How far into the future do you plan your purchasing? Six months? A year? More? In the airline industry, procurement specialists now must strategize their purchases almost a decade ahead to ensure they have the planes needed to meet consumer demand for air travel.
At the Paris Air Show, Airbus announced that India-based budget carrier IndiGo made a record $55 billion order for 500 Airbus A320s — the largest single airplane purchase agreement in history. This expands the airline’s number of planes on order to 1,330. Though the growing airline won’t see most of them until at least 2030, with the last few planes expected by 2035.
This deal is just the latest in a stream of large orders for airplanes this year. Last month, budget Irish carrier Ryanair ordered about 300 Boeing 737 Max jets. In February, IndiGo competitor Air India ordered 470 planes split between Airbus and Boeing. And two Saudi Arabian airlines ordered 78 Boeing 787 Dreamliners to boost travel to the nation. The total orders in 2023, by both airlines and airplane lessors, equals 1,429 jets. At just halfway through the year, that’s already more than the 2019 total of 1,377.
The demand for planes is largely spurred by the extreme demand for postpandemic travel. In April 2023, total passenger air traffic rose 45.8% compared with a year earlier, and there are no signs of slowing.
It’s understandable that airplane manufacturers are struggling to keep up with such demand, which pushes delivery windows out to the 2030s. An airplane order these days is essentially “a reservation of slots in the backlog, indeed for a resource that is scarce,” Guillaume Faury, Airbus chief executive, tells The Wall Street Journal.
Both Airbus and Boeing have grappled with production challenges in recent years, as well as supply constraints for engines, chips and labor. During the pandemic, Airbus worked closely with its suppliers to keep assembly lines running, knowing demand for planes would ultimately return. Experts believe this paid off for the manufacturer and allowed it to pull ahead of rival Boeing, garnering 62% of the market.
Boeing leaders say they aren’t as concerned with regaining market share as they are with addressing delivery issues, which started back in 2019 with the grounding of the 737 Max and continued with a pause on delivering the jet this year because of production problems. In addition, the company paused deliveries of its 787 Dreamliners in February to address a fuselage component issue. Boeing CEO David Calhoun explains in The Journal that he doesn’t see his company’s supply chain stabilizing until the end of 2024.
ASCM CONNECT 2023 on the horizon
Effective procurement strategy in our ever-evolving market is just one of the essential supply chain topics that will be explored at ASCM CONNECT 2023: North America, September 11-13 in Louisville, Kentucky. The Sourcing and Procurement track will consider ongoing resource constraints, fostering positive relationships while reducing purchasing costs and risks, ethical and sustainable procurement, contract management and negotiation, methods for tracing purchase order flow, strategic sourcing best practices, and more. Today is your last chance to save at least $600 on registration with early-bird pricing, so don’t delay — plan now to join us in Louisville!
