Aerospace industry struggles to deal with Coronavirus - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Saturday 21 March 2020

Aerospace industry struggles to deal with Coronavirus

By Ajai Shukla
Business Standard, 22nd Mar 20

The novel Coronavirus disease (COVID-19) pandemic is creating ripples across the global aerospace components industry, with red lights flashing over its two most fundamental characteristics -- global supply chains that move materials and components rapidly across borders; and fabrication facilities with large numbers of employees working in close proximity. 

India is directly impacted, as a growing player in the global aerospace industry. Several hundred small, medium and large Indian firms manufacture or assemble over Rs 10,000 crore worth of aerospace components annually for “original equipment manufacturers” (OEMs) such as Boeing, Airbus, Lockheed Martin, Bell Helicopters and others.

Boeing alone sourced over Rs 7,000 crore worth of components and services last year from over 200 Indian companies. Airbus, in turn, sourced over Rs 4,500 crore worth of components and services from over 45 Indian companies.

Indian aerospace suppliers, from large corporates such as Tatas and Mahindra, to medium-sized high-tech manufacturers such as Dynamatic Technologies, cater to a common imperative: supplying top-quality components to their respective OEMs within a rigid time schedule.

Interfering with this now are disruptions relating to COVID-19, including delays or non-arrival of raw materials and inputs, disrupted financial flows and growing absenteeism amongst production line workers.

Indian firms are searching for answers at three levels: government assistance in managing this situation; assistance and clarity from the OEMs they supply; and internal measures to contain the pandemic.

From the government, there is little support or clarity. It was hoped that Prime Minister Narendra Modi would announce financial support, such as low interest loans, moratoria on loan repayments, corporate tax cuts and direct cash transfers to workers, the way the US government is envisaging.

However, in his address to the nation on Thursday, Modi was silent on these issues, merely urging citizens to stay at home for the coming weeks.

Nor have Indian aerospace suppliers been clearly advised by their OEMs about what to expect. A question that remains unanswered is: Will OEMs expect deliveries according to contracted schedules; or are delays now acceptable?

In the absence of clarity, Indian firms are reading the global tealeaves. Airbus shut down production this week for four days on orders from the French government. This could continue, with French workers unions urging the company not to resume production on March 23, when the deadline expires.

But Airbus insists that “any supply chain disruption is only temporary. “With the global spread of COVID-19 we are constantly expanding our global supply chain monitoring in order to widen and strengthen our early visibility, anticipation and mitigation capabilities. As of today, we are able to mitigate and contain the effects of COVID-19 inside our industrial system, without impacting aircraft deliveries,” stated Anand Stanley, president of Airbus India.

Boeing is equally sanguine. “We are having extremely frequent communications with our suppliers multiple times a day. We do this is by having individuals from Boeing located regionally, and even in the sites and production facilities of our suppliers to help navigate the challenges that might cause shipping disruptions,” stated Salil Gupte, president of Boeing India.

Indian suppliers, however, say the OEMs are not sharing what the situation is in their own facilities overseas, or with suppliers in other countries. 

“We haven’t asked them for any help or financial support yet. But we have alerted them to the possibility of delays. So far, they have just heard us out, but they have stopped visiting our facilities,” said an Indian supplier who asked not to be identified.

Asked whether there would be production line shutdowns in the US, Gupte of Boeing said: “We don’t really know. We will follow guidelines issued by the US government and the World Health Organisation. Most important for us is the health of our colleagues in our supply chain. Boeing’s guidance is that anyone who can work from home, should. But in factories, we recognize there are people working on site.”

“In the long term we think aerospace is going to be a very strong industry. We recognize there will be disruptions in the short to medium term. We have to stay in close contact with our suppliers,” said Gupte.

Meanwhile most Indian aerospace firms have already implemented precautions, short of closing down production lines or cutting shifts. Biometric attendance has been scrapped and the temperatures of workers coming on shift are checked with temperature guns. Shop floors and offices have sanitizers and hospital grade hand-rubs at entry points and stock masks and medical supplies. 

Some, like Dynamatic Technologies, have been innovative in holding a “Townhall meeting”, where top executives have interacted with employees to reinforce workplace awareness of COVID-19. The firm is also sponsoring employee street plays that disseminate “dos and don’ts” for combating the virus. 


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