this morning. “We are late on our LEAP deliveries, but we have reached the through and are now catching up on our backlog progressively. It is a challenge considering the supply chain issues. Are we going to come back by the end of the year? This is a challenge. Frankly speaking, I think that the supply chain issues are going to probably until 2023 and maybe until the end of 2023," said Andries, who referred to the current supply chain situation as “very fragile”, notably in the US. Earlier this year, he said that CFM is ready for higher rates which Airbus had planned. Raytheon CEO Greg Hayes said on Tuesday that Pratt & Whitney is unlikely to fully catch up on deliveries of the Geared Turbofan engines, but is nevertheless planning “a big step up” in the second half of the year. He said that P&W isn’t “holding up the line” of Airbus’ single-aisle production, suggesting that the engineless aircraft or ‘gliders’ that Airbus currently has are not waiting for GTF engines. A threefold problem The supply chain issues are actually threefold. The first one is a shortage of skilled labor, not just with the engine makers themselves but also with their suppliers. Many thought the problem would be related to just Covid and the Omicron variant and that things would improve after Omicron was gone. “That was a wrong assumption. The labor shortages have not abated, that’s is the reason that we continue to struggle”, confessed Hayes. In a high-tech business such as the aerospace industry, the labor shortage isn’t something that can be solved quickly. “It takes time to hire and train new employees, it doesn’t just happen overnight, especially in certain areas such as our classified work”, says Greg Hayes. “This all goes back to labor availability, as during the downturn two years ago, a lot of people have been laid off and let go. Typically, we see 75-80 percent of those folks come back, but in our supply chain, it is only 25 percent because they have found other jobs. The labor market is just so tight in this country.” Pratt & Whitney says it isn't holding up deliveries at Airbus. This is the A321XLR prototype with P&W GTF engines. (Richard Schuurman) Automation is only part of the solution, with P&W already running automated factories for some years and it will be pursued. A new automated factory is being opened in Dallas while recruiting 800 staff has started for a new factory in Asheville that will be opened by the end of 2023. Despite these challenges, Safran has expanded its industrial capacity by opening new facilities in Hyderabad and Bangalore in India, where it will hire 1.000 staff in IT functions. Later, Safran will open a new MRO facility for the LEAP engine in Hyderabad. In Morocco, it has expanded its engine nacelle facility, which confirms that labor shortages are not everywhere. Raw material The second problem is a shortage of raw materials, as the supply of them is delayed by problems elsewhere in the delivery chain. The shipping industry is suffering from labor shortages, often caused by Covid constraints, that slow down the global distribution system. Aluminum is one material that is currently produced at lower rates. Titanium supplies have also become problematic since western countries have placed sanctions on Russia in response to its invasion of Ukraine. Russia has been a key supplier of titanium and although the precious metal itself isn’t on the embargo list, doing business and financial transactions with Russian companies is. While Airbus, Boeing, and Embraer said earlier they have sufficient titanium in stock, Pratt & Whitney says that P&W Canada is short on forgings since the sanctions have been imposed that affected deliveries for some 25 aircraft. Greg Hayes said that it has identified new suppliers to source the material from them, but the parts need to be certified. Safran said that it has still sufficient titanium and is protected by sourcing it from other suppliers. "Titanium isn't going to be an issue anymore", said Olivier Andries. Then there is a shortage of structural castings of specific engine parts like airfoils, something from which P&W and CFM both suffer and most likely Rolls-Royce too. Casting issues affected both the GTF and LEAP programs before when they were in their start-up phase, but they are now back and were specifically highlighted by Boeing in its earnings call. "Structural casting is typically a pacing item", said Andries. "These are complex parts that require highly-qualified people, especially welders. Those people have gone and our suppliers have difficulty getting them back. This is affecting all engine suppliers." Although engine makers have long-term contracts and require suppliers to keep buffers in stock, this hasn’t prevented the problem, said Raytheon’s Hayes. As eighty percent of commercial engine suppliers are on long-term contracts, the problem here is less manifest than in the defense business, where only ten percent are long-term contracts and lead times have soared and caught out P&W, he explained. Pratt saw engine parts of so-called kits that are available in the shops for production drop from 95 percent in Q1 to fifty percent in Q2, meaning the parts could not be fully completed and needed rework as sub-parts were coming in later. This affects productivity. Hayes said that the target is to get back to eighty percent at the end of the year. “We have embedded 330 of our suppliers to help improve performance and we are also qualifying second and in some cases third sources for critical parts if necessary.” Deliveries Despite these issues, the engine makers reported higher engine deliveries in Q2. Pratt & Whitney delivered 177 large commercial engines compared to 144 in the same quarter of 2021, although it is down in GTF deliveries. In Q1, the numbers were 119 versus 137. Total deliveries in 2021 were 623 engines. Pratt & Whitney Canada delivered 459 engines, slightly down on 467 in Q2 last year. Military deliveries were almost flat at 62 versus 61. Safran delivered 465 LEAP engines in HY1 and 27 CFM56 or 492 in total, which compares to 448 in the same period last year. There was a notable increase in the production of LEAP spare engines. The OEM isn't giving guidance on the number of LEAPs it expects to deliver this year.
