Airlines evaluate legal options over delayed jet deliveries as travel demand soars

Backlog of 17,000 aircraft implies a 14-year wait between ordering and handover, Iata chief says

Supply chain bottlenecks have limited airlines' growth. Getty Images

The global airline industry is evaluating legal options over delayed aircraft deliveries that have constrained capacity and hampered growth plans, the head of the International Air Transport Association said.

However, the industry prefers to work collaboratively with manufacturers to address supply chain problems, Willie Walsh, director general of Iata, said at a media briefing in New Delhi on Monday.

“We continue to evaluate whether there is any reason for us to look at potential legal opportunities, so we haven't done anything, but we continue to evaluate that as a potential option,” he said. “Our preference is to work collaboratively with OEMs and all of the suppliers to try and bring greater clarity to the problem and work together to solve [it].”

The manufacturing sector is “failing badly” as a delivery backlog of 17,000 jets implies a 14-year wait between ordering and handover, Mr Walsh said.

This hits airlines' revenue because some travel demand goes unmet and aircraft scarcity pushes up maintenance and leasing costs.

“It's just not acceptable that manufacturers estimate that it could take to the end of this decade to to sort this mess out,” he said at an opening speech of Iata's 81st annual meeting on Monday.

“Real solutions must come from manufacturers … the solution cannot come fast enough.”

Iata represents 350 airlines comprising more than 80 per cent of global air traffic.

Supply chain bottlenecks have limited airlines' growth, driving up plane leasing costs, increasing the average fleet age to 15 years (from 13 in 2015), cutting the fleet replacement rate to half the six per cent of 2020 and reducing the efficiency of fleet use.

Willie Walsh, director general of the International Air Transport Association, speaks during a media conference in New Delhi. EPA

There are 1,692 aircraft expected to be delivered in 2025, and while this is the highest level since 2018, it is almost 26 per cent lower than estimates from a year ago.

“Further downward revisions are likely, given that supply chain issues are expected to persist in 2025 and possibly to the end of the decade,” Iata said in its annual report on Monday.

Engine problems and a shortage of spare parts worsen the situation and have caused record-high groundings of certain aircraft types. The number of aircraft younger than 10 years in storage is currently more than 1,100, constituting 3.8 per cent of the total fleet, Mr Walsh said.

Tim Clark, president of Emirates, said that the pandemic is no longer a viable excuse for supply chain problems.

“Covid was five years ago … you can only beat that drum for so long,” he said at a media briefing on Sunday.

“I'm pretty tired of the hearing the same hand-wringing that goes on: 'We're really sorry, you know it's the supply chain.' You are the supply chain, so what are you doing about it?”

Airlines' increasing frustrations with jet delays come as the total number of travellers is forecast to reach a record high 4.99 billion in 2025, a 4 per cent annual rise, according to Iata.

“The rate of growth in the industry has slowed down as a result of the supply chain issues,” Mr Walsh said at the media briefing.

Pieter Elbers, chief executive of Indigo, said that the limited number of suppliers means that whenever there is a “choking” in the system, it affects all airlines to varying degrees.

“We're pretty much three years post-Covid and there's no end of sight yet,” he said. “It's a missed opportunity in terms of addressing the market demand and especially some of the high-growth markets.”

US tariffs and aircraft costs

Airlines will also resist any efforts by manufacturers to pass on US tariffs as higher prices for aircraft, Mr Walsh said.

“Our desired position would be that aerospace, aircraft and aircraft engines be excluded from tariff regimes and that we return to the 1979 agreement where they are exempt,” he said.

“It is a global supply chain, it's functioning very well. Starting to unpick that by applying tariffs is going to be very complex.”

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Mr Walsh said there is no evidence yet of increases in aircraft prices due to tariffs but a number of key suppliers have indicated that this is something they are looking at.

“Obviously any development to increase the price of aircraft is going to be very much an unwelcome development by airlines and will be resisted by airlines,” Mr Walsh said.

“We will have to understand the justification behind any increase. We don't want to see any of the manufacturers using tariffs as an excuse or an opportunity to increase their prices to the industry.”

Iata's chief economist Marie Owens Thomsen said the US tariffs measure will be a “net negative economic policy” that will hurt the global trading system because supply chains are so interdependent.

A single aircraft has more than 800 different suppliers from all over the world. “If you start putting tariffs on this, the whole system breaks apart,” she said.

“These are like global arteries … if we have a problem with our arteries, we all understand intuitively that this will affect all of our organs and our overall performance. And it's the same when you mess with these supply chains and the global trading system.”