Airbus and Boeing parts supplier Senior said it would be furloughing and cutting staff in response to the current supply chain challenges in the aviation industry.
The British company said in a trading statement on the London Stock Exchange on October 8, 2024, that while demand remains high across the industry, it needed to apply cost saving measures to mitigate near-term challenges.
With Boeing continuing to grapple with regulatory oversight and also contending with ongoing strike action, Senior said it has had an "inevitable impact" on certain operating businesses.
Airbus has also faced its own challenges in the supply chain environment, in particular with engines and interiors. In other parts of the Airbus supply chain, Senior has had contracts that have "generally produced in line with the originally scheduled rates".
Airbus CEO Guillaume Faury said in its second quarter earnings call: "We experienced a high level of missing parts, mainly on engines, on cabin and equipment and on Spirit AeroSystems work packages. On engines, the 2024 and 2025 volumes are aligned with our suppliers. To assess the performance issue of engine manufacturers, we have joint improvement plans going down to the elementary part bottleneck and encompassing both the line fit and the airlines in service demand with a high level of transparency."
"Consequently, there appears to be an imbalance of supply into different parts of the aircraft, and we have recently been informed by one of our customers, an Airbus Tier 1 supplier, that they intend to significantly reduce scheduled deliveries from Senior in Q4 of this year before returning to normal during Q2 next year," Senior said in its update.
The company said the full impact of the affected programmes "is not yet certain" but implemented the mitigating actions to preserve costs and cash. Aside from staff reduction, it is curtailing discretionary spend, rescheduling incoming materials to align with future demand and postponing uncommitted capital expenditure.
Airline Economics+ SVP of appraisals Gary Crichlow said: "Airbus has a supply chain of something like 30,000 entities. Within that chain, you’ll have entities that supply finished components and materials to Airbus (Tier 1), entities in lower tiers that feed into higher tier suppliers, and entities that supply other suppliers with one widget and simultaneously supply Airbus with other widgets. It’s a long running challenge for OEMs to make sure that they minimise a situation where there’s an oversupply of one set of widgets and a dearth of another set of widgets."
He added that while it is not necessarily a new scenario for OEMs, it has "become much more challenging to do so".
Senior announced a multi-year extension on its contract with Airbus in February 2024 with it continuing to manufacture and supply various aerostructure parts used in the A320 and A330 aircraft programmes, including aluminium parts and assemblies used throughout the aircraft. Deliveries had commenced in January 2024.
A report from Bloomberg on the same day said that Airbus' annual delivery goal of 770 commercial jets may fall short. The news outlet cited UBS analyst Ian Douglas-Pennant estimated annual deliveries to be 750 aircraft.
However, speaking to someone familiar with the matter, Airbus leadership has maintained its annual delivery goal of 770 jets. The European OEM had already scaled back its annual deliveries down from 800 in June.
The Airline Economics+ team noted that there is typically "a rush of deliveries" in December. "Based on what Airbus has been able to achieve thus far, we're of the opinion that it's not pie-in-the-sky thinking for Airbus to believe it can still make its target," said Crichlow.
Airbus will publish its September orders and deliveries report on October 9, 2024. The company has delivered 447 aircraft to date as of its August deliveries report.