The aerospace and aviation industries have been fighting unprecedented supply chain challenges in recent years, and one of the biggest problems has been the shortage of titanium. This shortage has sent a significant shockwave through the MRO sector, creating a dire need for agile supply chain solutions to counteract the impact. Toma Matutyte, CEO of Locatory.com, shares insights on the reasons behind the titanium shortage, the consequences it has brought, and the potential solutions that MROs must adopt to navigate this challenging landscape.

To understand the titanium shortage, it is essential to recognize Ukraine’s historical significance as one of the largest producers of titanium in the world. Ukraine’s rich titanium resources, particularly the deposits located in the Zaporizhia region, have played a crucial role in global supply. However, the annexation of Crimea by Russia and the war in Ukraine have disrupted this supply chain.

While Ukraine itself does not manufacture metallic titanium or its finished products, the country exports titanium concentrates, which are subsequently processed and utilized in various nations. Throughout the conflict, the Ukrainian state-owned United Mining and Chemical Company (UMCC Titanium) managed to export a substantial 82.2 thousand tons of titanium-containing ores between July 2022 and April 2023. Reports from KyivPost and other investigations carried out by Ukrainian and Western media outlined that a notable portion of these shipments ultimately reached Russia.

The Role of Ukraine in Titanium Production

The world’s most significant titanium producer, the Russian VSMPO-Avisma Corporation, has historically depended on Ukrainian raw materials and continues to do so. Investigators have raised alarms, as VSMPO-Avisma’s products are widely used in global aerospace production.

Russia was a significant supplier of titanium to both Boeing and Airbus before the war. Boeing even had established a joint venture with VSMPO-AVISMA, a part of Rostec, a Russian government-owned industrial and defense conglomerate. As recently as November 2021, just three months before the war began, Boeing and VSMPO-AVISMA had extended and expanded their collaboration, with approximately one-third of Boeing’s titanium coming from Russia.

In Airbus’s case, their reliance on Russian titanium supplies was even more substantial. While they didn’t have a joint venture like Boeing, it’s estimated that they sourced about half of their required titanium from Russia. However, the war has brought about a significant change.

To illustrate the gravity of the titanium shortage issue, according to KPMG’s Aerospace & Defence Outlook 2023, titanium shortages have been identified as one of the top supply chain concerns in the aerospace industry. The Oliver Wyman Global Fleet and MRO Market Forecast Update 2022 report highlighted that the demand for titanium in aviation is expected to grow steadily, with no signs of slowing down.

Meanwhile, AviationPros reported that US aviation supply chain challenges, including parts shortages and rising costs, are partly attributed to the titanium shortage. Ukraine’s titanium production has been severely impacted by the Russian invasion leading to a decline in exports and a tightening of global titanium supply.

This disruption has had far-reaching consequences, as titanium is a vital material in aerospace manufacturing, known for its exceptional strength-to-weight ratio, corrosion resistance, and high-temperature stability. As CFRP (Carbon Fiber Reinforced Plastic) is becoming more widely used in the production of airframe and engine components, global demand for titanium used in aerospace manufacturing is also rising as the metal is perfectly compatible with CFRP when it comes to coefficient of thermal expansion and even corrosiveness.

The Problem That Continues to Extend Worldwide

In addition to airframe components, titanium alloys find application in modern aircraft engines, including turbofan motors, which power the majority of the world’s most popular commercial aircraft. Titanium plays a critical role in the production of key engine components, such as the fan, compressor, combustion chamber, and turbine.

Ukraine’s titanium production has decreased significantly, contributing to a global titanium production decrease of approximately 12% over the last five years, as per the Oliver Wyman Global Fleet and MRO Market Forecast Update 2022. The shortage has led to a sharp increase in titanium prices. AviationPros puts down that rising costs are one of the factors pressuring the aviation supply chain, with titanium being a major contributor to these cost escalations.

Numerous indicators suggest that the biggest aerospace manufacturers, like Boeing, Airbus or Embraer were making earnest efforts to reduce its reliance on Russian suppliers ever since the invasion began and even before the majority of Western sanctions on Russian exports were applied. Nonetheless, as challenging as it was already, additional issues were piling up ever since. While Russia stands as the world’s third-largest titanium producer, lagging behind China and Japan in terms of material output, it had held the position of the primary supplier of aerospace-grade titanium, contributing to half of the world’s aerospace titanium prior to 2022.

Various strategies are being considered to address this issue. One possible solution is to procure titanium from China, which overtook Russia as the world’s foremost titanium producer many years ago. However, this approach still presents challenges, as China’s titanium production is steadily increasing, and it would essentially shift the West’s titanium dependency to another nation.

The shortage has resulted in delays and disruptions in the production of critical aerospace components, impacting aircraft manufacturing and maintenance schedules. ‘MROs are experiencing resource crunches, with access to sufficient titanium materials becoming increasingly difficult. This directly affects their ability to repair and maintain aircraft.

Agile Supply Chain Management As Solutions for MROs

In the face of these challenges, MROs must adopt agile supply chain strategies to mitigate the impact of titanium shortages’ – explains Matutytė. Acknowledging the current state of the MRO industry, outlines the following strategies to offset supply chain risk in MRO.

