Five considerations for the aerospace industry

The restrictions in place to curb the spread of COVID-19 have had an unprecedented impact on the commercial aviation industry. Many airlines are operating at 20% of normal capacity through April, with over half of the combined, global fleet grounded.

 By Andy Alexander and Martijn Karrenbeld

Aerospace manufacturers face challenges maintaining normal operations and providing safe conditions for employees, while implementing the necessary controls to stem the spread of the virus. This has led to a suspension of activity at some companies and significantly reduced capacities at others.

Looking beyond the immediate crisis, we expect that, ultimately, demand for air travel will return, though it will likely be 2023 before it rebounds to pre-COVID-19 levels. Given the uncertainties around international travel restrictions, the initial signs of the recovery will be seen in regional and domestic business travel needs. This will drive a change in the numbers and types of aircraft needed. This will influence the mix of new aircraft orders, and, proportionally, there will likely be a higher demand for single aisle aircraft, which offer airlines the flexibility to operate multiple routes efficiently.

With diminished demand for new aircraft, manufacturers will need to bridge the gap by operating with production volumes reduced by 30 to 40 percent. Government bailout or stimulus funding may be necessary to maintain resources and capability at the OEM level and throughout the supply chain. In parallel, we expect to see companies seek opportunities to diversify their products and services to increase exposure to defense markets and support other less-impacted programs. For example, some surplus engineering and production capacity may be repurposed and absorbed by more stable defense programs, maintaining vital skills and the flexibility and capacity to respond to increased market demand in the long-term.

So, here are five things savvy aerospace companies should consider now, as they make plans to recover from the COVID-19 crisis:

Conduct a thorough supply chain analysis: 
Manufacturers should re-evaluate the products and services that are insourced versus those that are procured with an eye to minimize exposure while maximizing supply chain resilience. This may lead to strategic decisions to divest some production activities into the supply chain, while others may be deemed more critical and bought in-house.

Evaluate and redefine assets:
After an extended period of increasing production rates, investment in facilities and infrastructure has not kept pace, resulting in portfolios with a high proportion of ageing assets. The ability to restart safely, efficiently, and flexibly will be critical to the success of any recovery. Manufacturers should re-evaluate capital portfolios, using facility and asset condition assessments to develop nimble capital plans that support multiple scenarios. This will show which assets are a drag on operational performance.

Invest in digital toolsets
Identify and develop enterprise initiatives to effectively capture and share critical data, which will drive efficiency and informed decision-making, while enhancing resilience across business operations.

Redefine processes
Use this time to engage with employees and tap into their knowledge and expertise. This can be a tremendous catalyst for change, helping to redefine business processes and spur on improvement projects that promote efficiencies and point the way to low-hanging fruit: simple and inexpensive changes the business can make that can benefit company performance.

Design with flexibility
In contrast to long production cycles and record commercial aviation backlogs, the ability to flexibly react to changing circumstances is a critical component of future, industry resilience. For example, pivoting to maximize the volume of work supporting the defense market will help absorb some of the immediate reduction in the commercial market. Business processes, supply chain strategies, continuity planning, EHS compliance or production operations must all begin with a mindset of flexibility.

Andy Alexander
Martijn Karrenbeld

Andy Alexander

Sector Leader Aerospace +206 726 4724 Ask me a question
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