Some aerospace suppliers have in recent days said the grounding of the Boeing 737 Max has not significantly impacted their financial results – at least not yet.
Notable exception exist, but several suppliers say the diversity of their businesses and Boeing’s decision to maintain 737 production during the grounding has largely insulated them from the 737 Max’s fallout.
Also, the grounding has brought needed slack to an already stretched supply chain, allowing suppliers to prepare for what they see as an inevitable return to higher production rates, some say.
“We do not anticipate a significant impact related to the grounding, but we will continue to monitor the situation closely,” Thomas Gendron, chief executive of Colorado-based Woodward, told investors on 5 August.
Woodward, which also makes non-aviation products, developed the fuel system and air management system for the 737 Max’s CFM International Leap-1B turbofan, and supplies the engine’s thrust reverser actuation system.
“Max issues should not have a material impact on our financials this fiscal year,” TransDigm CEO Kevin Stein said on 6 August. TransDigm makes a variety of aircraft products, including 737 Max latches, audio control panels and fuel line connectors, a company presentation shows.
Boeing has stockpiled 737 Max as its production continues amid the grounding
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Likewise, in July the heads of Honeywell and aerospace structures provider Triumph Group, both 737 Max suppliers, predicted the grounding would minimally impact their company’s full-year results.
The grounding’s impact has been “relatively negligible” for Triumph largely because several – though not all – its facilities have continued to produce 737 components at a rate of 52-aircraft monthly, Triumph CEO Daniel Crowley said.
Boeing reduced its 737 output from 52- to 42-aircraft monthly following the March grounding, though some suppliers have maintained the 52-monthly rate.
Not all companies have been spared.
The grounding lobbed $300 million off General Electric’s second quarter financial results, and executives warned the impact could balloon to $800 million in the second half of the year. GE Aviation owns half of engine maker CFM International.
Spirit AeroSystems, which makes 737 fuselages, reported an 11% year-on-year spike in second quarter costs due partly to the expensive, disruptive process of cancelling a planned production rate increase, Spirit reported in late July.
The grounding has also affected companies working in the aircraft aftermarket segment, such as connectivity equipment provider Astronics.
On 5 August, Astronics CEO Peter Gundermann said the grounding has exacerbated an already tight supply of aircraft, leading some airlines to delay pulling aircraft from service for work such as in-flight entertainment (IFE) installations.
“IFE is generally an aftermarket-type of installation. Its usually a fleet-wide installation,” he told investors. “And when [airlines] don’t have the airplanes they thought they would have… the last [thing] they want to do is take airplanes out of service.”
But several suppliers see a silver lining.
Boeing’s production slowdown, they say, has lifted some stress from an incredibly tight supply chain – one that struggled in recent years to meet Boeing’s and Airbus’s increasingly higher narrowbody production rates.
“We are using the temporary rate reduction to de-risk our supply chain and prepare for higher production rates,” says Triumph’s Crowley.
“There’s no doubt in my mind the supply chain has had the opportunity to catch up,” Nick Stanage, chief executive of aerospace composite company and 737 supplier Hexcel said in July. “I think we certainly are in a very good position to support… ramping back up for Boeing, as well as staying aligned with Airbus.”
Source: Cirium Dashboard
