04 July 2024
Aerospace Manufacturing Sector: Tackling the Skills Gap
Much like other high-tech sectors, aerospace manufacturing is facing a talent crisis as older, experienced workers retire and the demand for skills continues to grow. The deficit is causing a critical shortage of aircraft mechanics, avionics technicians and manufacturing engineers, resulting in production delays, increased costs and even safety concerns. So how can the skills gap best be tackled?
The global aerospace sector is facing a skills gap as its workforce ages. A significant proportion of the workforce is approaching the retirement window, with over 29% of the workers aged above 55. This trend is present among both highly skilled manufacturing trades and advanced technical engineering professions.
The shift in demographics and the Great Resignation (or Big Quit) have led to lower hiring levels and higher attrition rates, particularly in areas critical to the future of the aerospace industry. Challenges in attracting and retaining talent are particularly prevalent for digital and advanced analytics roles, where there is strong competition from Big Tech and start-ups.
According to a UK government study, 186,000 engineers need to be hired each year in order to plug the country’s current skills deficit. Brexit is another factor where the UK is contributing to a significant shortage of skilled workers within manufacturing, which currently accounts for an estimated 11% of the workforce.
From a risk management perspective, there is a direct correlation between skill shortages and operational expenses. Lack of skills results in project delays, and a higher probability of human error leads to a greater frequency of claims, particularly concerning workplace accidents, product flaws, and inadequate quality control.
Ultimately, a shortage of talent drives up operational costs, having a detrimental impact on brand and reputation. Meanwhile, insurers are pricing the skills gap into their underwriting decisions.
Every four minutes, a new civil aviation professional is required due to the existing workforce crisis, including an additional 300,000 pilots, 300,000 maintenance engineers, and 600,000 cabin crew over the next ten years.
Understanding the drivers of the skill gap
In addition to the ageing workforce, increasing job exits and an industry-wide underinvestment in succession planning contribute to the shortfall of skilled personnel within the aerospace industry.
According to the Aerospace Industries Association (AIA), the American Institute of Aeronautics and Astronautics (AIAA), and Ernst & Young's 2022 Aerospace & Defence workforce study, 78% of employees cite the opportunity for increased total pay (base/bonus) as their primary reason for leaving an aerospace company.
Some of the other drivers include:
Rapid change: The sector's swift evolution outpaces university courses, which leaves employees ill-prepared as demand and skill requirements constantly change due to technological advancements, supported by digitalisation and artificial intelligence (AI).
COVID-19: The pandemic outbreak and the resulting country lockdowns caused significant disruption in aerospace manufacturing. Production deadlines slipped across the entire supply chain and many furloughed workers never returned. While recruitment has picked up substantially, the lack of apprenticeship and graduate schemes in the intervening years continues to be felt.
Recruitment flaws: The industry relies heavily on referral-based recruitment and prefers hiring experienced or relevantly skilled candidates. This not only reduces the total skilled labour pool but also takes the focus away from training efforts.
Sector competition: There is a loss of talent because of competition with other higher-paying sectors such as financial services, information technology, AI, data analytics, machine learning, and robotics.
Insufficient STEM Graduates: Universities are failing to attract the required number of students in science, technology, engineering, and math fields, which are critical for aerospace roles. The misalignment between industry needs and academic curricula is resulting in a skills mismatch.
Baby Boomers and Gen X retire: Retirement rates will rise significantly over the coming decade, with the European Space Agency anticipating that 44% of the workforce will retire by 2030. Retirees take invaluable experience with them, and fully transferring this knowledge to junior personnel is challenging, despite effective succession planning
It is well known that there is a current skills shortage within aerospace manufacturing and that there will be a host of new roles arising from developing technologies, for example, AAM (Advanced Air Mobility). This will require upskilling and/or new hiring strategies to future-proof businesses.”
“Skills shortages/staffing issues can have a knock-on effect on aircraft production rates, which manufacturers are already struggling with, following the pandemic. The pandemic impact on the aviation industry was unprecedented, and many staff were laid off — many have since returned, but it has been reported that a sizable chunk switched careers or left the industry completely.
Bill Parnell Senior Partner, Aerospace Manufacturing & Infrastructure, Gallagher Specialty
How skills shortages impact operational risk and safety
In the aerospace industry, where precision and safety are paramount, any compromise in quality can have catastrophic consequences. The skills gap, along with higher levels of fatigue, may contribute to a greater risk of accidents and incidents in the workplace.
