IndiGo and Air India’s Record Plane Order Deliveries Pose Challenges for Airbus and Boeing
Airbus SE emerged as the unrivaled champion of the Paris Air show, commencing with an extraordinary 500-plane order from Indigo, a prominent low-cost carrier. However, the company now faces the challenge of securing an adequate workforce to construct these aircraft.
Beneath the captivating grandeur of multi-billion dollar aircraft sales and mesmerizing aerial acrobatics showcased near the city of Paris, lies a pressing concern for the aerospace industry. A scarcity of both parts and labor looms, posing a significant threat to the industry’s capacity to meet the increasing demands of airlines within stipulated timelines.
Amidst engine and semiconductor shortages, supplier glitches, and disruptions caused by the war in Ukraine, Airbus and its US counterpart Boeing Co. have faced a series of challenges in establishing a global network of subcontractors, all of which were severely impacted by the pandemic. Although the crisis reached its peak last year, the fragility of the recovery was evident in Paris, where job openings were abundant.
During a meeting with analysts in Paris, Airbus CEO Guillaume Faury acknowledged that they fell significantly short of their targets last year. However, he expressed confidence in their ability to meet performance expectations this year.
The primary obstacle lies in the scarcity of skilled workers. In typical downturns, aerospace companies lay off employees and then aim to rehire them when conditions improve, achieving a success rate of approximately 80%, as stated by Airbus procurement chief Jürgen Westermeier. However, during the Covid-19 pandemic, many workers transitioned to other areas of manufacturing that were less severely affected or even left the industry altogether. Currently, Westermeier noted that aerospace employers are fortunate to rehire only two out of every ten workers.
Airbus’ Target of Hiring
Airbus has set an ambitious target of hiring 13,000 new employees worldwide this year. Although the labor market has proved to be challenging, the company has managed to fill 7,000 positions by the midpoint of the year. Similarly, Boeing expanded its workforce by 15,000 individuals in the previous year and aims to hire an additional 10,000 people in 2023.
Mike Kauffman, the supply chain chief at GE Aerospace, emphasized the significance of labor in almost every aspect of the industry. He stated that attracting, retaining, and training skilled workers within the given timeframe is crucial.
While Airbus CEO, Faury, maintains optimism regarding the goal of delivering 720 aircraft this year, the company faced difficulties in meeting its reduced target last year. As of May, Airbus had achieved only about one-third of this year’s delivery objective, indicating the need for a race against time to meet the December deadline.
Airbus’ Extensive Network of Suppliers
The setbacks experienced last year had a ripple effect on Airbus’ extensive network of suppliers, consisting of around 13,000 companies. These suppliers contribute 70% to 80% of the value of parts in a typical airliner. Some contractors struggled to keep up with demand, leading Airbus to scale back its plans. On the other hand, certain suppliers who had overextended themselves in procuring parts suddenly found themselves with excess inventory from their own suppliers.
The network of around 13,000 Airbus suppliers, responsible for supplying 70% to 80% of parts in a typical airliner, experienced significant setbacks last year, causing concern. While some suppliers struggled to keep up with demand, forcing Airbus to scale back its plans, others faced the issue of over-ordering parts from their own suppliers after stretching their capital resources.
To address any lingering doubts, Airbus aimed to dispel uncertainties during its Wednesday presentation. Westermeier reassured stakeholders, saying, “We have firm horizons for at least six months,” and emphasized the reality of the ramp-up to the banks.
Similarly, Boeing has encountered its own obstacles while striving to restore its production to pre-Covid levels. Challenges range from the departure of experienced engineers and mechanics early in the pandemic to supply chain issues caused by turnover and hiring difficulties among suppliers. Amidst a turbulent environment, stabilizing production has become a key priority for Dave Calhoun, CEO of the aviation giant.
The progress of work at Boeing has been sporadic, with intermittent delays caused by minor structural flaws that halted 787 deliveries for over a year. More recently, defects from suppliers have emerged, affecting the tail sections of the Dreamliner and 737 Max aircraft.
Airbus and Safran
Smaller suppliers have been heavily impacted by the shortage of skilled workers, often finding themselves in fierce competition with their larger customers. Jean-Charles Faure, a key account manager at Clayens NP, a French manufacturer of composite parts for Airbus and Safran SA, stated that they are seeking to hire approximately 50 employees across manufacturing, sales, and administrative roles in Europe to replace retiring older workers.
Since the onset of the pandemic, the task of recruiting staff has become significantly more challenging. Candidates, particularly younger workers, are now demanding greater flexibility in their work hours, increased days off, and the option to work remotely.
Faure acknowledged the difficulty, saying, “But we are coping with the workforce we currently have.”
The labor shortages at crucial suppliers have been particularly severe in the United States due to financial setbacks. Spirit AeroSystems, a former Boeing unit responsible for manufacturing 737 fuselages and other major components for Airbus and Boeing aircraft, required $280 million in advances from its former owner and other customers this year.
Lockheed Martin Corp
According to Greg Ulmer, the head of aeronautics at Lockheed Martin Corp., recruiting mechanics and technicians has proven to be a challenge, especially when the new generation entering the workforce lacks experience in hands-on skills. Ulmer mentioned that with the absence of shop class or wrenching experience, vocational training programs have been established in high schools and community colleges near Lockheed’s F-16 assembly lines, such as in Greenville, South Carolina. They are implementing a similar approach in other locations like Marietta, Georgia, and Palmdale, California.
Faury emphasized the importance for Airbus to meet its production targets this year. With enough orders to keep them occupied for the next 10 years, the focus is squarely on maintaining consistent output.
“We aim to replicate our achievements in ’23 with ’24 and ’25,” Faury said so that suppliers “can have confidence in our commitment.”
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