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Chain reaction: The story behind the helicopter industry’s supply chain squeeze

By Oliver Johnson

Published on: June 12, 2023
Estimated reading time 21 minutes, 55 seconds.

As the industry faces renewed demand for service, it must do so despite lingering supply chain challenges that could get worse before they get better.

As the industry gathered in Atlanta, Georgia, for HAI Heli-Expo earlier this year, the main theme was positivity. The industry was rebounding in every sector; demand, bookings and flight hours were up; and we were all set to finally wave goodbye to the Covid-induced dark days. But there was also an undercurrent to pretty much every briefing given by the OEMs: “our ramp up will be impacted by ongoing supply chain issues.”

As those working in the Northern Hemisphere prepare for (what is for most) their busy season, the issue of keeping the active fleet flying — let alone bringing new aircraft on board to meet market demand — remains top of the agenda.

Miguel Carrasco, SVP technical services at offshore operator CHC & president of MRO giant Heli-One, told Vertical that both companies are being impacted by supply chain disruptions across its product lines.

While there are undoubtedly some short-term factors causing the problems, there are also structural issues at play — including a shortage of skilled labor. Heath Moffatt Photo

During the pandemic, most of the supply chain took a very aggressive stance toward costs, reducing capacity, people, and inventory. As demand returned with operations beginning to move toward pre-pandemic activity — and a supercharged oil-and-gas demand resulting from the economic sanctions caused by the war in Ukraine — the supply chain has struggled to catch up.

Carrasco noted that the war has also had a secondary impact on the market through an increased demand for supplies for military use, as countries around the world seek to enhance their defense capabilities.

“The military has consumed an enormous amount of available capacity in the industry, and that has caused several bottlenecks,” he said. “We’re seeing it with castings, we’re seeing it across multiple product lines, and the best way to see that is with the lead times.”

The shortage of parts appears to be impacting all aircraft and engine OEMs, said LCI’s Nigel Leishman. PAG Photo

Carrasco said parts that would typically have a lead time of between three to six months are now at six to 12 months, and critical parts, particularly related to castings, are now at 12 to 18 months.

And for new aircraft, an order that would have had a 12-month lead time is now likely to take 18 months to be delivered.

Kevin Michaels, managing director of aerospace consultancy firm AeroDynamic Consultancy, said the wider aviation industry has been impacted by structural issues caused by pressure from fixed-wing OEMs on tier three and four suppliers over the last decade. Many of those suppliers are now in a weak financial shape — short of working capital and people — and are late delivering parts.

“It’s almost like the more OEMs want to ramp up production rates, the more pressure it puts on this weak part of the supply chain,” said Michaels. “And it only takes one supplier to hold up delivery of that helicopter.”

He said European governments are typically being very proactive in intervening to help alleviate the issues, restructuring some of the weak suppliers.

The difficulty in securing some OEM parts is leading to an increased interest in PMA parts, said industry analyst Kevin Michaels. Lloyd Horgan Photo

For example, in 2020, the French government, along with Airbus, Safran, Thales and Dassault, established the Ace Aero Partenaires investment fund to support the French Aerospace industry. Since then, it has helped complete dozens of mergers and acquisitions.

“In the U.S., governments aren’t particularly involved, but there’s a lot of quiet restructuring going on beneath the surface,” said Michaels. “You haven’t had a lot of public announcements of big companies failing, but a lot of these companies are £10-, £20-, £30-million companies that you never hear about, but if you talk to the supply chain people at the OEMs or tier one [suppliers] they definitely know about them.”

The short-term outlook isn’t promising, he added, with it likely to be “several years” to work through the current supply chain problems. He said working capital and labor are typically the root cause of delays in mechanical items.

According to Heli-One’s Miguel Carrasco, lead times for most parts are double — and for some critical parts, triple — what they would typically be. Ray Smith Photography Photo

“Labor is affecting every part of the supply chain, even at the raw material mills, where the capacity output expected from them is lower than it was before Covid — but yet they’re not delivering,” said Michaels. “Well, why? It’s not the physical capacity — it’s the people. . . . You can’t get enough skilled people back and so they’re having to recruit new people into the industry and train them up.”

