Competitiveness and New Development Opportunities in Aerospace

Transcription

1 Competitiveness and New Development Opportunities in Aerospace Desmond Hickie Emeritus Professor, University of Chester, UK

2 Outline Key characteristics of the aerospace industry Current issues facing the industry Opportunities for new or developing players

3 Industry Structure Involves design, manufacturing, assembly and servicing Mature and, among prime contractors, oligopolistic Global customer markets and globalising supplier markets Has long and complex supply chains

4 High Technology and Risk Incorporates a wide range of technologies, including new ones (e.g. new materials, biofuels) R&D and manufacturing are hugely expensive and knowledge intensive Time horizons are long for development, supply chains and aircraft These involve risk it is The Sporty Game

5 Concentration and Diversification Organisationally the core of the industry its prime contractors and aero-engine manufacturers are at best oligopolies Geographically they are concentrated (e.g. Seattle, Toulouse) But, the supply chain is much more organisationally and increasingly geographically diverse

6 The Role of Governments Governments have played a critical, arguably dominant, role in the industry since its inception Governments impact heavily on the industry s structure, collaborations, R&D, products, customers and location

7 International Collaboration R&D, capital investment and knowledge requirements on major projects have stretched the capabilities of single companies even single nations National markets are too small even the US Manufacturers see international partners as a way to broaden market access Governments are unwilling or unable to fund major projects alone Hence major projects are usually the products of international collaboration

8 Aerospace in 2013 Military expenditure is under severe - pressure in Europe and the US Commercial aviation sales have more than compensated for the decline in military programmes both Boeing and EADS increased civil earnings by 7% in 2011 The key focus for commercial aviation growth is in developing markets (e.g. Asia, Middle East)

9 Key Industry Issues 1. Managing the decline in military programmes and the downward pressure on costs Developing other markets exports and adjacent markets

10 Industry Issues 2. Managing the growth in commercial aviation Global air traffic growth is strong and steady. It rose 5.9% in 2011(revenue passenger miles) An 8 year order backlog at 2011 production rates Increased demand will be met partly by new aircraft (e.g. Bombardier C series) and new suppliers (MRJ, COMAC C919, Irkut MS21) But most will be met by ramping up by Boeing and EADS

11 Industry Issues 3. The necessity to innovate and reduce the costs of ownership 64% of senior industry executives identify innovation as critical to competitive advantage 15% operating cost reductions promised by the A320 NEO, B737 MAX and Bombardier C series Co-creation with customers and suppliers seen as a way to focus R&D and cut costs

12 Industry Issues 4. Developing and managing increasingly complex and globalised supply chains Globalised supply chains are seen as ways to: gain market access share risks and investment costs cut production costs access skilled labour

13 Industry Issues But a complex and geographically dispersed supply chain brings managerial headaches such as IP leakages, delays due to underdeveloped technologies or financial weakness Primes and Tier 1 suppliers are increasingly focusing on improving supplier performance, enhancing the supplier s role (e.g. subsystem integration) and integrating the supply chain more closely This potentially builds long-term relationships, but also creates a high degree of mutual interdependence, and may jeopardise technological leadership

14 Industry Issues 5. The need to attract and retain engineering and managerial talent to design and build increasingly complex aircraft in the face of defence layoffs and demographic challenges 6. Industrial restructuring - vertically, in particular to acquire new technologies - horizontally, if governments will allow it!

15 Industry Issues 7. The emphasis on cost of ownership and long product lifecycles are reinforcing the criticality of product support/maintenance, Repair and Overhaul to competitiveness leading to technological and process improvements

16 Opportunities and Issues for new or expanding players 1. Moving away from simple offsets towards partnerships across a more integrated supply chain 2. Focus - on a sector. 3. Focus on an activity, from R&D to MRO. Consider its applicability to adjacent industries, and potential to develop critical mass and support an industrial cluster

17 Opportunities 4. Developing and maintaining a local technological capability and the capacity to innovate (e.g. finding partners, acquisitions) 5. Developing or attracting a highly educated labour force - engineers, managers and blue collar workers (- an infrastructure of universities and technical colleges) 6. Provide adequate IP protection

18 Thank you for your attention Any questions?