KAI’s Boeing 787 parts supply contract with Subaru to provide relief to COVID-19 hit South Korean economy, says GlobalData

Following the news that Korean Aerospace Industries (KAI) and Subaru of Japan have signed an exclusive supply contract to extend deliveries of Boeing 787 parts till the end of certification);

Mathew George, Ph.D., Aerospace & Defense Analyst at GlobalData, a leading data and analytics company, offers his view:

“As of now, KAI’s agreement with Subaru is expected to last till 2038 with a total value of US$754m while helping to secure KAI’s supply chain of at least 20 Korean partners. This is important for KAI and South Korea’s government as it looks at ways to deal with the effects of COVID-19 on its economy and harsh realities faced by the civil aerospace sector. In April 2020, Subaru and Kawasaki had announced a halt in the production after losing orders from Boeing due to COVID-19. These announcements indicate a slow but determined return to long-term growth and security of the sector.   

“Last month, KAI secured a contract for the supply of 20 TA-50 trainer aircraft for KRW688.3bn (US$ 573m) to be completed by 2024, which was a boost for the company and suppliers at the same time. Other contracts were also announced that aligned South Korea’s strategic goals and the need to invigorate the local defense industry.

“This agreement helps the company with its civil programs, and comes with two companies in a much larger international supply chain for Boeing working together to ensure continuity of business. KAI will provide the components for the Boeing 787 Sec. 11 wing structure (Center Wing Box) for Subaru’s manufacturing at their Handa plant in Aichi prefecture, Japan.

“While companies were reorganizing and taking stock of their supply chain management with increasing focus on localization, partnerships such as these cannot be written off entirely. These agreements allow companies like Boeing to remain competitive in their pricing and allow them to focus their energies on other endeavors like a sustainable and green future for the aviation industry.”

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