Second-tier and third-tier vendors to the Airbus and Boeing narrowbody manufacturing programs will struggle to maintain a smooth flow of their products to the two major OEMs’ assembly lines if the two companies decide to accelerate A320neo and 737 monthly production rates in sudden large increments, according to United Technologies CEO Greg Hayes.

Responding to a financial analyst’s question during UTC’s first-quarter 2018 earnings call on Tuesday morning, Hayes said such suppliers stand to be the manufacturers most affected by any Airbus and/or Boeing decision to increase in any sudden sizable chunk the monthly assembly rate of its single-aisle aircraft.

“It is something we are struggling with today,” said Hayes. “At Pratt & Whitney we are at rate 55 with [geared turbofan] engines...and we have committed to take the rate up over the next couple of years. But for second- and third-tier suppliers, I question if the sub-tiers really have enough capacity. If we are going to see big jumps [in A320neo and 737 production rates], it will be a problem, so you will see big bottlenecks.”

Hayes said a shortage of skilled production personnel globally stands as the main reason UTC worries about the ability of aerospace vendors to increase their production quickly to meet the requirements of Airbus and Boeing. “One of the biggest shortages we’re seeing is not materials but workers,” he said. “Having trained workers available is a big challenge.”

This shortage is becoming manifest at a crucial time for the airline industry, according to Hayes. OEMs such as Airbus, Boeing, Pratt & Whitney, and UTC Aerospace Systems now boast seven-year order backlogs for their single-aisle jets, turbofan engines, and aircraft systems, even at the unprecedented monthly rates Airbus and Boeing have said they intend to achieve. “The reason for the seven-year backlog for narrowbodies is airlines need the lift,” he said. “Oil prices, though they’re up a bit, are still relatively moderately priced,” and demand for additional seat capacity globally remains strong.

While potentially offering unprecedented revenue and profit opportunities, the situation presents a particularly important challenge to UTC Aerospace Systems (UTAS) as production of new-generation aircraft models increasingly replaces production of previous-generation aircraft, according to Hayes. The CEO explained that UTAS’s largely electronic systems for new-generation aircraft generate much lower margins than they do for the largely hydraulic or pneumatic systems it makes for previous-generation aircraft because the newer systems use fewer moving parts, making them more reliable. UTAS has had to respond to the phenomenon. “It has worked very hard to take cost out…[and] is very focused on lean [manufacturing techniques] to continue to take margins out as older aircraft are replaced by newer, lower-margin” models, he said.