Commercial Aerospace Trends Gain Altitude Despite Inflation and Supply Chain Concerns

By Michael C. Gabriele

Despite the widespread damage caused by Hurricane Ian, the International Titanium Association (ITA) moved forward and held its 38th annual TITANIUM USA conference and exhibition Oct. 9-12 at the Rosen Shingle Creek Golf Resort in Orlando, FL. The resort suffered no major damage from the storm, and over 580 registrants attended the event.

But there were other ill winds on the minds of conference attendees caused by economic and geopolitical storms. Russia’s invasion of Ukraine, rising trade disputes and hostile language between the United States and China, the threats of global inflation and a possible recession, and the hangover from Covid-19 supply chain snarls, have contributed to a sense of unease among people who conduct business in the international titanium sector.

In contrast to all this uncertainty, the commercial aerospace industry, the showcase end-use market for titanium, reported upbeat business conditions, according to information from the International Air Transport Association (IATA). The titanium industry closely monitors commercial aerospace business conditions as an early indicator for near-term, and long-term, titanium demand.

The IATA, in an October 6, 2022 press release posted on its website (https://www.iata.org), stated that the peak travel season ended on a high note in August, and that the commercial aerospace industry has continued to make progress from the Covid-19 downturn.

“The International Air Transport Association (IATA) announced passenger data for August 2022 showing continued momentum in the air travel recovery. In August 2022 (measured in revenue passenger kilometers or RPKs) was up 67.7 percent compared to August 2021. Globally, traffic is now at 73.7 percent of (Covid-19) pre-crisis levels.”

Asia/Pacific airlines had a 449-percent rise in August traffic compared to August 2021. “While the region experienced the strongest year-over-year growth, remaining travel restrictions in China continue to hamper the overall recovery for the region.” For European carriers, August traffic climbed 79 percent versus August 2021. North American carriers saw a 110-percent increase in traffic in August versus the 2021 period.

“The Northern Hemisphere peak summer travel season finished on a high note,” Willie Walsh, IATA’s Director General, said.

“Considering the prevailing economic uncertainties, travel demand is progressing well. And the removal or easing of travel restrictions at some key Asian destinations, including Japan, will certainly accelerate the recovery in Asia. The mainland of China is the last major market retaining severe COVID-19 entry restrictions.”

Tom Captain, managing director, Captain Global Advisory LLC, in his presentation “Aerospace Industry: Tailspin or Recovery,” also was optimistic on the state of the commercial aerospace industry as it continues to recover from the dark days of Covid-19. “We expect by 2025 to see global aircraft OEMs to produce over 1,600 aircraft annually. Thus, it will have taken five years for the industry to recover to the (pre-Covid) 2019 levels of economic activity. However, he did note several concerns or “interruptions” on this progress, such as pilot and labor shortages, rising fuel costs, and inflation’s impact on aerospace.

“Inflation is not theoretical concept, but a real one for the aerospace industry,” Captain declared. “Prices of labor for pilots, mechanics, and suppliers are rising. The prices of new and used aircraft, maintenance, repair and overhaul (MRO) services, supply chain parts and systems are rising. The price of jet fuel is rising. This in turn translates into higher prices for airline tickets. Moderated demand for travel, for goods and services in the general economy, causing recession concerns.”

“With the interruptions as described above to the recovery from the pandemic, the aerospace industry is facing a delay, not a backward step,” Captain continued. We do not foresee a nosedive, but rather a halting and delayed recovery moving in a positive direction. After all, there is an insatiable appetite for family, business and leisure passenger travel, and for air cargo due to the internet shopping and the ‘Amazon’ effect. The pandemic itself was an interruption, as was the subsequent fuel price increases and labor shortages, not to mention the Ukraine war, and production delays on the Boeing 737 MAX and the 787 programs, plus the possibility of a recession in 2023. The industry is resilient and will not only survive but eventually thrive on the long-term demand for air travel. It always has, and that’s a good reason for optimism.”

Jeff Carpenter, senior director, Boeing Commercial Airplane Supply Chain Category Management & Contracts Director for Material and Standards, provided a market outlook and observations on the titanium supply chain. Carpenter said airlines will need 41,170 new airplanes over the next 20 years and 19,575 new airplanes over 10 years, while the freighter fleet to grow 80 percent by 2041

“Aviation has proven resilient over and over again,” he said, noting that airline fleets are stabilizing and replacement opportunity is evident. The airline industry is becoming increasingly competitive, while pandemic disruptions boosting nearterm freighter demand.

Carpenter listed accumulated savings, rising employment and wages, and business investment as three key headwinds for commercial aerospace, while he saw a high rate of inflation, supply chain challenges and financial market volatility as three headwinds.

Boeing’s titanium market outlook sees order cancellations and aircraft production cuts from Covid-19 as having created a reduction in titanium demand, but this could turn around over the next two to three years as the global aerospace market gradually regains altitude. Carpenter listed Boeing’s titanium market observation as including a price decline on all titanium products. “Sponge and scrap prices had a quick recovery. Inventory across the supply chain is high. Lead times are finally starting to stabilize. Near term Russia/Ukraine metal units unlikely to return. Prices are expected to climb towards the end of the year. Participant forecast data indicates inventory burndown for titanium will continue through 2025. Boeing has discontinued procuring Russianorigin titanium and is implementing more conservative inventory draw down to mitigate potential risk.”

