Apr 12, 2023

IATA: Airlines ‘Beyond Frustrated’ by Supply

The International Air Transport Association (IATA) is considering the establishment of a dedicated working group to monitor the overall performance of the suppliers in the aircraft and engine value chain. The initiative, announced at the trade body's annual general meeting taking place in Istanbul from June 4 to 6, will address delays in the delivery of new aircraft and maintenance, repair, and overhaul services. "OEM suppliers have been far too slow in dealing with supply-chain blockages that are both raising costs and limiting our ability to deploy aircraft," said IATA director general Willie Walsh. "A solution must be found."

The initiative builds on the experience IATA gained by addressing concerns over jet engine aftermarket practices, more specifically engine OEMs’ practice of withholding repair information from third-party maintenance shops, thereby limiting competition and consequently allowing the manufacturers to increase prices. The IATA-led effort resulted in CFM International agreeing in 2018 to adopt a code of conduct and associated measures to increase the opportunities available to third-party providers of engine parts and MRO services on the CFM56 and Leap series engines. The agreement specified its product support policy and guidelines related to such aspects as licensing, warranties, servicing, technical support, repairs, communication, and contracting. Rolls-Royce followed suit and agreed to a similar voluntary agreement.

"We are reviewing if there are opportunities to do the same," Nick Careen, IATA's senior vice president of operations, safety, and security, told AIN. "We are looking [at whether] IATA could develop key performance indicators that would enable airlines to monitor and measure supplier performance," he said, admitting that a lot of information is "very sensitive."

Today, product and service standard support agreements between original aircraft manufacturers (OAMs) and the Tier 1 suppliers do not include terms protecting the airlines from abuse in the supply chain, remarked Mehmet Tevfik Nane, Pegasus Airlines chairman and outgoing chair of the IATA board of governors. The board has asked IATA "to develop a new standard support agreement between OAMs and their Tier 1 suppliers," he said, adding that IATA has already engaged with OEMs as well as OAMs.

Careen expressed confidence that with time, the supply-chain issues "will work themselves out.

"There is too much money involved," he said. "Aircraft deliveries are the lifeline of Airbus and Boeing." He described the unprecedented supply-chain issues related to aircraft parts as a "perfect storm" due to a combination of several factors including Covid, which greatly disrupted global supply chains for key components and caused the departure of large numbers of skilled personnel, and the war in Ukraine, which led to economic sanctions that caused shortages of key raw materials such as titanium used in aircraft structural components. "Additionally, OEMs' increasing reliance on single-source parts as well as exclusive agreements have created an 'eggs in one basket' effect," he said. "A bottleneck with one supplier—or a single manufacturing facility—can ripple through the entire supply chain."