He said the engine supply chain is seeing the most acute problems, with the availability of castings and forgings a particular concern. The former are used to make turbine blades and major components in engines, while the latter make the shafts and components in the transmission. The result is much longer engine overhaul times.

Operators are increasing inventory stocks as much as they can in response, said Michaels, with some turning to PMA (parts manufacturer approval) parts for the first time.

“There’s a lot more interest in PMA than there was before, because customers/operators want supply chain resilience,” he said. “They’re looking at more options.”

A perfect storm

Aviation and helicopter leasing company LCI is also noticing the impact of the supply chain issues. Lead times for new orders are going up, engine overhauls are taking longer, while a shortage of parts is often causing delays in allowing aircraft to transition between contracts.

Castings and forgings appear to have been particularly impacted by supply chain pressures. Heath Moffatt Photo

“We’ve got 50 customers operating our fleet all around the world,” said Nigel Leishman, LCI’s executive vice president and global head of marketing. “All of them, to some degree, are experiencing this [supply chain problem], and it is having a direct impact on their operations.”

He said the pandemic had interrupted demand, with many contracts for offshore work and even air medical tenders postponed. Since then, demand has skyrocketed — while supply chains and logistics are continuing to cause disruption and limiting availability.

“It’s not an insignificant problem,” Leishman told Vertical. “And, despite what we’re hearing from quite a few of the OEMs, who are saying that this is something to be resolved probably in the next six months or so, I’m not sure if that’s the case. It’s certainly not what we’re hearing from our customers.”

The most direct impact for LCI is when aircraft are transitioning between contracts, he said. Lessees who are trying to return a helicopter are facing problems with getting the parts needed to complete the checks for redelivery, potentially delaying the aircraft’s arrival with the next operator.

One of the impacts of the shortage of parts is an increased call for parting out work, with some of the legacy fleet cannibalized to feed material back into the system. Mike Reyno Photo

Leishman said the shortage of parts seems to be affecting all aircraft and engine OEMs, and that they would struggle to meet the market demand for the next 12 to 24 months.

“To some extent, it’s also outside of their control,” he said. “I think everything has come together like a perfect storm, to be honest.”

The situation is placing an increased emphasis on longer term forecasting, he added.

“It’s something that we’ve spoken to all the OEMs about — making sure that they’re purchasing spares sufficient enough to be able to cover all these helicopters, when, for example, they’re all coming up to four-year or eight-year checks.”

We could also see a shift in the market as a result, Leishman added, with the lack of aircraft availability providing further incentive for operators to shift away from heavy aircraft towards super mediums.

“I think many operators and many end users are beginning to think, ‘Well, what’s the longer-term option here, if there’s not going to be more [Sikorsky] S-92s coming into the market?’ he said. “And perhaps, if they’re starting to question whether the long-term support of that type will be there, then certainly more and more of them are thinking about some of the super medium types, and we’re certainly seeing that from some of the discussions that we’re having.”

Finding solutions

Joe Hawke, president and CEO of MRO specialist Uniflight Global, said he is seeing “significant demand” for parting out work, which he believes is directly correlated to the industry’s supply chain issues. The types have included the Leonardo AW109, AW119, AW139, and Airbus EC135.

“It wouldn’t surprise me if other types come into the mix,” he said, adding that the problems aren’t just limited to engine and airframe OEMs.

“Even on the completion and customizing side, where we’re going to non-aircraft OEMs — meaning the OEM of the air conditioning and heating system, or whatever it might be — they seem to be equally caught flat footed and they commit to dates, and then they fail to deliver,” said Hawke. “Then that obviously affects delivery schedules.”

An increased use of digital tools and artificial intelligence will allow companies to better predict future requirements for their aircraft, said Heli-One. Cyril Abad Photo

He said he believes the OEMs seem to have moved to a “just in time” inventory approach in recent years, with more of a focus on demand planning for new builds.

