Safran chief says aircraft makers have ‘unprecedented supply crisis’

French jet engine maker Safran has warned that the “unprecedented crisis of supply” in the aerospace industry will stretch into next year as aircraft manufacturers struggle to source the parts and staff they need to keep up with resurgent demand. 

Safran’s chief executive Olivier Andriès told the Financial Times there had been no let up in supply chain problems dogging the industry since the Covid-19 pandemic as well as the Russia’s invasion of Ukraine that caused shortages of raw materials. 

“We have to fight every day to get the parts. This is true for Safran and also the whole industry,” Andriès said in an interview. “We’ve gone from an unprecedented crisis of demand back in 2020. Now demand is back but we are in an unprecedented crisis of supply. We have never seen this before,” he added. 

Others in the industry are also facing similar headwinds, with Airbus warning of supply chain constraints lasting until 2024, as airlines rush to order new aircraft to meet high travel demand. 

Andriès added the constraints would likely last into 2024, limiting the speed at which the sector can further increase production. “I would like to say it’s going to be over in three months. But this is not true . . . it is going to last,” he said.

Despite the challenges, Paris-based Safran now expects sales growth of around 20 per cent this year. That would put it on track for revenues to recover to their pre-pandemic 2019 peak of €25bn by next year, according to analysts, and the shares have also rallied 55 per cent in the past 12 months. 

The company generates significant revenues from supplying both civil and military engines, as well as from its aircraft interiors business, which together accounted for close to 60 per cent of group revenues in 2022. 

In a sign of how Safran is on firmer financial footing, the company is now looking at bigger acquisitions and is also open to further share buybacks, the CEO said. 

Safran recently disclosed it was in talks to buy the flight controls unit of US-based Raytheon Technologies, estimated to be worth around $1bn, in what would be its biggest acquisition since 2018.

Andriès said a deal for the division — whose operations are largely based in the UK, France and Italy, and not the US — would “in one step” help Safran become a market leader in an area where it has lagged competitors. “Our DNA at Safran is to be active in critical equipment for which the barriers of entry are high and where there are not too many players,” he said.

Analysts had questioned if the deal would dent Safran’s ability to do further share buybacks, with the current buyback programme, which started in October 2022, nearly completed.

“There’s an openness” to buybacks, said Andriès. “Our balance sheet has become stronger because we’ve been able to have a good cash generation profile in the last two years, and this will continue.”

One of the main issues that remains for the civil and military aviation industry is overcoming severe hiring problems after cutting staff during the pandemic. 

Sanctions tied to the Ukraine war have also made it tougher to source materials such as aluminium.

In an effort to diversify some of its raw materials sourcing, it purchased French steel parts maker Aubert & Duval alongside Airbus and Tikehau Capital earlier this year. However, it has no immediate plans to stop imports of Russian titanium, which is not currently covered by sanctions as switching suppliers takes time due to the intricacies of certifying materials needed for critical aeroplane parts, Andriès said. 

“We are going to continue to source titanium from [Russia] as long as we are authorised to do so,” he said. 

Andriès also reaffirmed the target to deliver in 2023 1,700 Leap engines, which Safran produces together with America’s General Electric. The engines, which power the Airbus A320neo and Boeing 737 Max aircraft, have encountered some durability problems in hot and dusty climates such as India and the Middle East. 

Andriès stressed that no airlines have had to ground aircraft because of engine problems. “We keep [their aircraft] flying,” he said.

This story has been amended to correct the share Safran’s aircraft engine and interiors businesses in overall revenues.