Planning for Uncertainty in Commercial Aerospace

Aerospace and Uncertainty

Planning for uncertainty in commercial aerospace     in McKinsey

February 15, 2023   Article

By  Frank Coleman, Chris Daehnick, Morgan Holecek, Vik Krishnan

Commercial aviation faces its most uncertain future in decades. COVID-depressed demand is now resurging, but there are many uncertainties and challenges for operators and manufacturers to manage.

The commercial aviation industry is facing a tidal wave of demand—passenger air travel has largely rebounded from COVID-19 lows, aircraft orders are being placed at an aggressive rate, and suppliers, operators, and OEMs are feeling pressure to deliver at a level that is straining production capacity and workforces.1

We hear a similar story from OEMs and operators. Major manufacturers have plans to ramp up production and are facing challenges in scaling capacity and supply chains. Operators want to capture surging demand but face shortfalls in pilots and ground personnel and are eager for new-generation, more fuel-efficient aircraft.

However, there are reasons to question the duration and magnitude of this increased demand. Inflation is at a level not seen in developed economies in decades, different economies are on divergent trajectories, and experts disagree on the effect of central bank measures to control inflation and their potential to overcorrect and cause a recession. Consumer confidence is taking a hit as economic pressures increase. Adding to the burden, high fuel and oil prices have increased costs for airline operators, which translates to higher ticket prices.

Beyond economic concerns, operators and manufacturers are grappling with other major disruptions: the effects of travel restrictions and the sudden reopening of borders in China, the war in Ukraine, and the resulting restricted airspace, labor shortages, and supply chain complications. Sustainability issues, for many years a secondary concern, are becoming more urgent, prompting and perhaps forcing operators and manufacturers to revise long-established practices.

The commercial aviation industry is facing an uncertain future with arguably more unknowns ahead than at any point in its history. In this environment, airline operators may find it more difficult than ever to forecast the demand for air travel. That, in turn, makes it challenging for manufacturers to confidently predict the long-term market for new aircraft and fleet upgrades and to ensure they will have the capacity, material, and labor to meet it.  ... '