Commercial Aircraft Manufacturers Face Increasing Pressure to Ramp Up Production
June 16, 2023 |?Alessandro Furlong, Analyst?|[email protected]
The COVID-19 pandemic and the grounding of Boeing’s 737 MAX caused unprecedented disruptions to the commercial aircraft supply chain.?Production rates have yet to reach the levels observed prior to these disruptions, primarily due to the limited supply of key components such as engines.?Boeing and Airbus, for example, delivered 1,141 commercial aircraft combined in 2022—465 short of the 1,606 they delivered in 2018.?That said, recent announcements by major manufacturers show that production is ramping up.
In May, Boeing delivered a total of 50 commercial aircraft, compared to 35 in May of last year.?Airbus has also increased deliveries, from 47 aircraft in May 2022 to 63 in May of this year.
With an aging fleet, and with the current fleet unable to accommodate the fast-recovering demand for air travel, manufacturers are facing more pressure to deliver planes than they have in decades.?Because of the increasing urgency to meet demand, Airbus and Boeing have announced plans to further increase production.
Boeing has announced that it plans to produce 67 planes a month by 2025, up from 50 currently.?Airbus expects to produce 80 aircraft by 2025 and 90 by 2026, up from 63 currently.
These goals are aggressive and, if not met, can seriously affect the manufacturers’ customer relationships.?Considering that the manufacturers’ production rates are constrained by the capabilities and productivity of their suppliers, Boeing and Airbus may have to provide powerful incentives to their suppliers, to encourage them to ramp up their build rates sooner rather than later. If this is the case, then the next few years may see heightened profitability for suppliers.?Consequently, owners of businesses within the commercial aviation supply chain who choose to sell during this period might also see increased valuations for their companies.