The global aviation industry faces challenges in meeting the demand for new planes due to supply chain issues when demand roared back after the pandemic. Boeing and Airbus project a demand for 48,000 operational aircraft by 2043, nearly 88% being newly manufactured planes.
National Aerospace Fasteners Corporation (NAFCO), a significant player in aerospace fastener manufacturing, reports a resurgence in the aerospace supply chain that has been constrained in the past few years.
NAFCO is optimistic about its operations in 2024, with order visibility extending beyond one year, foreseeing substantial growth in the aerospace industry. To accommodate future growth and diversify production locations, NAFCO plans to invest in establishing a facility in Malaysia.
NAFCO's product applications span various domains, with the aerospace sector being the primary contributor to revenue. In the first three quarters of 2023, aerospace fasteners accounted for 54% of revenue, aerospace machining components accounted for 34%, and other industrial fasteners accounted for 12%. The company's fortunes are intricately linked to the overall health of the aerospace industry.
Despite the setbacks caused by the pandemic, the aerospace industry is on track to recover to pre-pandemic levels by 2024. Industry projections suggest a return to 2019 levels by that time. Both major aircraft manufacturers, Boeing and Airbus, express optimism about the future. According to their market outlooks, it is estimated that airlines will require approximately 48,575 operational aircraft by 2043, reflecting an 81% increase from 2019, with 88% being new planes.
Examining the demand for different types of aircraft, Boeing predicts that single-aisle narrow-body planes will constitute 76% of the global market's new delivery volume and wide-body dual-aisle planes will only make up 18% of new deliveries. Airbus provides a similar forecast, with wide-body planes accounting for around 20% of demand and 80% being single-aisle narrow-body aircraft.
NAFCO notes that single-aisle narrow-body planes will be the mainstream demand in the commercial aircraft market, driving the market for its primary product, the LEAP engine. Market estimates project a demand for 1,700 LEAP engines in 2023, similar to 2019 levels, and reaching 2,000 engines by 2024, with potential further increases in 2025. NAFCO is a major supplier of components for the LEAP engine.
Airlines, already dealing with higher fuel and labor costs, are now faced with the need to increase spending on maintenance. Due to downsizing or closures in the European and American supply chains during the economic downturn, there is a need for recertification. This situation presents an opportunity for NAFCO to enter the market. The company reports experiencing order conversion benefits in 2023, with expectations of even more significant impacts in 2024.
NAFCO is optimistic about the outlook for 2024 but acknowledges the presence of variables, particularly labor shortages and inflation in Europe and the US, which may impact the company, especially in terms of materials. Material supply has been significantly affected over the past 1-2 years. Despite the industry trend of reducing inventory, NAFCO continues to build up stock, ensuring seamless delivery to meet customer demands and expedite the advantages of order conversions.
Additionally, in response to the economic downturn of the past two years, NAFCO has prioritized internal enhancements, reinforcing smart manufacturing and automation. Although the company had 800 employees in 2019, the current workforce has decreased to 700. Nevertheless, the revenue for the first three quarters of 2023 has already equaled that of 2022, demonstrating the effectiveness of the automation measures. In the initial ten months, NAFCO's revenue reached NT$24.84 billion, indicating a 44.07% year-on-year increase.
Article translated by Vyra Wu
