A short quote from Lufthansa CEO Carsten Spohr is enough to sum up the precarious state of the aviation industry: „Every new aircraft is delayed.“ Supply chain issues are causing delivery targets to be missed. Combined with the large order backlog at aircraft manufacturers – over 16,000 planes worth more than 1 trillion dollars – this means that planes ordered today are unlikely to be delivered to airlines before the late 2030s.

That makes planning more difficult for companies and has a number of negative consequences for Lufthansa – and similarly for other airlines: capacity expansion is falling short of original plans, and instead of operating a modernised fleet, older aircraft are still in use. That drives up costs due to more frequent repairs and higher fuel consumption. The latter, incidentally, also threatens both internal company, and political, climate targets. Replacing older aircraft with new ones is currently considered the most important lever for cutting emissions, as new planes typically use about 30% less kerosene.

The shortage sometimes leads to strange consequences: for instance, Lufthansa trained pilots for the expected new Boeing 787s, which are delayed due to seat certification issues – those pilots are now stuck waiting. In Frankfurt, one in five long-haul aircraft is held in reserve, partly because the older planes are more prone to breakdowns. The bottleneck is also affecting the cargo business, as the newer aircraft were expected to offer more cargo capacity than those still in operation. The only real winner is Lufthansa Technik: the ageing global fleet and problems with new-generation engines are boosting demand for maintenance and overhaul. But even Lufthansa Technik struggles at times due to a lack of spare parts, which hampers operations.

The situation is likely to worsen rather than improve in the medium term. That’s because limited supplier capacity is no longer just contested by airlines and aircraft manufacturers, but also by companies from the space and defence sectors. Global defence spending is rising rapidly, and the space business could also gain momentum. Many suppliers operate across all three areas and are finding it increasingly difficult to meet rising demand in all segments equally.

Expanding capacity would be costly and could not be achieved overnight. Hopes for efficiency gains through new technologies also come with caveats. Many of the required technical components are scarce, subject to high tariffs, or in competition with other industries. There are early discussions about whether and how companies from the automotive or mechanical engineering sectors could be integrated into the defence industry. Experts remain sceptical: while there is potential – such as using production capacity or manufacturing and development expertise – the market structures, regulations, and technical standards differ significantly from the civilian sector, according to corporate restructuring experts at Alix Partners.

When supply is limited, increasing demand usually drives up prices. Who will be more willing to pay – aircraft manufacturers/airlines or defence companies – and thus win out in individual cases remains to be seen. In light of the war in Ukraine, however, countries like Germany are currently giving themselves large financial leeway for military buildup, which gives them a strong position in the battle for scarce resources.