Large aircraft orders placed in recent months by a number of airlines are raising doubts about the industry’s current ability to meet production deadlines and contracts.
The accumulation of mega-orders adds stress to global supply chains, which continue to face difficulties in meeting the requirements of the different players.
As a Reuters report points out, while manufacturers are adding billions of dollars in orders, airlines are keeping a close eye on the situation and fear a possible shortage in the near future.
See also: Industry unrest over Airbus and Boeing delays
Current production capacity and large aircraft orders
The current situation is explained, in particular, by the strong increase in demand for air travel and the marked recovery of airline business after the pandemic. These factors have spurred the need for carriers to have sufficient capacity to sustain the growth of operations.
But this need coincides with the aforementioned supply chain problems. Labour shortages among small and medium-sized suppliers are one of the main causes. In many areas of the industry, the rapid increase in demand has outstripped the sector’s ability to adapt and maintain adequate service, leading to delays in delivery schedules.
Recently, both operators and leasing companies have begun to use their right to compensation as a bargaining chip for continued delays by Airbus and Boeing, the world’s two largest aircraft manufacturers.
Boeing CEO David Calhoun said in June 2022 that supply chain difficulties would continue until the end of this year. Airbus’ forecast was in line with these projections, although the European manufacturer expressed confidence about the ability of its global supplier network to maintain the desired pace of production.
According to Reuters, Rob Morris, head of Global Consulting at Ascend by Cirium, said that «airlines are getting worried about future new aircraft availability and so are perhaps getting spooked into ordering early».
The latest mega-orders
The last few months have seen large orders placed by Air India, Saudia, Ryanair and Turkish Airlines. All of them are examples of major operators looking to increase their market share and expand their business after leaving the pandemic behind.
In mid-February 2023, the Indian airline owned by Tata Group placed a record order for 220 Boeing aircraft, as well as another for 250 made by Airbus. A month later, the Saudi flag carrier and the American manufacturer announced an order for up to 49 Boeing 787 Dreamliner.
Later, Ryanair finalised an order for 300 Boeing 737 MAX 10, including 150 firm and 150 purchase options. Meanwhile, Turkish Airlines announced that it plans to finalise an order for 600 aircraft in June as part of its 10-year growth plan.
Industry analysts quoted by Reuters point out that not all airlines can place large orders so far in advance, as long-term inflation can substantially increase costs.
In that sense, they argue that companies that maintain strong cost controls, or have strong government support, are better positioned. This is the case for most of those that have placed mega-orders in recent months.
