When aviation almost ceased due to the corona pandemic at the beginning of 2020, Airbus made an important decision. Although no airline or leasing company wanted to take over new aircraft, Airbus produced the short- and medium-haul jets of the A320neo-Series continue. Instead of 60 machines, the manufacturer still built 40 a month, even if the finished jets were initially mothballed for months.
The decision was vital for many suppliers. At the time, Airbus was probably rightly afraid of many bankruptcies in smaller companies and accepted the risk of building up inventories that would run into billions. Because at some point the specialists for cabin equipment, fuselage parts or landing gear would be needed again. That time seems to have come: “The market is back. Our customers want our aircraft faster than we can deliver them,” said Jürgen Westermeier, who is the head of purchasing at Airbus, recently at the Aviation Forum in Hamburg. “We did what we announced,” he argues. Therefore, the growth plans are “credible”.
The only problem is: the suppliers don’t trust the whole thing. According to a survey by the management consultancy H&Z, 41 percent of business partners do not rely on the aviation company’s production planning, but prefer to make their own plans. These provide discounts of up to 20 percent. The smaller companies in the industry are therefore significantly less optimistic than Airbus when it comes to the recovery in air traffic.
Nobody can afford to stockpile production
Andreas Ockel, board member at the Austrian carbon fiber specialist FACC, makes it clear what that means: “A single missing component can stop the run-up.” Then everyone else who adhered to the Airbus forecasts would heap production, which, however, hardly anyone could afford.
Airbus already told its suppliers last May what was going on. By the end of 2021, around 45 aircraft from the A320neoRow can be built. The group wants to increase this to 65 machines by mid-2023, more than ever before. In 2025 it should even be 75 a month, even if that has not yet been formally decided.
The main reason is the high order backlog. Airbus has firm orders for more than 6,200 short and medium-haul jets, and even 65 aircraft are fully booked for years to come. If the manufacturer wants to have any chance of being able to build an aircraft for a new customer in the medium term, the cadences must be increased significantly. And there are many more larger ones A321neo (and the long-haul versions of the jet) than two years ago, the individual aircraft are much more complex than the more or less standardized machines that are used on short-haul routes.
Many suppliers are financially troubled
This is actually surprisingly good news for suppliers too, given the many restrictions in international air traffic. But many of them are financially troubled. First of all, in the boom years before 2020, they had to pre-finance an unprecedented ramp-up that went anything but smooth and was therefore more expensive than expected. Then, because of Corona, they practically lost 50 percent of their orders from one day to the next.
And now they should again take a lot of money in their hands, even if the delta variant of the coronavirus has delayed the recovery of air traffic and Omikron is making it even more unsafe. Airbus argues that there should now be enough trust “that we will really do what we announced,” said Jürgen Schuler, Head of Cabin Purchasing at Airbus. Obviously, trust alone is not enough. Because the many smaller companies need loans from their house banks to finance the expansion. In turn, banks often want to see firm orders before lending money. But the binding orders sometimes come only a few months, sometimes just weeks before the delivery date.
FACC board member Ockel has a proposed solution: If Airbus is already ramping up, the group should simply order much earlier. According to the industry, the proposal is being examined at Airbus. The company does not officially comment on this. But time is of the essence. “It is extremely important that the demand is passed down the supply chain,” says Schuler. The suppliers would also have to adhere to the lead times. In some cases this means that for some components you already have to produce the quantities that Airbus will only achieve in a year’s time in final assembly.