Why is the Supply Chain Crisis so Out of Control?

Why is the Supply Chain Crisis so Out of Control?

Airlines Need New Planes, but the Supply Chain Has Other Ideas

One of the hottest themes running through Wall Street and the air travel industry at the moment is the so-called “supply-chain crisis” — the idea that airlines are being forced into spending too much on pilot training, new aircraft, and other maintenance just to keep on flying. There’s plenty of evidence to support this idea, but that in itself does not make it untrue: If your business is being pressed into doing something you don’t necessarily need to do, you might be having problems.

One of the most notable examples of this came to light this week when the CEO of JetBlue announced a $6.2 billion cost cut across the company that included the elimination of 100 jobs. The carrier also announced that it would be retiring 50 aircraft, and it reduced the number of flights it flies. As far as I can tell, the CEO chose to eliminate the job of the CEO of JetBlue, but the airline is making money anyway. So why is the chain of airline pilot training so out of control?

Airlines that fly the “A”-model are flying old aircraft and training many of their pilots on old airplanes:

“The problem is what’s called ‘the old aircraft problem.’” says David S. Aaker, a former Air Force captain who now runs AirVenture, a company that hosts airshows and other aviation events. “If you don’t have an Airmail, you’re stuck buying another Airbus or an A380 for your fleet. You’ll take a big loss and have to raise prices, and with that loss you’ll start having a lot of extra maintenance expenses. Even if you keep the aircraft in the first place, it’s going to take a lot of the value out of it and make it more expensive to maintain and operate.” An A-model airline needs to fly the type of aircraft that it’s in the business of flying, and that means it needs to buy a lot of new aircraft.

Airlines like Southwest and JetBlue will buy new planes to increase their fleet size, but they may not be able to do that without cutting salaries of the pilots who are certified to

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