Upheaval in the aviation industry

AluReport: Can you give your views on the aircraft industry, what has fundamentally changed over the last 5 years and what is the outlook until 2030 and beyond?

VB: The aviation industry is undergoing a dynamic change, shaped by technological innovations, sustainability goals and geopolitical challenges. After the COVID-19 pandemic, the sector recovered significantly, but business travel is still behind 2019 levels while tourism traffic is booming. The industry remains under pressure to reduce its emissions as regulations and awareness of climate change increase. In terms of technology, we see a strong focus on developing sustainable aviation fuels (SAF) as well as electric and hydrogen-powered aircraft. But it shall take some good years until we see them flying, but they will surely become a reality. What I can assure you is that digital innovations such as artificial intelligence and automation are driving efficiency improvements and cost reductions at OEMs and airlines. Geopolitical tensions, such as the Ukraine war, have increased the cost of fuel and raw materials, while competition between Western and Chinese manufacturers such as Airbus, Boeing and now COMAC and Embraer is intensifying. Supply chain issues and skills shortages continue to pose challenges. Overall, the aviation industry is in a phase of transformation: it is battling short-term economic uncertainties while setting the course for a greener and more technologically advanced future. Pressure from governments, investors and consumers is steadily driving this change.

AluReport: Can you elaborate on the topic supply chain issues the major airframers have been facing?

VB: As I mentioned, the pandemic led to global production shutdowns and supplier bottlenecks, particularly in the electronics and metals industries, which are important for aerospace production. When you combine these bottlenecks with shortages of key raw materials such as aluminum, steel and titanium, which are key to produce assemblies and components, we have the perfect storm, I mean, higher production costs and strong delays in ramping up the build rates. In addition to commercial aviation, we see a steep rise in demand for business jets and defense which brings additional challenges to regional and global supply chains. The globalization we saw happening in the last decades in the search of the optimum costing for the supply chain has been rebalanced, and now, the “local-for-local” has regained force in major supply chain and procurement strategies at the main OEMs as well as at its tiers. When we look at it from AMAG’s perspective, I see it from a very positive angle since the invisible hand of the market, as Adam Smith would say, will lean towards the most efficient, the most competitive and the most customer centric players. We offer sheet, plate, components and advanced recycling, a unique combination. We are in the right place, at the right time with the right products! Demand for new airplanes is solid and strong for the next decade and we will be there to support it.

AluReport: So, demand for new aircraft remains strong?

VB: Demand for new commercial aircraft remains solid and, although the order books of major manufacturers are fuller than ever before, there is still no celebratory mood in the industry since OEMs are not able to increase the build rates and deliver new airplanes. Airlines are expected to report a relatively strong profit in 2024, despite rising costs and limits on capacity building, and at the same time they need to open new routes, improve operating and maintenance cost efficiency, reduce noise levels and limit fuel consumption. There are plenty of old aircraft flying that need to be replaced but deliveries of new planes do not keep up, so airlines are forced to keep flying older airplane models. At the same time, demand could shift towards new airplane manufacturers outside of the Airbus and Boeing duopoly, which in the end, can be a positive trend in the market. Let’s see how it unfolds in the coming years but rest assured, demand for plate and sheets as well as components remains strong and positive and AMAG has invested to support this demand. The challenge is that all parts must be ready so an airplane can be built, which delays deliveries and consequently slows the whole chain.

AluReport: AMAG has been developing its position and capabilies in the Aerospace industry over the last decades. Please tell us more how you see AMAG today and in the future in this market?

VB: AMAG has been successful in the aviation sector for over 20 years delivering plates, sheets and more recently components. In Ranshofen we have a full ecosystem dedicated to aerospace flat rolled products: state-of-the-art scrap management, a robust cast house, two rolling mills and contour-band sawing capabilities. On top of that, a dedicated R&D team and more recently our smart factory for sample production and testing. All in one-single site which gives speed in decision-making and flexibility in supporting our customers. A prerequisite for supplying aircraft manufacturers is approvals and qualifications, and I can confirm AMAG covers a large part of the approval spectrum of all major commercial and business aircraft manufacturers globally. When we look at our components business in Germany, we have extended our presence in the value chain since 2020 by acquiring two machine shops with highly skilled teams and Know-How in machining short and long bed parts in aluminum, titanium and steel. AMAG components brought us the opportunity to better understand and also integrate into manufacturers' supply chains. We invested heavily in new machinery in Übersee and Karlsruhe and now we deliver additional value such as material use optimization - what we call the optimized buy-to-fly ratio, segregation and scrap closed loop management with chips and off-cuts coming back to Ranshofen, and more recently we confirmed our capabilities in delivering AMAG’s low-residual stress plate. It’s been an exciting journey and everyday we learned something new. In a nutshell, our unique positioning stands for a competitive supplier in sheets, plates and components, ensuring outstanding performance in quality and delivery reliability, pioneering role in close-loop management with our components business and a guaranteed low CO₂ footprint across the whole portfolio!

AluReport: Talking about sustainability, how has AMAG developed on this front within this industry? Can AMAG market the AL4® ever family to OEMs?

VB: Sustainable aluminum is becoming increasingly important in aviation. In view of increasing demand for the reduction of CO₂ emissions and the transition to a circular economy, more and more manufacturers are relying on recycled aluminum. Suppliers such as AMAG are not only required to implement measures to meet sustainability criteria, but also to be able to demonstrate their efforts and results to customers through external certifications. In addition to the NADCAP (National Aerospace and Defense Contractors Accreditation Program) approvals for heat treatment, non-destructive testing and material testing as well as for assembly at AMAG components, AMAG takes part in extensive ratings such as CDP (Carbon Disclosure Project), Sustainalytics or EcoVadis, which assess sustainability performance in the areas of environment, social issues and business ethics. AMAG is a leading company with outstanding results and performance in sustainability ratings and is on track with its measures to achieve our decarbonization goals. Regarding AL4® ever, by combining a high proportion of recycled material with low-CO₂ primary aluminum, we shall be able to offer our customers aerospace plates 7000 series with AL4® ever certification and a guaranteed CO₂ footprint of a maximum of 4 t per ton of aluminum. However, it should be noted that some alloys require significantly higher metal purity, which in fact, would only be possible to achieve AL4® ever grades if a closed loop agreement is in place and then access to chips and offcuts will then enable that scrap becomes an aerospace plate again, but this time, with a guaranteed lower CO₂ footprint.

AluReport: Before we come to the end, Paris Air Show is around the corner. Any plans for AMAG’s participation?

VB: Yes, indeed. We plan to have our own chalet again in 2025. Paris Air Show is an important occasion to meet and have discussions with as many customers and partners as possible within a short space of time. We are going to enjoy being back in Paris and being part of this event, its diversity, its intensity and the aircraft show itself. It`s been a few decades since my first air show, but when I am there, but when I am there, I always feel like the little boy that used to spend some Sunday afternoons with my father in my hometown airport just watching airplanes land and take-off. This feeling is priceless.