CompositesWorld
Issue link: https://cw.epubxp.com/i/791367
MARCH 2017 6 CompositesWorld COMPOSITES: PAST, PRESENT & FUTURE » Over the past 10 years, the aerospace industry has been marked by a lot of design innovation and technology introduction, starting with the Airbus (Toulouse, France) A380, and followed by e Boeing Co.'s (Chicago, IL, US) 787 and the Airbus A350. But there are important changes coming. We're entering a new period, one not so focused on the above but instead on a theme of "better, cheaper, faster." e past decade was about innovation; the next will be about produc- tivity, and this change will require different success factors from aerospace suppliers. Worldwide aircraft production today, across all market segments, is valued at US$180 billion, and should peak at nearly US$210 billion in the year 2021. A slowdown is likely after that. e good news is that aerospace is and will remain a growth market — it was the only major capital goods industry that grew through the Great Recession. Large jetliners account for more than half of this market value, and the military segment looks to be on a growth trajectory. But I've focused on the commercial air trans- port market, because this is where the clear majority of aerocom- posites are used. We've been in a very unusual period: An incredibly large number of aircraft orders have been placed over the past few years, and these orders have been driven largely by a combination of high jet fuel prices and the current ultralow cost of capital. Simply put, airlines wanted more efficient aircraft to offset fuel prices, and could afford them. Although jet fuel cost has ebbed since 2012, continuing low interest rates are supporting fleet recapitalization and current aircraft orders. at said, reduced oil prices do impact twin-aisle aircraft, making it less expensive to keep older aircraft flying, which has reduced backlogs for larger twin- aisle planes, such as the 787. e bottom line is that there is currently a record number of orders booked for single aisles, including the newer re-engined versions of the Airbus A320 and the Boeing 737. Both Boeing and Airbus want to get to a production rate of 60 single-aisle units per month, because this is where they make their money, given the current weakness in the twin-aisle area. e Boeing/Airbus duopoly is, in fact, dependent on single- aisle aircraft sales for the vast majority of their profits, which is the motivator for increasing production rates. Yet, the two companies have for years been engaged in a market share competition. As a result, both have offered single-aisle products below list prices, so the realized prices (what air carrier customers have actually paid) for A320s and 737s have remained virtually unchanged since 2002. Some argue that single aisles have become commodities. e two OEMs are now shifting focus to increasing their profits, to as high as 15-20% margins. Boeing and Airbus are undertaking initiatives that include growth in higher margin services (aftermarket) revenue, which will include new value propositions and, potentially, acquisitions of service companies. Others include aggressive supplier cost reduc- tion through initiatives like Boeing's "Partnering for Success," plus better labor agreements, more auto- mation and "lean" programs. In aero- structures, OEM tactics will include part redesigns, a move to lower-cost processes, material substitution, tougher commer- cial contracts and recapturing more scrap. e bottom line is that we're in for a period of extreme focus on cost, that is, reducing costs to pursue profits. Expect more automotive-style operations and practices. So, what are the implications for suppliers? Typically, the aero- space supply chain includes 30-60 Tier 1 suppliers that are respon- sible for systems integration; hundreds of Tier 2 suppliers that make principal components; thousands of Tier 3 suppliers respon- sible for subcomponents, and perhaps 20 to 50 Tier 4 compa- nies that supply materials and processes (metals and composite prepregs). e OEMs prefer to deal only with Tier 1s, so those firms are the primary targets of OEM supply chain initiatives, and they'll face enormous pressure in terms of pricing and selec- tive customer vertical integration. is will lead to continued The past decade was about innovation and new technology. The next will be about productivity. Aerospace composites in "the more for less" era Tier 2 suppliers face a squeeze from consolidating Tier 1s and Tier 4s. The clear overabundance of Tier 3 suppliers spells certain attrition on that level of the supply chain. Source | AeroDynamic Advisory OEMs Aircraft & aeroengine Tier 1 Systems Integration Tier 2 Sub-assembly manufacture Tier 3 Make-to-print components Tier 4 Materials & Processes AEROSPACE SUPPLY CHAIN Typical number per program 30 - 60 100s 1,000s 20 - 50 Aircraft OEMs Aeroengine OEMs Systems & major structures Modules & accessories Principal components Sub-components Mill product, casting, forging, other Consolidating