Shortage of capacity is rarely a problem in transport. Up until 2020 one of the major characteristics of road freight transport markets was the over-supply of vehicles. Shipping was even more prone to overcapacity. Air freight was slightly different, with the three large air express carriers maintaining a strong grip on large segments of the market by virtue of the sophistication of their networks, but not because there was any shortage of aircraft. Indeed, in much of the world, there was too much belly-freight. This condition of oversupply might be changing as aircraft manufacturers struggle to keep pace with demand.
The problem is that key equipment manufacturers have supply chains that are finding it hard to adapt to higher levels of production. A recent example is the jet engine manufacturer Rolls-Royce. It has been working, but not always succeeding, to provide the levels of spare parts support for the customers of its large Trent 1000 engine. This particular engine, which powers long-range airliners such as the Boeing Dreamliner, has proven to have a rapacious appetite for components. It appears that Rolls-Royce cannot source sufficient components to sustain the existing fleet let alone expand the fleet. These supply chain issues are also having an impact on the large maintenance hubs that Rolls Royce operates, with both a shortage of spares inventory and difficulties with maintenance hub capacity.
The situation is such that some airlines that operate the Trent 1000 are restricting operations, with British Airways interrupting services between London and Fort Worth Dallas, and Virgin Atlantic slowing the introduction of new services to Israel and Ghana.
Rolls-Royce is not alone in suffering supply chain issues. Both Boeing and Airbus have just been forced to inject cash into SpiritAero Systems, a supplier that builds aircraft wing and fuselage components. SpiritAero Systems has long struggled with profitability but recent strikes at Boeing appear to have destabilised production and inventory management operations with a resultant impact on cash-flow. A failure at SpiritAero Systems would bring production to a halt at much of Boeing and Airbus so they must ensure its stability.
These problems not only illustrate the importance of supply chain management to the aerospace industry but also warn that there are likely to be limits on the supply of aircraft in the short-to-medium term. Bearing in-mind the robustness of demand for airfreight at present, this is likely to have a major impact on both freight-rates and service quality.
Source: Ti Insight
Author: Thomas Cullen
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