The International Air Transport Association (IATA) in collaboration with Oliver Wyman, a leader in management consulting and a business of Marsh McLennan, launched a joint study, Reviving the Commercial Aircraft Supply Chain.
The report addresses supply chain
challenges in the aerospace industry, and explores the root cause of these
challenges, the impact on airlines, and initiatives to move the aviation
industry forward.
Challenges within the aerospace industry’s supply chain are delaying production
of new aircraft and parts, resulting in airlines reevaluating their fleet plans
and, in many cases, keeping older aircraft flying for extended amounts of time.
The worldwide commercial backlog reached a
historic high of more than 17,000 aircraft in 2024, significantly higher than
the 2010 to 2019 backlog of around 13,000 aircraft per year.
The slow pace of production is estimated to cost the airline industry more than
$11 billion in 2025, driven by four main factors:
• Excess fuel costs (~$4.2 billion): Airlines are operating
older, less fuel-efficient aircraft because new aircraft deliveries are
delayed, leading to higher fuel costs.
• Additional maintenance costs ($3.1 billion): The global
fleet is aging, and older aircraft require more frequent and expensive
maintenance.
• Increased engine leasing costs ($2.6 billion): Airlines
need to lease more engines since engines spend longer on the ground during
maintenance. Aircraft lease rates have also risen by 20–30% since 2019.
• Surplus inventory holding costs ($1.4 billion): Airlines
are stocking more spare parts to mitigate unpredictable supply chain
disruptions, increasing inventory costs.
In addition to the mounting costs, supply chain challenges inhibit airlines
from deploying sufficient aircraft to meet growing passenger demand. In 2024,
passenger demand rose 10.4%, exceeding the capacity expansion of 8.7% and
pushing load factors to a record 83.5%. The trend in rising passenger demand
continues into 2025.
The current aerospace industry economic model, disruptions from geopolitical
instability, raw material shortages and tight labor markets all contribute to
the origin of the matter. With these underlying causes considered, the report
outlines key initiatives for original equipment manufacturers (OEMs), lessors,
and suppliers supported by airlines to confront the supply-demand imbalance and
build greater resilience.
“Airlines depend on a reliable supply chain to operate and grow their fleets
efficiently. Now we have unprecedented waits for aircraft, engines and parts
and unpredictable delivery schedules. Together these have sent costs spiralling
by at least $11 billion for this year and limited the ability of airlines to
meet consumer demand. There is no simple solution to resolving this problem,
but there are several actions that could provide some relief. To start, opening
the aftermarket would help by giving airlines greater choice and access to
parts and services. In parallel, greater transparency on the state of the
supply chain would give airlines the data they need to plan around blockages
while helping OEMs to ease underlying bottlenecks,” said Willie Walsh, IATA’s
Director General.
There are actions for the aerospace industry to consider:
• Open up aftermarket best practices by supporting Maintenance, Repair and
Operations (MRO) to be less dependent on OEM-driven commercial licensing
models, as well as facilitating access to alternative sourcing of materials and
services.
• Enhance supply chain visibility by creating clearer visibility across all
supplier levels to spot risks early, reduce bottlenecks and inefficiencies, and
use better data and tools to make the whole chain more resilient and reliable.
• Unlock value from data by leveraging predictive maintenance insights, pooling
spare parts, and creating shared maintenance data platforms to optimise
inventory and reduce downtime.
• Expand repair and parts capacity to accelerate repair approvals, support
alternative parts and Used Serviceable Material (USM) solutions, and adopt
advanced manufacturing to ease bottlenecks.
To enact any of these initiatives, the first and most critical step for
commercial aerospace industry participants to take is to develop a strategic
approach among all stakeholders in the supply chain. The multi-headed
challenges facing the industry call for collaboration to progress in the goal
of better meeting aircraft production and maintenance demand.
“Today’s aircraft fleet is larger, more advanced, and more fuel efficient than
ever before,” said Matthew Poitras, Partner in Oliver Wyman’s Transportation
and Advanced Industrials practice. “However, supply chain challenges are
impacting airlines and OEMs alike. We see an opportunity to catalyse an
improvement in supply chain performance that will benefit everyone, but this
will require collective steps to reshape the structure of the aerospace
industry and work together on transparency and talent.” -TradeArabia News Service