Talent shortages pose complex challenges, including decreased productivity, compromised quality and safety, innovation stagnation, and increased operational costs. It also hampers the smooth functioning of the broader supply chain. Manufacturers may struggle to meet rising demand due to suppliers’ inability to deliver parts on time or with proper assembly.
It is a vicious cycle. To avoid missing production deadlines due to frontline labour shortages, companies expect their employees to take on additional workloads. This results in expensive overtime contributing to the risk of burnout and higher turnover.
“Could these problems potentially lead to longer groundings (and in turn more expensive claims), as staffing shortages delay maintenance inspections and repair timeframes?” asks Gallagher Specialty’s Bill Parnell. “Recent safety issues in the sector and a failure to comply with quality-control requirements are linked to the high turnover of staff and pandemic factors, resulting in more ‘inexperienced’ workers and managers on production lines.”
Reducing the skills gap through strategic solutions and increasing industry resilience
Addressing issues around competence in the workforce calls for a sustained, coordinated, and multipronged approach to hiring. This also includes targeting alternative talent pools and priming the next generation. Major players, including Airbus and Boeing, are actively investing in STEM education programmes to spark interest in younger generations.
Some of the strategic solutions to address current workforce gaps and ensure industry resilience include:
Upskilling and reskilling training: Retooling is not just for young graduates but also for mid-career employees and returners. Notably, the Pact for Skills, a key initiative of the European Commission, aims to upskill and reskill 30% of the current EU workforce within the next five years.
Technology and digital solutions (Industry 4.0): With the adoption of new technologies like blockchain, AI, and data analytics, the industry is hoping to bridge the skills gap by automating certain processes, which should free up engineers to add the human touch where it most counts. Responding to the acceleration of digital transformation, the future of aerospace manufacturing will likely depend on how effectively the industry can integrate advanced technologies into its operations and trainings.
Talent forecasting: Effective succession planning rests on the sector’s ability to forecast its skills and capability requirements adequately, while anticipating the key skills needed in the next 5-10 years. By performing skills forecasting or ‘foresighting’, it will be easier for firms to define training metrics for individual employees at each step of their professional development.
Extended learning programmes: Targeted education programmes, including apprenticeships, offer valuable hands-on experience and a direct pathway into the industry. Aerospace manufacturers are investing more in research and training to address challenges related to composite damage detection, repair processes, and certification.
Innovation in workforce management: Leveraging advanced technologies such as augmented reality and AI can enhance training efficacy and streamline operations. Where possible, the use of flexible work arrangements and remote collaboration tools can expand the talent pool by tapping into global resources.
A role for risk management and insurance
Insurance carriers are looking at talent shortages in the aerospace manufacturing sector more closely, given how a lack of competence and/or burnout can result in a higher frequency and severity of claims.
- The shortage of skilled labour can cause production issues, such as defects in manufactured components and systems, resulting in claims related to product quality and safety.
- Production delays can lead to contractual disputes and claims from clients or collaborators over unmet timelines and specifications.
- The absence of skilled workers may contribute to a higher risk of malfunctions and accidents in the workplace, leading to workers' compensation claims.
- Product liability claims arising from product defect harm/injuries become more common in product liability litigation and are often one of the main issues that a jury or judge determines.Potential costly claims associated with a less experienced workforce can necessitate higher premiums to cover the increased risk exposure.
- Underwriters may tighten terms and conditions and implement stricter coverage limits, higher deductibles, and more rigorous policy exclusions to mitigate potential losses.
Let Gallagher help you
Gallagher Specialty, a leading risk adviser, offers a collaborative approach to risk management, involving close collaboration between procurement professionals, risk managers, and insurance brokers. Together, we can advise on a range of risk mitigation and risk financing solutions to keep your business thriving.
Solutions for aerospace collaboration initiatives
Mitigating risks associated with joint ventures, strategic alliances, and international partnerships. C-suite can integrate our insurance considerations into collaboration agreements to protect against legal, financial, and operational risks.
Strategies for aerospace risk mitigation
To promote safety and quality assurance within aerospace operations, risk managers and insurers can conduct risk assessments and secure appropriate insurance coverage to protect against liability and reputational risks.
Tactics for aerospace business continuity
Enhance financial stability and resilience through strategic insurance planning. Mitigate financial risks and protect assets to ensure business continuity in the face of unforeseen events, such as natural disasters, economic downturns, or geopolitical disruptions.
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