Price management within locked contracts

Fixed (locked) contracts often provide substantial benefits to both parties. For one party, they promise stability and a trusted partner. For the other, they guarantee predictable business and revenue. This is the essence of fixed contracts – an arrangement that works smoothly in a steady world. But what happens when the world becomes anything but steady?

Consider the story of an aerospace maintenance and repair supplier. Locked into 5- to 10-year agreements with airlines, their contracts included a seemingly modest 2% annual price increase. It was a win-win—until turbulence hit. Between 2022 and 2023, the supplier found itself facing unanticipated annual cost surges of 8% to 10%. Skyrocketing material prices, soaring energy bills, increased…