Supply Chain Disruptions to Cost Airlines $11 Billion Additionally

The International Air Transport Association (IATA) on Monday has warned that airlines across the world will incur more than $11 billion in additional costs this year due to supply chain disruptions.

Releasing a joint study entitled “Reviving the Commercial Aircraft Supply Chain,” in collaboration with Oliver Wyman, a global leader in management consulting and a business of Marsh McLennan, IATA said that challenges within the aerospace industry’s supply chain were delaying production of new aircraft and parts, resulting in airlines re-evaluating their fleet plans and, in many cases, keeping older aircraft flying for extended amounts of time.

The worldwide commercial backlog reached a historic high of more than 17,000 aircraft in 2024, significantly higher than the 2010 to 2019 backlog of around 13,000 aircraft per year, the report, which addressed supply chain challenges in the aerospace industry, and explores the root cause of these challenges, the impact on airlines, and initiatives to move the aviation industry forward, explained.

The slow pace of production is estimated to cost the airline industry more than $11 billion in 2025, which were driven by four main factors such as excess fuel costs (around $4.2 billion), additional maintenance costs ($3.1 billion), increased engine leasing costs ($2.6 billion), and surplus inventory holding costs ($1.4 billion).

In addition to the mounting costs, supply chain challenges inhibit airlines from deploying sufficient aircraft to meet growing passenger demand. In 2024, passenger demand rose 10.4%, exceeding the capacity expansion of 8.7% and pushing load factors to a record 83.5%. The trend in rising passenger demand continues into 2025.

The current aerospace industry economic model, disruptions from geopolitical instability, raw material shortages and tight labour markets all contributes to the origin of the matter. With these underlying causes considered, the report outlined key initiatives for original equipment manufacturers (OEMs), lessors, and suppliers supported by airlines to confront the supply-demand imbalance and build greater resilience.

IATA’s Director General Willy Walsh said that airlines depend on a reliable supply chain to operate and grow their fleets efficiently. Now they have unprecedented waits for aircraft, engines and parts and unpredictable delivery schedules.

Together these have sent costs spiralling by at least $11 billion for this year and limited the ability of airlines to meet consumer demand. There is no simple solution to resolving this problem, but there are several actions that could provide some relief.

“To start with, opening the aftermarket would help by giving airlines greater choice and access to parts and services. In parallel, greater transparency on the state of the supply chain would give airlines the data they need to plan around blockages while helping OEMs to ease underlying bottlenecks,” he added.

Actions for Aerospace Industry

IATA has suggested some suggestions such as opening up aftermarket best practices by supporting Maintenance, Repair and Operations (MRO) to be less dependent on OEM-driven commercial licensing models, as well as facilitating access to alternative sourcing of materials and services.

It also wanted enhancing supply chain visibility by creating clearer visibility across all supplier levels to spot risks early, reduce bottlenecks and inefficiencies, and use better data and tools to make the whole chain more resilient and reliable, unlocking value from data by leveraging predictive maintenance insights, pooling spare parts, and creating shared maintenance data platforms to optimize inventory and reduce downtime.

To enact any of these initiatives, the first and most critical step for commercial aerospace industry participants to take is to develop a strategic approach among all stakeholders in the supply chain. The multi-headed challenges facing the industry call for collaboration to progress in the goal of better meeting aircraft production and maintenance demand.

Matthew Poitras, Partner in Oliver Wyman’s Transportation and Advanced Industrials practice, said that today’s aircraft fleet was larger, more advanced, and more fuel efficient than ever before. However, supply chain challenges are impacting airlines and OEMs alike.

“We see an opportunity to catalyse an improvement in supply chain performance that will benefit everyone, but this will require collective steps to reshape the structure of the aerospace industry and work together on transparency and talent,” Poitras added.