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Raytheon: Vaccine mandate will likely add to supply chain disruptions

Raytheon's new Cityline campus in Richardson, TX. (Jpalens, Wikimedia Commons/Released)

The Biden administration’s federal contractor vaccine mandate is expected to cause a “minor level of disruption” in the defense supply chain, the head of the world’s second-largest defense company said Tuesday.

But Raytheon CEO Greg Hayes added that his company would on balance benefit from vaccination efforts like the Dec. 8 deadline for federal contractors to get vaccinated or receive a medical or religious exemption.

“We certainly expect that there will be some disruption in both the supply chain and with our customers as a result of this, but we’re going to work our way through it,” Hayes said Tuesday on the company’s quarterly earnings call.

Raytheon put a vaccine mandate in place for its employees before the Biden administration announced all federal contractors must get the shot.

Companies across all sectors have been facing supply-chain issues driven by the pandemic and other factors, causing prices of raw materials and other items to skyrocket.

“It’s just harder to get material in the door on time,” Hayes said. “We’re also seeing labor shortages in our supply chain, which is also slowing down input and I think that’s going to be a continuing problem into next year.

“The vaccine mandate [is] probably not going to help that, although the vaccine mandate probably will help us on the commercial aerospace side if everybody gets vaccinated, so we’re all for that,” he continued.

More than half of Raytheon’s business is dependent on commercial air travel, which has been severely disrupted by the COVID-19 pandemic over the past two years. The company is a major supplier of engines, avionics and other aircraft components to both Boeing and Airbus.

The decline in passenger travel has led airlines to park fleets of aircraft. Domestic passenger travel has increased in recent months and the U.S. is scheduled to allow vaccinated international travelers to enter the U.S. beginning next month.

“While we anticipate the pending vaccine mandate may put further pressure on the supply chain in the near term, higher vaccination rates will continue to build confidence in the safety of air travel going forward,” Raytheon CFO Neil Mitchill said on the call.

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