Can supply keep up with demand as aviation business booms?

Category: (Self-Study) Business

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The aviation industry has bounced back after the pandemic halted air travel during the coronavirus lockdowns. Now aircraft manufacturers are struggling to produce enough jets to keep up with demand from carriers.

The Paris Air Show is back after a four-year hiatus caused by the pandemic. Airlines, manufacturers, militaries and industry analysts have landed at Le Bourget to the north of the French capital for this aviation extravaganza.

More than 300,000 people were expected to visit the site. They got to see the latest aircraft, from huge passenger jets to the innovative 2-seater electric air taxi VoloCity that will begin commercial flights next year. At the last show, in 2019, $140 billion worth of contracts were signed. The show’s CEO was expecting more orders would be made.

“I suppose there will be a lot of deals signed during the show, but we will see tomorrow or we will see the day after,” says Gilles Fournier, CEO, Paris Air Show. He added, “The orders are very important in the last few months and it will be very important during the show. So I suppose there will be a lot of orders.”

But placing orders is one thing. Receiving them is quite another. As people start flying again after the pandemic, demand is high. But making enough airplanes to meet that demand is proving a struggle.

“Right now, demand is not the problem. Supply is the challenge. Supply is the key constraint,” explains Darren Hulst, Vice President, Marketing & Sales for Boeing Commercial Airplanes.

The industry-wide production bottleneck stems from the pandemic when demand for flights fell off a cliff and supply chains had to scale down. Now air travel is surging again.

“To be frank, we started this decade with the biggest challenge the industry ever faced, went to zero demand and the production that had to adjust for it. And now we’re coming back up. And it’s not as easy to just to turn a switch,” says Hulst. Industry analyst Richard Aboulafia says this is the strongest aviation market he’s seen in 35 years.

This article was provided by The Associated Press.

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[Paris Air Show, aircraft on airfield]

[Airfield]

[Rockets to Air France aircraft]

[Volocity electric air taxi by Volocopter doing display flight]

Gilles Fournier (interview): “I suppose there will be a lot of deals signed during the show, but we will see tomorrow or we will see the day after, I suppose, as the orders are very important in the last few months and it will be very important during the show. So I suppose there will be a lot of orders.”

[Show floor]

[Aircraft propeller display]

Gilles Fournier (interview): “So the health of the transport industry seems to be good as a level is coming back at the same as 2019, except maybe in Asia but it will be done in a few months. And for the industry, the problem is the offer (supply), is the building of aircraft. There is much more demand than offer. So I think it will be resolved in the next two years.”

[JetBlue Airbus A321]

[Boeing 777-9]

Darren Hulst (interview): “Right now, demand is not the problem. Supply is the challenge. Supply is the key constraint. And so from our standpoint, we’re looking to return to the levels of production we had before the pandemic began and then in many cases actually increase from those rates because demand is stronger. From a backlog standpoint, we’re looking at 2027 and beyond for availability in terms of general availability.”

[Exterior of Boeing 737-10]

[Cockpit of 737]

Darren Hulst (interview): “The customers, they’ve realized how strong demand is in the market and they want to do their best to provide capacity for the market. But there are challenges across the industry, whether it’s our own airplane supply chains or human resources in terms of pilots and other technicians. And to be frank, we started this decade with the biggest challenge the industry ever faced, went to zero demand and the production that had to adjust for it. And now we’re coming back up. And it’s not as easy to just to turn a switch.”

[Fighter jet]

[US Army Shadow helicopter]

[US military Apache Helicopter]

Richard Aboulafia (interview): “You know, this is the strongest aviation market that I’ve seen in 35 years. You’ve got a very strong uptick in the defense side of the house, but also the commercial market recovery post pandemic really has hit its stride full bore and we’re almost back to the peak.”

[Aircraft in Riyadh Air livery]

[Qatar Airways aircraft]

Richard Aboulafia (interview): “A lot of the orders you’re going to see at this show are from Middle Eastern carriers that aim to connect the world. And in addition to the usual ones – Emirates, Etihad, Qatar – you’ve got Turks joining in that. The Saudis want to join that. And then the Indians are gearing up basically to say, well, we kind of want some of that traffic back, thank you. So everyone has plans to go after the same pool of international super connector traffic.”

[Mechanical arms moving model aircraft]

Richard Aboulafia (interview): “In the past we have seen growth in the five or even 6% per year range sometimes going higher. But obviously, what’s happening with world economies, with technology, whatever else, we’re projecting it to come down to roughly the 3.4% per year range, which when you think about it over 30 years, there’s still quite a lot of jets. But nevertheless, it’s not quite the same as the days of endless growth. And of course, every year another couple of hundred more jetliners built on top of the level we’d seen in the previous year.”

This script was provided by The Associated Press.