He said Boeing has suspended major operations in Russia, including the purchase of titanium (geopolitical risk mitigation started in 2014) and is developing alternate titanium sources to support production. He added that Boeing’s “Forging

Aggregation Strategy” will be a key driver of production stability and improved performance. The strategy will involve improved traceability to support reclamation, an increase in the recycling of titanium and aluminum scrap, an increased use of nesting software to reduce scrap, and lead-time reduction, forecasting, capacity planning.

Laurent Jara, vice president, metallic material procurement for Airbus, said the European aerospace giant’s titanium demand will recover to its pre-Covid 2019 volumes by 2025. Part of that recovery in procurement will be tied to trends in the wide body aircraft market. “The return to operations of the A350 (wide-body jet) is calling the titanium industry to anticipate Airbus demand post-2025. International traffic recovery is calling for A350 efficiency,” Jara said, noting that the aerospace market is recovering more rapidly than expected from Covid boosted by demand of fuel and costs efficient new generation aircrafts. “Airbus leadership and strong orders backlog is calling for a robust production ramp-up to the highest rates in the aerospace history until 2030 and beyond.”

Even though titanium demand is expected to be robust, the Covid crisis plus the fraught geopolitical situation has brought business uncertainties. As a response to this, Jara said Airbus’ E2E supply chain system would provide resilience strategies for companies in the titanium supply chain. He pointed out that the Airbus titanium E2E supply chain revolves around a “holistic” resilience and flexibility supply strategy by securing “quality first, collaboration and anticipation.” In addition, Jara said Airbus will improve its closedloop titanium recycling operations, “for which Airbus is engaging into a transformation of its scrap/swarf policy.”

Separately, Guillaume Faury, the chief executive officer of Airbus, interviewed by Reuters in London on Oct. 12, reaffirmed a target of delivering 700 aircraft in 2022—a task he said was necessary to reach a separate monthly production target of 65 narrow-body jets in early 2024. Reuters reported that a recent decision to delay the recovery of monthly A320-family production to 65 by six months, to early 2024, eased pressure on suppliers, though some small suppliers in Europe have had to pause plans due to high energy bills, according to Faury.

Eyeing demand for its single-aisle jets, Airbus wants to go beyond this output to 75 jets a month. Airbus was likely to achieve this in 2025 as planned, Reuters reported. “We think that 75 is the right place to be for the second half of the decade. There is more demand than 75, but 75 is a robust place to be from the demand side,” Faury said. He added that Airbus was still forecasting a global traffic recovery between 2023 and 2025, but that 2023 now looked less probable amid ongoing travel restrictions in China.

ATI addressed commercial aeroengine trends and demands, saying that, for the near term, the growth of current-generation engine fleet will increase titanium demand. For the long term, next-generation, lowemission demonstrator engines will be tested in 2020s. “In the 2030s, new engine architectures for single aisle and twin aisle aircraft will enter service. The industry is at a crossroads, driving the need for ‘disruptive’ technologies.” The Rolls Royce UltraFan, the CFM RISE, the Next-Gen GTF, the PW127XT, the Pearl 700 and Pearl 10x, and the ZA2000 are among the next generation of aerospace engines, according to ATI. Technology innovation will include geared turbofans, composite/titanium fan blades and more components produced via additive manufacturing.

Stephen Fox, Timet/PCC Metals Group, considered the topic of “global demand trends for aerostructures.” The forecast, according to Fox, shows a shift towards single-aisle planes that will continue to impact titanium demand through 2025. “The forecast

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shows deliveries lighter than previously expected in 2022 due to multiple supply constraints,” Fox said. “When widebody build rates return, demand has potential to increase significantly. Geopolitics, oil, and interest rates have an impact, but historically nothing like the impact of Covid. The disruptive effects from pressure to decarbonize the airline industry may accelerate. The industry must be prepared to innovate throughout the supply chain and drive to expand titanium usage by delivering the most cost-effective solutions for the airlines.”

Fox examined various factors for titanium use in aerospace. The pre-Covid mix of aircraft deliveries was 75 percent single aisles and 25 percent twin aisles. Forecasts indicate that deliveries will be 80 percent single aisles. He said that, historically, the industry average of titanium per plane is 30 metric tons, but it’s expected that there will be an overall shortfall in titanium per plane through 2025 as deliveries of narrowbody jets will dominate. However, increases in built rates for the Boeing 787 and 777, and an increase in sales for the Airbus A350 rates would begin to correct this mismatch in titanium demand. Fox indicated that the 2022–2026 forecast demand remains robust, “but there are headwinds.”

Sam Stiller, vice president, commercial, for Howmet Engineered Structures, (a division of Howmet Aerospace Inc.), addressed “Titanium Demand Trends in Defense Aerostructures.” Stiller began by citing increasing utilization of

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