1. Diversify Suppliers: Reduce dependence on a single source of afterparts by diversifying suppliers and exploring alternative sources. Collaboration with global suppliers is vital to ensure a stable supply of titanium parts.
2. Strategic Stockpiling: Maintain strategic stockpiles of critical titanium compounded materials and parts, to buffer against supply disruptions. This ensures a consistent flow of materials even during shortages.
3. Advanced Forecasting: Utilize advanced forecasting tools and data analytics to predict and plan for material shortages, enabling proactive responses rather than reactive measures.
4. Technology Adoption: Embrace innovative technologies, such as 3D printing and advanced composite materials, as potential substitutes for titanium in certain applications, reducing dependency on traditional materials.
5. Collaborative Partnerships: Foster collaborative partnerships within the aerospace and aviation industry to collectively address supply chain challenges and share best practices.

The titanium shortage, exacerbated by disruptions in Ukraine’s production, has presented a formidable challenge to the MRO sector and the broader aerospace and aviation industries. As highlighted by key statistics, the consequences of this shortage are far-reaching, impacting production, costs, and resource availability. Locatory.com as part of the Avia Solutions Group family, the world’s largest ACMI (Aircraft, Crew, Maintenance, and Insurance) provider will continue to deliver solutions in the competitive aviation aftermarket landscape. To navigate this turbulent landscape, MROs must be agile in their supply chain management. Diversifying suppliers, stockpiling critical materials, and embracing innovative technologies are essential steps toward ensuring resilience in the face of ongoing titanium shortages. Collaborative efforts within the industry will play a pivotal role in finding sustainable solutions to this supply chain crisis. By doing so, the aviation industry can continue to soar, even in the face of titanium scarcity.

In a recent revelation that has reverberated across the aviation industry, the Federal Aviation Administration (FAA) issued an Unapproved Parts Notification (UPN) on September 21, 2023, highlighting a critical bushing part supplied by AOG Technics. The crux of the matter? This part lacked the essential FAA production approval, and associated documents were found to be “falsified.”

AOG Technics, known for its involvement in the aerospace spare parts industry, had supplied these questionable parts, raising concerns about the safety and the authenticity of components used in the aviation sector. Airplane parts suppliers and, especially, marketplaces for aerospace parts and supplies, play a crucial role in supporting the MRO sector, airplane operators, and the whole aviation industry in an unforeseen situation like such explains Toma Matutyte, CEO of Locatory.com.

TAP Air Portugal, one of the mayor European flag carriers, was first to raise the alarm early this Summer. They have discovered that some parts, namely, engine bushings, installed on CFM56 engines, were worn out significantly, despite having been documented as completely new. This led to the discovery of false documentation for the parts supplied by AOG Technics.

How The AOG Technics Scandal Unfolded

UK-based broker AOG Technics, a name that might have gone unnoticed in the vast realm of aerospace suppliers ever since the company was founded back in 2015, suddenly found itself in the spotlight. The FAA’s UPN demanded immediate action: the removal and quarantine of uncertified bushings to prevent their installation until their eligibility could be verified.

After the London High Court issued a ruling, instructing AOG Technics to provide the record of its transactions with supplier and to giving more details on any CFM56 and CF6 parts it has sold along with the documentation for such parts, the company has gone completely silent.

These parts had been used in CFM56 engines, a workhorse of aviation, frequently seen in older-generation Airbus SE A320 and Boeing 737 aircraft.

The CFM56 engine, manufactured by CFM International, has long held the title of the world’s best-selling aircraft engine. The ripple effect of this scandal is undeniable, but what does it signify for the MRO industry?

Implications for the Aircraft MRO Industry

The MRO industry’s ability to respond effectively will determine its resilience and continued trustworthiness in the eyes of airlines and passengers. There probably will be several implications, as the aviation MRO sector is poised for increased regulatory scrutiny and stricter compliance measures. Moreover, there could also be a quality assurance reassessment as MRO facilities will need to revisit their procedures and quality control principles. This leads further to the issue of the security of supply chains as MRO companies will need to collaborate with trusted suppliers and enhance supply chain transparency to prevent counterfeit parts from infiltrating the system.

Also, do not forget that reputation is everything in the MRO industry. MRO companies may need to rebuild or reinforce their reputation, demonstrating their commitment to safety, quality, and compliance. Yet, those market players that adapt swiftly and demonstrate their commitment to safety and quality may find new business opportunities. Airlines and regulators will be seeking reliable partners in the MRO sector who can provide the highest levels of assurance and compliance.

The reminder of importance of reliable airplane parts suppliers and marketplaces

The AOG Technics scandal serves as a stark reminder of the critical role that MRO companies play in maintaining the safety and reliability of the aviation industry. While these developments present immediate challenges, they also offer opportunities for innovation and growth for MRO companies that can adapt to the evolving landscape of aviation safety and compliance.

The short-term implication, which is already manifesting itself, and is about to undoubtedly have further impact on the future of the whole sector, is the growing need for a timely supply of critical parts for the affected airplanes which are crucial to keep them flying.

As the aviation industry embarks on this journey of introspection and reform, the MRO sector will stand at the forefront of ensuring that aircraft continue to fly safely and reliably. The implications of the AOG Technics scandal may have a scope big enough to reshape the MRO industry, with an enduring commitment to safety and mutual trust among the business partners within the sector.