INFLATION

Still in the midst of recovering from the fall in business volumes caused by the pandemic, historic global inflation levels are forcing us to manage risks and challenges that we are not used to. 

The vast majority of us, during our working lives, have not lived through a situation of high global inflation like the one we are experiencing at the moment. Price inflation reached high levels in the second half of 2021, and has worsened further with the war in Ukraine.

Aernnova is very sensitive to inflation for two main reasons: (1) our sales contracts with major customers have fixed prices for the life of the aircraft, therefore the increase in costs is drastically reducing our margins, and (2) the interest we pay to our financial lenders for the debt we have (which is high) has increased significantly as the major central banks have raised the reference rates (Euribor,…). In addition to this, we face the risk of losing competitiveness against competitors who either are in countries less impacted by inflation, or who are able to better manage the impact of inflation

At Aernnova, as we always do when a threat arises, we have launched countermeasures. Among other initiatives, we have launched an Energy Efficiency Project, as well as an Energy Responsibility Decalogue, aimed at optimizing our energy consumption, with the dual objective of fighting against price increases and contributing to the sustainability of the planet. Also, in the effort to continuously improve our product costs (and fight inflation), we have established an area within the company, Design to Cost, to help and push the organization to optimize our product competitiveness and profitability. And we continue to work on new business opportunities. But once again, it will be the support of our strategic pillars (industrial performance, efficiency, Lean, cash and digitalization), with everyone’s contribution and responsibility, that will help us overcome this new challenge.

Some of these topics, and more, are expanded in this edition of ANNNews. As always, we hope you will find it of your interest.