The International Air Transport Association (IATA) represents nearly 350 airlines, accounting for about 85 percent of global air traffic.
During his address at the 69th Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA), IATA Director General Willie Walsh expressed significant frustration over the lack of improvement regarding supply chain issues.
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Walsh noted that while airlines operate on thin margins, Original Equipment Manufacturers (OEMs) enjoy significantly higher profit margins.
He provided examples highlighting that engine manufacturers have been enhancing their financial performance even amidst considerable disruption that has incurred substantial costs for airlines.
Walsh conveyed his concern when hearing suppliers discuss price hikes attributed to tariffs and other supply chain disruptions.
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“We need to see a correction here. Airlines should be adequately compensated. I have no issue with anyone making a profit….
However, we require a better balance, and these critical suppliers must significantly elevate their performance to meet the industry’s needs,” he asserted.
The global aviation sector is facing significant supply chain hurdles, particularly post-pandemic, resulting in delayed aircraft deliveries at a time when airlines are eager to expand their fleets to accommodate increased passenger traffic.
At the assembly, AAPA Director General Subhas Menon highlighted that tariffs are likely to hinder the fledgling recovery of the supply chain and inflate non-fuel costs for airlines.
“The recovery of the supply chain is being jeopardized by tariffs that escalate supplier expenses. Although aircraft and engines are exempt, their raw materials and components sourced from various regions are not.
“Tariffs also exert pressure on demand through inflation, creating a double whammy that impacts both supply and demand in the market,” Menon stated, while also noting the optimistic outlook for air transport demand.
In discussing sustainability, Menon stressed that taxing airlines directly or indirectly via mandates has been ineffective, and the production of Sustainable Aviation Fuel (SAF) remains insufficient.
A study conducted by IATA in collaboration with consulting firm Oliver Wyman estimates that supply chain difficulties will cost the global airline industry over USD 11 billion by 2025.
Last year, the global commercial aircraft backlog exceeded 17,000 planes, surpassing the 13,000 planes/year average seen from 2010 to 2019.
The slow production rate is forecasted to cost the airline industry more than USD 11 billion this year, primarily due to excess fuel, heightened maintenance, increased engine leasing fees, and additional inventory holding costs, as per a study released in October.
