As Commercial Aerospace Loses Altitude, Titanium Industry Faces Difficult Questions in the Days of Covid-19 Pandemic

By John Byrne

Several years ago during an address to the International Titanium Association (ITA) conference I said I wanted to write a book about my experiences in the titanium industry. It would be titled “Fear and Loathing on the Titanium Trail.” Capturing the complexities and characters in the titanium industry proved to be beyond my writing skills. And little did I know the craziest chapter was yet to play out… Covid-19.

The emergence of Covid-19 has upended the global aerospace industry and, in turn, the titanium industry—a key part of the aerospace supply chain. Many questions exist: Where and when is the bottom? What does the recovery look like? What are the long-term impacts? What should be done moving forward?

The answers, like any titanium forecast in aerospace, will be elusive and often wrong.

The impact of Covid-19 on commercial airplanes production rate is far from stabilized. The original equipment manufacturers (OEM’s) have announced new production rates that are 40-percent percent lower compared with fourth quarter, 2019, production rates. The natural cycle of increasing passenger traffic, increasing utilization and profitability at the airlines, resulting in increased demand for new airplanes has been significantly disrupted.

The International Air Transport Association (IATA) now indicates it will be 2024 until air traffic recovers, meaning a 2025 recovery

As it confronts the fallout from the global pandemic, the titanium industry must focus on two basic questions. First: Where and how can it use its influence to gain assistance from federal authorities for the aerospace industry and for member companies in the ITA? Second: What will the titanium industry have to do internally to survive and enable success in the future?

of production to pre-Covid-19 rates at the earliest. The Boeing 737 MAX grounding and the production delays and disruptions from the pandemic only add to the magnitude of the commercial challenge.

While positive and hopeful news about vaccines come each day, there are no guarantees, especially in terms of a quick cure, and must be discounted when planning. We are now seeing virus infections and spikes in the United States and other parts of the world. Additional travel restrictions and quarantines are being imposed. These factors point to a deeper and longer impact than currently predicted.

A downside scenario should be the baseline that the titanium industry uses for operational and sales planning.

As it confronts the fallout from the global pandemic, the titanium industry must focus on two basic questions. First: Where and how can it use its influence to gain assistance from federal authorities for the aerospace industry and for member companies in the ITA?

Second: What will the titanium industry have to do internally to survive and enable success in the future?

The titanium industry is about melting, converting and fabricating metal for its customers of which the largest is commercial aerospace. Financial support is critical both short term and long term, but real demand for titanium is the key. The industry needs to help find a way with the federal government to accelerate the return of new demand for airplanes. While the titanium industry serves both new production and the aftermarket, the industry needs to push for a solution that prioritizes new planes over the aftermarket.

It’s true that, during the last 10 years the titanium industry has enjoyed a good run in the commercial aerospace market, but long lead times (50-plus weeks), large economic order quantities and inventory solutions are now albatrosses. Given the airplane rate cuts and inventory in the system, the OEM’s most likely do not need any additional material until the end of 2021, at the earliest. Other markets, like defense may soften the impact but not to any significant degree. The titanium industry needs to plan for any growth in the commercial aerospace demand to be consumed by inventory for at least the next two years.

Suppliers and customers will have to work together to find the right balance. Transparency will need to be increased, forecasts will need to be improved, plans will need to be shared throughout the supply chain. Risks will have to be taken equally by the customers and suppliers. Everyone will need to work to get the demand supply equation rebalanced. Any effort to put any additional pound of titanium into the industry that is not needed is wasted effort and could stretch the challenge out for the entire industry.

In addition, suppliers and customers will need to establish an operating level for key parts of the supply chain. What is the right amount of metal to melt, convert and fabricate to keep the key assets and capabilities in place? Companies will need to be commercially viable. The assets and capabilities cannot atrophy to the point where when the recovery comes the titanium industry is a constraint.

How the fast recovery unfolds depends on many factors, but two important things to follow are inventory and increased demand for Boeing’s 787 and the Airbus A350. The aggregate industry inventory will need to reach a bottom and can only begin to grow once production rates are formally committed to increase. The demand for 787 and A350 planes will happen when international travel increases back to its pre-Covid-19 levels. Economic drivers and environmental issues may accelerate that demand. The market dynamics for those airplane programs will be a bellwether for the near-term future of the titanium industry. If those programs go down from current announced rates, then the crisis will deepen and stretch out.

Every supplier in the industry should be focused during this time on how to develop the capability to “build to order.” Lower lead times and economic order quantities are critical. Improvements in quality and all drivers of cost will be needed through the downturn and cannot deteriorate when the recovery begins. Technology will need to continue to push forward. Improvements in operational automation and additive solutions will add value.

The last area of focus must be leadership. There are very few leaders are left in the industry who have managed through previous downturns. Previous leaders had the experience of multiple downturns and disruptions, allowing for better and quicker decision making. One area of concern will be Airbus. Much to its credit, Airbus has never had to manage a significant production downturn through their supply chain. Covid-19 just changed that.

The titanium industry will survive; it must survive. The commercial aerospace future depends on it. The commercial aerospace industry will recover. All the demand drivers will still be in place after the pandemic ends. The titanium trail is rough right now and will get rougher. We will all need some luck along the way, but it will be worth the journey. n

Editor’s note: John Byrne, a former executive with Boeing Commercial Airplanes, currently serves as an advisor at Pasayten Advisors LLC, Auburn, WA. He was a distinguished speaker at the ITA’s North American conferences in 2013 and 2014. Byrne joined the Boeing Co. in 1987 and retired in November 2017. Since then, he has been working with various groups and suppliers in an advisory capacity, focusing on supply chain strategy and operational efficiencies. He also serves on the boards of Consolidated Aerospace Manufacturing (CAM) and Daher North America and currently the Chairman of the Board for STS Metals.