Aerospace Pulse Check Q3/2024

Current sentiment

The rate adjustment announced by Airbus following the ILA in Berlin has had a significant impact on sentiment in the industry. While the highest value since the outbreak of the Ukraine war (with 76% positive or very positive sentiment and only 4% negative sentiment) was reached in the run-up to the ILA, this value has now fallen to 62%, combined with a fivefold increase in the negative/very negative sentiment to 21%.

The positive mood in the industry, caused by the dominance of Airbus in the commercial aircraft sector, the good capacity utilisation in the supplier companies, investment programs and the associated increase in personnel, has turned negative due to the announced significant slowdown in the ramp-up. The signs were clearly pointing to growth – this is no longer the case.

The current rates of missing parts were already present and addressed in the QII/2024 sentiment barometer, as could be seen from a large number of ad hoc inquiries and orders at Tier 2 and Tier 3 suppliers.

Airbus rate adjustments and their effects

The adjustment of production and delivery rates did not come as a surprise to those in the industry.

Despite the predictability of the decision, the communicated adjustment also has a significant impact on the companies. This is also true in view of the fact that small and medium-sized suppliers in particular were regularly made aware of their weak points in the context of ‘rate readiness’ investigations and have initiated measures with regard to investments, financing and resource development. There is also great resentment among those who have fully committed to the Airbus plan and are already mapping out future rate readiness. It is questionable whether these companies will make such advance investments again in the event of a ramp-up that is only delayed, as we all hope it will be.

Quote: ‘You actually end up the loser if you rely on Airbus plans. It won't happen to me again.’

But what exactly are the effects of the rate adjustments?

After the discussions and the considerable efforts to get the relevant specialists in a tight market, more than a quarter of the companies surveyed are now planning to reduce their workforce. The impact on inventories is particularly significant for manufacturing companies: 30% expect inventories to increase or increase sharply.

To cover the costs of these expenses, 27% plan to raise prices for their customers. Investments, on the other hand, will be reduced or sharply reduced by 27%. An additional challenge for companies is the increasing need for financing in an already tight financing environment.