Aerospace Suppliers: Winners and LosersBy Roberto Corral Cazares | Wed, 07/27/2022 - 10:00
It has been quite a roller-coaster being an aerospace supplier since April 2020. We live in a strange world where before the COVID-19 pandemic there were signs of struggle with the supply chain but starting the end of March for the American continent, every supplier and, very particularly, our industry hit a stone so hard it has taken a year or so to get back to where we were. All of a sudden you had restrictions to air travel, first internationally with testing requirements, then domestically, then even in an office or restaurant. Then, closings went into full effect. The world stopped somehow and then reflection is all we had, day in and out.
Companies that were losing money were unaware they could evolve and digitalize their processes and change quickly. The turnaround from the pandemic was so evident that something needed to be done. This included reducing work hours or providing leftover vacation time to those owed, even eliminating some compensation benefits to survive the hit on sales that most companies experienced.
Initially few companies accepted, no matter how difficult, that the pandemic was an incredible challenge that called for change and an update to their company policies. A few other companies increased their capital debt in order to continue operating in hopes there would be a quick turnaround, but the pandemic kept going, lasting much longer than most expected.
Unfortunately, some companies gave up or were sold for a bargain because their priorities became taking care of their family first instead of investing. Much of this was due to the uncertainty of when everything would go back to “normal” or, at least, to some degree of an environment where the business could be sustained. I would personally say, this was the most unusual industrial challenge of our current lifetime. Add to the fact that so many people were sick or died in 2020/2021 despite vaccinations, given poor eating/health habits.
Mexican businesses also did not have any Paycheck Protection Program from the federal government like that provided to businesses by the US and some European countries where you could get a percentage of the equivalent of your 2019 revenue from your financial statements and be financed to get through the 2020 business storm. Nor did many citizens receive any specific support for their families in this time of need in the form of a government check in the mail. Everyone had to do whatever it took to get their family ahead despite the adversity. Businesses could have gotten this support to keep employees on the payroll, which could have given them room to breathe and allowed them to continue to operate, paying taxes and utilities.
Early meetings at home or from a certain place were now in effect, with zero or no travel. People were in the comfort of their home with home office; however, it was difficult for married families with their kids also at home. But this became the norm. At the same time, manufacturing was being pushed to the brink of collapse as they worked to avoid COVID contagion while keeping final products flowing to the industry. For the rest of 2020, the airlines were unable to contain the impact and in North America, they had to ask for government help. In the case of Mexico, Aeromexico went into Chapter 13 to avoid bankruptcy as flights could have only two or three seats occupied per row to keep operating. The rest of the supply chain was also affected, airports were understaffed, travel agencies were hit as fewer flights took to the skies, there was less maintenance, fewer personnel and fewer parts to overhaul.
The winners basically were health and pharma suppliers for hospitals and home care, the food industry as a whole (supermarkets), funeral homes and crematoriums, and online coaching for whatever theme or title you can imagine to employ your time on “webinars.” Schools went digital so the breach provided one drastic step forward, maybe even the giant leap it needed to modernize everything under the circumstances. Online stores or apps (Amazon, EBay, UberEats, Rappi) and just about anything that could be delivered without people having to take a single step outside also emerged as winners. Logistics were the name of the game but they were under a lot of pressure from both the government and the demand. Fitness equipment basically sold out at stores and construction/remodeling of homes boomed as people spent more time at home.
Fast forward to today, with most or some health testing requirements now relaxed or halted in most of the modern world after at least one/two/three anti-COVID-19 vaccine shots and people are now coping with inflation, high oil prices, the illegal invasion of Ukraine by Russia and diminished economic output. That is the new reality. The apparent loser was the tourist/hospitality industry, including airline businesses taking a big hit.
Now, however, people are eager to go out and get on with their lives, although, I would say, with caution.
Overall, companies around the world are facing shortages of engineers and other staff. Many want to avoid going back to the office given the new “normal.” Many are asking for higher salaries/compensation for proving that productivity can be also achieved while working from home. Of course, most of these positions can be dealt with but the feeling is that their professional career ladder has taken a hit.
In the aerospace sector, existent or surviving companies can supply and provide solutions that matter in order to keep costs down and keep the supply chain flowing. They also have the discipline to evolve and innovate. It has also become an area of study to see what could happen if the “Great Resignation” era that started in the US spreads worldwide. A better understanding of what employees are realistically calling for is healthy for any company. This relationship cannot fail or companies will be forced to make hard choices like reducing staff, automating more areas with fewer people for good and standardization; therefore, asking everyone to eventually multitask duties as the norm.
Suppliers are eager to see what comes next as we enter the next chapter of an endemic phase. I believe it will get better as we progress in 2022.