Airlines face $11 billion supply chain hit in 2025, IATA says
The global aerospace industry is facing a significant challenge this year, with airlines expected to incur over $11 billion in additional costs due to supply chain disruptions. This revelation comes from a recent report by the International Air Transport Association (IATA) in collaboration with consultants Oliver Wyman.
The study highlights the impact of a five-year supply chain crisis that has led to increased fares, flight cancellations, and overall operational challenges for airlines worldwide. One of the key findings of the report is the $4.2 billion in extra fuel costs incurred by airlines as they are forced to keep older planes in service due to delays in maintenance.
In addition to fuel costs, airlines are also expected to spend $3.1 billion on additional maintenance, $2.6 billion on leasing engines to replace those stuck in maintenance queues, and $1.4 billion on holding more spare parts to mitigate delays. These costs are putting a significant strain on the industry and hindering its recovery from the impacts of the COVID-19 pandemic.
The supply chain crisis has been exacerbated by shortages of labor, materials, and parts, as well as mounting delays at repair shops, particularly for engines. There is also increasing competition for capacity with the defense industry as governments ramp up military spending.
IATA Director General Willie Walsh expressed surprise at the extent of the findings and raised concerns about potential anti-competitive practices by suppliers. He emphasized the need for additional competition in the aftermarket to address the consolidation that has taken place in the industry.
While IATA has previously filed complaints against engine makers like CFM International and Rolls-Royce, agreements have been reached to maintain open and competitive markets. However, Walsh did not rule out the possibility of launching new challenges in the future, noting the disparity between airline operating margins and those of engine makers and suppliers.
Overall, the aerospace industry is facing a challenging road ahead as it navigates the complexities of the supply chain crisis. With airlines expected to spend $120 billion on repair and maintenance this year, rising to $150 billion by 2030, it is clear that collaborative efforts and innovative solutions will be needed to overcome these challenges and ensure the industry’s long-term sustainability.
