Airlines Need To Be Properly Rewarded, Says IATA Chief Amid Supply Chain Woes

IATA Director General Willie Walsh has expressed strong concerns regarding ongoing supply chain issues impacting aircraft deliveries and the potential for original equipment manufacturers (OEMs) to increase prices. Speaking at the Association of Asia Pacific Airlines (AAPA) assembly in Bangkok, Walsh highlighted the frustration within the airline industry over the slow pace of supply chain improvements, particularly as airlines grapple with rising passenger demand and fleet expansion plans. He emphasized that while airlines operate on thin margins, OEMs maintain high profitability, even amidst industry-wide disruptions. Walsh called for a correction to this imbalance, advocating for airlines to be fairly rewarded and for critical suppliers to enhance their service to the industry.

Walsh specifically addressed the issue of suppliers considering price hikes due to tariffs and other supply chain challenges. He argued that such actions would further burden airlines already struggling with increased costs. AAPA Director General Subhas Menon echoed these concerns, noting that tariffs undermine the nascent recovery of the supply chain and contribute to non-fuel cost increases for airlines. Menon also pointed out the detrimental impact of tariffs on demand through inflation, creating a double whammy effect on both the supply and demand sides of the market.

The aviation industry has been grappling with significant supply chain disruptions since the pandemic, leading to delayed aircraft deliveries and increased operational costs. A study by IATA and Oliver Wyman estimates that these challenges could cost the global airline industry over $11 billion in 2025. The global commercial aircraft backlog remains high, exceeding 17,000 aircraft, and the slow pace of production is projected to cost airlines billions this year due to excess fuel consumption, additional maintenance, increased engine leasing, and surplus inventory holding costs.

Furthermore, the discussion touched upon the crucial topic of sustainability, with Menon emphasizing that taxing airlines directly or indirectly has proven ineffective. He stressed the need for increased Sustainable Aviation Fuel (SAF) production. The industry faces the dual challenge of managing supply chain constraints and rising costs while simultaneously pursuing ambitious sustainability goals. IATA and AAPA are advocating for a more balanced and collaborative approach to address these challenges, ensuring the long-term viability and sustainability of the aviation sector.