Suppliers to the aerospace industry are being told to cut their prices or lose business as big manufacturers seek savings to help push their new aircraft programmes into profit.
Boeing is demanding “significant” savings from 2017, according to one company, after negotiating a 15 per cent reduction over five years from 2012. This was likely to be a process of continuing efficiency rather than a one-off target, another said at the Le Bourget air show in Paris, which starts on Monday. Airbus recently called on GKN, one its main suppliers, for a 10 per cent cut in prices.
Prime suppliers are pushing that pressure down the supply chain, with their own demands for new investment and cost reductions to meet the accelerating pace of aircraft production being demanded by Boeing and Airbus.
The two companies are set to produce some 1,400 aircraft this year, accelerating to 1,800 by 2018, to meet rapidly increasing air travel. By 2035 it is estimated that the number of people flying will more than double from roughly 3bn to 7bn.
David Gitlin, president of aerospace systems at UTC, one of the leading suppliers to aircraft manufacturers with annual sales of $14bn, said he was seeking to cut the number of his own suppliers by a quarter to less than 3,000.
“The demands are very significant,” he said. “Having an effective supply chain is among our most important priorities. Our job is to make sure that we. consolidate that sub-tier into a few suppliers who can support that ramp up.”
The heat is being turned up at Le Bourget on the outskirts of Paris, host to the world’s largest air show, which kicks off on Monday. Held every two years, Paris alternates with Farnborough air show in the UK as a venue for the industry to showcase its newest products. Some 2,200 exhibitors are expected to set out their stalls, and more than 139,000 trade visitors will attend.
Bombardier, the Canadian group, unveiled its long-awaited CSeries jet at a pre-show event on Sunday. The aircraft is pitched at a gap in the market between smaller regional jets and the popular single aisles made by Boeing and Airbus. However it is running several years late and over budget, resulting in a profit warning and management reshuffle earlier this year.
While the group said on Sunday that the aircraft was exceeding expectations, it is struggling to find new customers and this week’s display is aimed at drumming up interest. Meanwhile Pratt & Whitney, the US engine maker that is supplying its new generation geared turbofan engine to the CSeries, said it was confident of reaching 7,000 orders by the end of the air show, up from 6,450.
Airbus has said it will announce “hundreds of new orders” but it will also use the show to try to restore the reputation of its beleaguered A400M military transport carrier. One crashed several weeks ago in a field outside Seville, leaving four crew members dead. The Atlas cargo and troop carrier will take part in the flying display that crowns the air show, performing the same routine that it has been demonstrating at air shows since 2010, Airbus has said. It will be flown by two test pilots, Nacho Lombo and Tony Flynn, every day from Monday to Friday.
Though the show is mainly a civil event, the prospect of a revival in military spending after years of squeezed budgets around the world has turned the spotlight on defence companies. The US industry is expected to turn out in force, having eschewed the event in 2013 when automatic cuts to the defence budget curtailed corporate ambitions. The US presence will be second only to the French with more than 300 trade exhibitors.