Geopolitics is at the heart of the issues surrounding the shortage of engines and spare parts for aircraft around the world. Sanctions, war, terrorism, and global warming across the world have all contributed to:
- Shortages in raw materials.
- Logistics challenges.
- Delays in global delivery.
Sanctions, war, and terrorism directly affect flight paths, as aircraft are diverted away from hot spots. This involves longer flight paths or forces an aircraft onto a more congested or complex route with more stops. That produces more wear and tear on the engine and parts. More wear and tear require more maintenance, which then causes additional pressure on the purchase of raw materials and machine components. Delays in delivery of raw materials and spare parts, then slow down the speed of renewal. It is a vicious cycle.
Linda Jacques, Partner at UK law firm Lester Aldridge and expert in representing logistics clients, explained some of the reasons for the global shortage of spares.
Airport Capacity
It is difficult to get an accurate picture of the impact of the shortages. Flight cancellations are often the direct and immediate impact, but obtaining data on the bigger picture is more difficult. The IBA 2024 forecast concluded that average air cargo yields would fall by about 18%, but they also concluded there was plenty of air cargo capacity in the market.
Other commentators point to a steady increase in air cargo demand over the last few years but highlight that freighter aircraft may not have benefitted overall because of the increase in passenger aircraft demand. That increase in passenger demand has led to more freighters being parked or stored.
In addition, narrowbody aircraft are now at the forefront of the cargo market and there has been a marked increase in the number of conversions taking place, which increases capacity and supply.
If the IBA forecast is accurate, there may be enough airfreight capacity in the market in the short term to deal with the situation. That is exemplified by the fact that both Nippon Air and Amazon Freight have announced new freight routes in the last few months.
Going forward though, pressure on the supply of raw materials, spares and new engines is likely to result in an increased number of planes being stored or parked waiting for maintenance. As the world attempts to grapple with climate change, the race for reliable access to raw materials for electronic components is likely to intensify. At some stage in 2025, new startups might well experience similar issues to the airlines involved in the current spares dispute.
These issues are not germane to the European and US markets. Rumours abound that the Russian civil aviation sector is about to ground half of its fleet of Airbus A320/321's due to a lack of spare parts. Russia was a major supplier of titanium, which is used to build engines, before the imposition of sanctions (following Putin's illegal invasion of Ukraine), but without spare parts, a fleet can be brought to a standstill.
If shortages continue, storage and places to lay up aircraft waiting for maintenance will need to be planned. Airports may find aviation operators make greater demands in 2025 for hangars and layup positions.
Contractual Issues
A review of the contractual terms apportioning risk for the lack of materials or certain components or difficulties in the supply chain should be undertaken
Air operators directly affected by the shortage of spare parts will be reviewing their maintenance leases and agreements in earnest. British Airways and Virgin have already made it known to the market that they blame their Trent 100 engine maker - Rolls Royce, for having to ground hundreds of plane flights.
Rolls Royce will no doubt take the position that the aircraft has been used in a manner not envisaged in the original maintenance contract because of extra flying hours or that a contract term exempts them from liability. Whether the carriers’ allegations will result in legal claims may turn on the foresight and allocation of risk determined at the time the maintenance contracts were drafted.
The maintenance of aircraft is often outsourced to third parties. A carrier is then dependent on that third party to ensure it keeps to its end of the bargain.
One way of minimising the exposure caused by a lack of spares or engines is for an operator to take back aircraft maintenance and the replacement of engines in-house. Whether there is the manpower and expertise to assume those responsibilities is another issue.
The aviation manufacturing and maintenance market is dominated by a few large players, and trying to rebuild maintenance expertise in-house may be impractical.
As far as existing contracts are concerned – a review of the contractual terms apportioning risk for the lack of materials or certain components or difficulties in the supply chain should be undertaken. If an existing contract does not cover the situation, then both the aircraft operator and the maintenance provider of parts and engines should engage in a direct and open discussion on the issue. Being proactive rather than reactive means that some degree of control over the situation can be maintained when things start to unravel.
Insurances should also be checked thoroughly to ensure they react to geopolitical changes (foreseen or unforeseen) in the supply chain.
Identifying and monitoring the performance of maintenance operators should also be pushed to the top of the agenda.
At the height of the Covid-19 pandemic, 20,000 aircraft were parked and stored at airports and open spaces on gravel, sand and hardcore. It is unlikely that the current spares shortage would result in similar scenes, but maintenance issues may result in an increase in the number of planes being temporarily laid up in the next few years.
Linda Jacques is Partner in the Marine, Shipping and Logistics team at Lester Aldridge.
