These are tough times for the aerospace supply chain. However, it should be good times—orders are great, and backlogs are nearly a decade out. Not so fast. We explained in two articles (first and second) why the OEMs and supply chains are stumbling. A perennial question we seem to be talking to industry people about is production rates. The duopoly has contracts with the supply chain, but these are one-sided. Essentially, a supplier is required to deliver at a specific rate. Except there are clauses that allow the OEM to switch rates. The OEM can switch rates with suppliers, and the risk is on the supplier. Are orders being accelerated? Then, the supplier needs to invest to deliver faster. There's a slowdown? The supplier has to sit on inventory and fund it. Being in the supply chain is like the kiss of death. It's nice to be kissed, but it can kill you, which may be why there is so much supply chain consolidation. McKinsey has this guide for supply chain firms to consider. Their statement summarizes the situation described in our articles cited above: "While strong demand is encouraging, commercial-aerospace OEMs and suppliers are dealing with multiple challenges in parallel. These include quality control issues, new regulations, talent shortages, and an increasingly splintered geopolitical environment." The big challenge we are considering for clients is the rate and what drives this. Here are some thoughts. Numerous factors make the future hard to predict OEMs face customer model switches, i.e., United Airlines switching away from MAX 10 OEMs face greater and longer certification scrutiny. OEMs face frustrating skill shortages. Technology issues emerge Metal contamination in GTF and LEAP engines SAF production/supply and managing this going forward Trickle-down impacts Slow new deliveries cause older aircraft to incur unplanned MRO costs A shortage of available aircraft Too few pilots or too many? Looking at this (incomplete) list, it is clear why forecasting rates are so tricky. Any forecast is probably good for a month. What data can we examine that might act as a guide? We have some sources for that. Before that, let's talk about the monthly "delivery rate." This is the actual monthly delivery rate. It does not matter if the OEM is running at 45 if it delivers far less, as with MAX. Similarly, Airbus can produce 45 A320 family aircraft, but without GTF engines, several deliveries will be parked until the engines are ready. We argue that the delivery rate is the effective rate. The first table summarizes monthly delivery data from ch-Aviation—the average delivery rate for 2015 through 2023 is in the second last column. The final column lists their 1Q24 deliveries. [caption id="attachment_82952" align="aligncenter" width="580"] ch-Aviation[/caption] Our delivery tracker starts in 2021, and we show the following monthly delivery rates: [caption id="attachment_82953" align="aligncenter" width="408"] AirInsight[/caption] Combining the tables, we have this. Differences between the periods before 2024 are because the AirInsight tracking is shorter. The differences for 1Q24 are likely because both sources registered deliveries at the end of the quarter differently. Other sources, probably, show similar rates. [caption id="attachment_82954" align="aligncenter" width="363"] Respective sources[/caption] The results illustrate how cloudy the process is. Figuring out what to expect from the OEMs is slippery. Assuming no exogenous factors like war, pandemics, or other global disruptions, we estimate 2024 monthly rates as follows: A220 - 5; 60 for the year A320 - 45; 540 for the year A330 - 2.5; 30 for the year A350 - 4.5; 54 for the year 737 - 25; 300 for the year 767 - 1 777 - ? 787 - 5; 60 for the year Our numbers are conservative compared to analysts' expectations and what OEMs project. All of this could change within a month, of course. For example, if the FAA lifts MAX rates to over 38 and Boeing can reach that rate, their numbers will pump.