“I think that the aftermarket spares support demand planning is just much less precise,” he said. “Because of that lack of precision or ability to forecast with any real confidence, you end up in situations where you’re trying to get the OEM to pull something that they’ve allocated for new build. . . . Sometimes they’re willing to accommodate it. Sometimes they’re not.”

Carrasco said Heli-One and CHC are taking several measures in response to the current situation. Firstly, they have worked closely with the OEMS to gain additional repair capabilities to keep components serviceable and aircraft flying. They have increased planning horizons and forecasting from six to 12 months, to 12 to 18 months, and are placing orders “more aggressively” to help OEMs and their supply chains plan.

They’re also parting out aircraft to feed serviceable parts into the system, while recovering materials from unserviceable parts. Heli-One recently completed the part out of its sixth helicopter. These have included a Sikorsky S-92 and S-76, Airbus AS332, and a Leonardo AW139. “Anything that has been flying in the market for more than 15 years, we have found opportunities to part out and use serviceable use material,” said Carrasco.

Finally, an increased use of digital tools and artificial intelligence are allowing the companies to better predict what is going to fail on an aircraft.

“We have engine health monitoring tools that are helping us keep engines on wing longer, by doing more what I would call predictive maintenance and performance control,” said Carrasco. “That’s proven to be a pretty powerful tool.”

In terms of Heli-One’s message to customers, it’s to plan ahead as much as possible.

“if you pitch up at the last minute, there’s probably going to be no space for you and it’s going to be a long battle to get parts,” said Carolyn Forsyth, general manager of sales, commercial and customer support at Heli-One. “You have to be thinking along a longer planning horizon, and you need to be developing strategic relationships.”

Structural issues at play

Some aerospace industry suppliers are choosing to focus on more lucrative industries, such as automotive or space. Mike Reyno Photo

While the supply chain disruption is industry-wide, a company like Precision Aviation Group (PAG) — a leading provider of MRO services and supply chain logistics to the aerospace and defense industries around the world — is working at the coalface.

In addition to the supply chain being impacted by the wider stresses and strains — such as Covid and the war in Ukraine — there are structural issues at play, said Ketan Desai, chief sales and marketing officer at Precision Aviation Group.

Better and more advanced forecasting is required to ensure parts availability going forward, said Nigel Leishman, LCI’s executive vice president and global head of marketing. Dan Megna Photo

“The supply chain is long and the resources serve multiple industries,” Desai told Vertical. “You’ve got a supplier that manufactures chips [for example], and they’ve shifted their model. Instead of just supporting the aerospace business, now they’re supporting the automotive or space industry because it’s more lucrative.”

Some of these are sources that PAG has been working with for decades, he added.

“Then you’ve got raw metal machining issues, where you’re trying to obtain these metals and all of a sudden, once again, suppliers are not supporting the industry,” said Desai. “We’ve also run into [issues with] specialty metal infusion processes, where one of the only three people in the world that can do this has decided to shut their doors.”

As well as financial pressures, labor issues often lie behind these decisions, he said — with the highly experienced workforce that create some of these highly specialized parts retiring and not being replaced.

Finding new suppliers capable of producing at the level of quality required for aerospace is not an easy task.

“Trying to get a new supplier [AS9100-, ISO 9001- or FAA/EASA-] approved in a short timeframe, that can actually do the work for you, that’s another challenge in itself,” said Desai.

PAG typically carries between 18 to 24 months’ supply of piece parts to support its MRO operations, in addition to $150 million of inventory. This has allowed it to largely insulate its customers from the issues it is facing.

“We’ve had challenges with bearings, particularly for fuel controls,” said Desai. “There’s been a massive supply chain issue on that, and it grounded a number of our customers.”

The company has moved to place orders two to three years in advance to ensure supply, “which is unheard of” said Desai.

And the situation doesn’t appear set for a quick fix. In a call with media ahead of the Paris Air Show, Safran Helicopter Engines’ new CEO, Cedric Goubet, said the industry consensus seems to be for at least another 18 months of supply chain challenges. Planning, patience, and out-of-the box thinking appear to be the keys to help the industry endure this difficult period.

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