“OEMs should step up to solve the supply chain issues”

Aircraft manufacturers must step up to make sure that the supply chain of parts at Original Equipment Manufacturers (OEMs) gets stabilized. Unless OEMs invest massively in resources and staffing and adjust their business models, the airline industry continues to be exposed to parts shortages and unavailability of aircraft. That was a view shared by various key stakeholders at airlines on the first day of MRO Europe, the Aviation Week-sponsored conference at the Amsterdam RAI Convention Center. Bring together a couple of hundred stakeholders from airlines, maintenance, repair, and overhaul (MRO) companies, and lessors, and you get a clear view of their concerns. In a number of polls among attendees, 48 percent said that the supply chain is the main reason for the current instability in the industry. 75 percent say that the unavailability of trained staff is an issue, while 71 percent blame ‘OEM dynamics’ for having a negative effect on the aftermarket. We all know of aircraft manufacturers and engine makers reporting supply chain issues since the pandemic. The aircraft OEMs struggle because the OEMs of other parts are struggling to produce parts and subassemblies in the numbers they used to before the Covid crisis started in March 2020. Staffing shortages are one of the reasons. Basil Papayoti, Vice President Commercial of Delta TechOps said: “We are in a perfect storm. We at Delta lost 58.000 years of experience during the pandemic through retirement packages, so you have that labor constraint and training your new people. You have got the supply chain issues, you have got huge demand from our main customer Delta that increased capacity by 20 percent, and you have got the issues with the new-technology airplanes.” Oscar Perez of Globalia Maintenance, the MRO subsidiary of Air Europa, said that staffing numbers might be back to where they were, “but instead of twenty years of experience, people have now only one year. It’s experience that is lacking.” These staffing and competence shortages need to be urgently addressed because they continue to slow down the production of parts. High demand for engine parts for the less-durable new generation of engines from Pratt & Whitney, CFM, GE Aerospace, and Rolls-Royce is certainly not helpful, but various panelists stressed that not only engines are affected. The result is that aircraft maintenance planning has become most uncertain. “You risk preparing for MRO, only to find out at the last minute that an essential part is not available in time,” said one of them. ‘OEM performance is extremely poor’ “OEMs (of parts) have a huge responsibility for the current status of the industry. We are in a situation today where fleet availability has decreased significantly, where aircraft are grounded because of the supply chain situation. We (airlines) are suffering like we never suffered,” said Benjamin Moreau, SVP of Strategy & Business Development at AFI KLM Maintenance and Engineering. “The performance of the OEMs is extremely poor today. I looked at the performance of A350 components for which we placed orders recently. The average performance of the top-10 OEMs is below 50 percent, with an average delay of 90 days before a part is delivered. It sometimes gets even up to 240 days.” Repairs of parts and the refurbishment of used parts are also lagging behind, said Moreau. Eighty percent of parts ordered by Iberia are delivered late. (Iberia) “OEMs need to solve this and invest more. They have a huge responsibility. Of course, this situation is the result of a long-term business model that has been developed in the industry to benefit themselves. We are currently facing a situation where the industry has so many limitations that, when there is a shock in the supply chain, there is less agility to adjust and solve these issues. So OEMs should invest massively and adjust their business models. Some do, but we also see that OEMs are sticking to their behavior of price escalations several times in the year with two-digit numbers.” Alex Cabello, Director of Technical Assets & Supply Chain at Aer Lingus, said that airlines end up being exposed to monopolies of OEMs and have little choice. “But that should come with a responsibility from the OEMs to provide a service to the customers. I think aircraft manufacturers have to help here and put up the rules there.” Boeing, Airbus, and Embraer are assisting their suppliers both financially and with staffing to overcome problems at tier-1 or even tier-2 and -3 suppliers, but Benjamin Moreau thinks it isn't enough: "Evidently not. When we look at the current status, they aren't doing enough. Airframers are acting but we believe they should do more." Risk is passed to the airlines “There has to be a clear understanding of the impact the OEMs or the providers have on airline operations and ultimately the customer. The order books are full, but in our world, the risk is passed on to us with flight-hour agreements. Although there has been a significant improvement in those agreements, we are still a number of percentage points below what the contract rates would say. That difference in the amount of delivery means an amount of risk, and that risk transfers to us,” said Andy Best, Chief Technology Officer at British Airways. “I have met with both large aircraft manufacturers, and they have stepped up. They have done a lot of work and investment and we will start to see that come through. But it would need me to beat the drum for that to happen, it needs to be pro-active in their approach.” BA itself responded to the OEM issues with more stringent contract oversight but also invested in more stockholding of parts to mitigate the supply chain imbalance. Brexit isn’t helping the airline, said Best, with parts not arriving on time at Heathrow every day. Both problems have resulted in British Airways starting to do more work in-house. “We can not push maintenance to the right all the time and end up with this bubble. It has to be dealt with in a matter of time.” Jan Kotka, COO of Magnetic MRO, referred to the last twelve months as “a hell of a headache”, but added that there are “certain improvements” in the supply chain. That view was shared by Iberia’s Director of Strategy and Supply Chain, Ivan Gonzalez Vallejo, but that is mainly because the Spanish airline has put in a lot of work in predicting demand for MRO capacity, taking extended lead times from OEMs into account. “We have a more predictable (aftermarket) supply from our partners, which helped us a lot on availability.” Overall, Gonzalez Vallejo has been disappointed with lead times in the past year. “Eighty percent of our parts are on delayed purchase orders. But there is not across-the-board shortage, there is a shortage of certain parts which is not predictable. The issue is that there is not enough (production) capacity.” He thinks that the whole industry should have a good thought about what the constraints are and how to solve those. Legacy engines set the benchmark A separate panel discussed engine issues. Dimitri Zaitsev, Senior Director of Global Sales of Engines Services and Engine Lease at Lufthansa Technik, made the observation to put engine issues with the Geared Turbofan, LEAP, GEnx, and Trent 1000 into perspective: “It is fair to say that the benchmark that has been set by the OEMs and MROs with respect to the legacy engines is extremely high. But the durability and cost efficiency of those legacy engines have taken a long time to achieve and the path was not even. I trust that with the new-generation engines, we will put the industry on the right path and essentially achieve comparable results. But for the moment, it obviously is extremely rough. Airlines are suffering badly. There aren’t enough spare engines, causing significant operational disruptions.” Lufthansa Technik's Mobile Engine Service station in Dublin. (Lufthansa Technik) Alan Downey of Willis Lease Finance concurred: “The previous engines were so good that everybody got lured into a false sense of security. I did a presentation in 2017 and I thought that the OEM's predictions of time-on-wing were optimistic at best.” This has been confirmed in subsequent years when Pratt & Whitney and Rolls-Royce suffered from serious durability problems. At Willis, this has resulted in lease contracts where the airline takes the maintenance risks. While pre-pandemic, turnaround times of engines that had to see the repair shop was between 60 and 65 days, P&W is now predicting that the latest powder contamination issue combined with other MRO requirements may result in turnaround times for the Geared Turbofan of 350 to 300 days. Lufthansa Technik’s Head of Corporate Strategy and Market Analytics, Sven Taubert, thinks this guidance is extreme. “I think most engines will be outside the shop for 240 days and then fixed inside at normal turnaround times. The 250-300 days is a worst-case scenario, but it will be busy and difficult in the next two years.”

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