‘The High Cost of Waiting: How Supply Chain Delays Hurt Airlines’ Bottom Line’

Airbus and Boeing, the duopoly that controls over 90% of the global commercial aircraft market, are still struggling to deliver aircraft on time. Last year, Boeing only delivered 348 jets, leaving it with a total backlog of 5,595 unfilled orders, and Airbus only fulfilled 776 orders, four below its official target. Airbus’ order backlog is still 43% more than Boeing’s.

With the International Air Transport Association (IATA) projecting over 4 billion passengers in 2025, scaling up capacity via new aircraft is clearly mission critical.

But these delays in new aircraft delivery have also been bad news for airlines’ bottom lines, as this both impacts expansion plans and make it harder to meet passenger demand. It has also partly resulted in higher fares for passengers.

However, I have long believed both market forces and strategic shifts will mean a return to business as usual by the end of the decade. And, having visited Boeing recently to officially sign our order for 80 737 MAX, I’m even more confident in that prediction.

But how did we get into this situation in the first place?

Ironically, while the aftermath of Covid has seen so-called revenge travel make demand for flights soar, the pandemic also contributed to the aircraft supply crisis.

Both firms’ production constraints stem primarily from pandemic-induced supply chain disruptions, which were only heightened by geopolitical tensions and raw material shortages.

Equally, the pressures of Covid-19 also saw both major OEMs slash their workforces; getting back to pre-pandemic strength will take time though both are in the process of doing so.

It also cannot be ignored that the engine manufacturers have also had their issues, with Pratt & Whitney’s issues slowing the introduction of new Neos into fleets.

Just look at Wizz Air, which expects to have around 40 aircraft grounded on average throughout 2025 due to these engine problems.

That’s not good for any airline’s plans or bottom line. Consider an airline called Airline Covid-19 waiting for 10 jets, each capable of generating ~$1 million in monthly revenue. A six-month delay means $60 million in lost income, plus the added burden of disrupted schedules, reduced capacity, and higher maintenance costs for aging fleets.

Times this simple and reductive example by 10 to make it a five-year delay and the costs are over half a billion for just one fictional carrier.

This constraint on supply means airlines are desperate for jets, especially during the summer season, to meet demand that was meant to be met in part by delivery of the new variants. Equally, those airlines that would have relied on buying or leasing older narrowbodies now face stiffer competition in the market for those aircraft.

Rather than take on longer-term options such as a finance lease, the above creates a perfect opportunity for ACMI providers such as Avia Solutions Group to offer airlines shorter-term solutions for capacity issues.

While the structural issues impacting airline capacity are set to be repeated over the next couple of years at least, we are about to turn the corner.

Firstly, the supply chain will stabilise and become more robust as, for example, sourcing strategies for materials are diversified to mitigate geopolitical risks. By the 2030, these investments will yield tangible improvements in supply chain efficiency and robustness.

There is also the interesting possibility that the duopoly, while not being broken by these issues, may be disrupted. Both Embraer and COMAC could stand to gain market share over the medium to long term from the past few years of disruption.

COMAC is the more likely winner as China will always without a doubt be the major customer of COMAC, but if the world continues down the path of deglobalisation, then it’s likely China’s closest allies will also order from COMAC.

Ultimately, supply chain investments, workforce expansion, and production enhancements will allow Airbus and Boeing to significantly reduce their backlogs by 2030.

But until then, airlines, especially short haul carriers with high seasonal swings in demand, will have to depend on either sourcing older jets in on lease or turn to the wet leasing market to meet demand.