Moving into 2015, the commercial jet market continues to grow at record levels, with the Boeing 787, 777X, 737 MAX, and Airbus A350 XWB, A320neo, and A330neo programs the stellar performers.
Airbus’ aircraft deliveries in 2014 were up for the 13th year in a row, with 629 aircraft delivered to 89 customers – 490 A320 family aircraft, 108 A330s, 30 A380s, and the first A350 XWB, to Qatar Airways.
Airbus booked 1,456 net orders from 67 customers, its second-best year ever, with 1,321 single-aisle aircraft and 135 widebodies. By year’s end, the backlog had climbed to a record 6,386 aircraft valued at $919.3 billion at list prices.
Boeing delivered a record-setting 723 commercial airplanes in 2014, maintaining its position as the world’s largest airplane manufacturer for the third consecutive year. Boeing’s widebody airplanes – 747-8, 767, 777, and 787 Dreamliner – accounted for more than 60% of all twin-aisle deliveries last year, and the single-aisle Next-Generation 737 program delivered a record 485 airplanes.
In 2014, Boeing booked 1,432 net orders worth $232.7 billion at list prices. Its backlog of unfilled commercial orders grew to a historic high of 5,789 airplanes.
Embraer delivered 92 E-series single-aisle commercial jets and 116 executive (92 light and 24 large) jets. By year-end, the firm-order backlog stood at $20.9 billion, mainly from 459 E-series jets.
Bombardier exceeded its 2014 delivery targets with 290 aircraft (204 business, 84 commercial, and two amphibious aircraft), compared to 238 aircraft deliveries the previous year (180 business, 55 commercial, and three amphibious aircraft). An engine problem slowed the test program on its CSeries single-aisle commercial jet last year, and the company is pausing its Learjet 85 business aircraft program due to weak demand. Despite reducing its workforce by approximately 1,000 employees, the company will continue to develop its larger Global 7000/8000 business jets where market demand is trending. Gulfstream and Dassault Falcon Jet also are introducing larger executive jets.
Teal Group Analysis
The aircraft market hit yet another new high in deliveries by value in 2014, says Teal Group Vice President, Analysis, Richard Aboulafia, in his annual perspective. The industry continues to outperform almost every other part of the world economy.
The largest segment, jetliners, continues to lead the industry with an ongoing production ramp that looks set to continue for another few years. Fixed-wing military aircraft are prospering as the F-35 program finally starts to see larger production numbers. Business aircraft are at last seeing a broad-based market recovery.
The only weakness can be seen in the rotorcraft segment, as delivery numbers fall in the aftermath of the Iraq and Afghanistan surges. There’s also some softness in civil rotorcraft demand, which may be aggravated by lower oil prices.
While emerging markets are either disappointing or slowing, U.S. aircraft demand has come back strongly. U.S. airlines are now among the healthiest in the world, and a major source of jetliner demand.
A growing perception of international threats and a Republican victory in the mid-term elections has boosted the outlook for many defense programs.
There are risks: Lower fuel prices could impact demand as carriers re-think their jetliner replacement plans, particularly if interest rates rise. There’s also the risk that Boeing and Airbus continue their aggressive ramp-up plans beyond the point of prudence. This would lead to overcapacity and a market drop after 2018.
Not all programs are prospering. The C-17, F/A-18, F-16, and V-22 lines are either slated for closure or at risk of closing. But in terms of the topline market, we look set for another record year ahead.
Teal Group Corp.
“Commercial aviation has been a very good market the last year and looks to remain so,” says Wayne Plucker, director of Frost & Sullivan Aerospace & Defense Research. “There will be some slippage in overall numbers, but the thirst for new, more efficient models will maintain the market.” Plucker notes that the regional jet and turboprop market has declined, but the relationship between the large carriers and their regional code-shares will continue to drive the market, just in lower numbers. Business aviation is still good for the large and medium-sized jets, and belated recovery by medium and light jets has started, although in a minimal way.
“Rotary wing aircraft sales have been modest, but consistent,” Plucker adds. “General aviation is still a basket case, and unfortunately, there is not a lot of light at the end of that tunnel.”
Not surprisingly, the military aircraft market is shrinking.
“Deliveries of F-35, KC-46, and a few selected new builds will help maintain the overall market, but globally, the number of sales and deliveries has declined,” he says.
That includes sales of unmanned aerial system (UAS) platforms for the military. There is some broadening of the market, however, as more countries adopt some level of governmental UAS policy and procurement. Plucker sees more opportunity in the commercial realm.
A long-term boom?
Aerospace suppliers are still in the early days of a long-term boom. At a recent summit hosted by GE Capital, 80 aerospace suppliers, manufacturers, and private equity professionals involved in commercial aircraft gave these responses to a survey:
- 84% – Plan to add to their workforces during next 12 months
- 76% – Expect aircraft deliveries will grow through at least 2016
- 91% – Think they’ll win new long-term supply agreements in next 3 years
- 92% – Believe merger and acquisition activity will increase
- 87% – Will invest in new manufacturing equipment in next 3 years
- 27% – Are using additive manufacturing (AM)
- 10% – Will use AM in the next 12 months
- 37% – Will use AM in the next 1 to 5 years
Steve Mason, vice president, Aircraft Analysis, CIT Aerospace, a financial holding company with more than $35 billion in financing and leasing assets, says the Asia-Pacific region will need approximately 13,000 new aircraft during the next 20 years to support the projected 6% annual growth in traffic.
The growth in low-cost carriers in China and elsewhere in Southeast Asia also will push demand for new airplanes, some produced abroad and some locally.
“Out to 2025, we estimate deliveries of Asia-produced aircraft to Asian customers to be between 6% and 9% of total deliveries to the region,” Mason says.
Regions such as China and East Asia have not yet ordered enough aircraft to meet forecasted demand.
Mason says, “This will bring opportunities for lessors who have ordered new technology, single-aisle and twin-aisle aircraft, which will deliver between now and 2020.”
Space & satellites
Boeing officials say airlines and lessors are set to benefit from increased competition among lenders and historically low interest rates in 2015.
“The strength we’re seeing in aircraft finance is largely the result of a healthy and balanced global demand for new aircraft, which is being driven by anticipated growth in passenger traffic, record airline profitability, and the continuation of a replacement cycle to improve the fuel and performance efficiency of the global fleet,” says Tim Myers, vice president and general manager, aircraft financial services, Boeing Capital Corp.
The stable performance of aircraft finance and investment during the past few years is attracting new participants and driving diversification both geographically and in terms of funding sources.
Lessors will support about 40% of all deliveries this year, with about $124 billion in deliveries across the industry.
Boeing Capital Corp.
Skilled labor in short supply
Jeff Owens, president of Advanced Technology Services Inc. (ATS), thinks skilled labor is keeping aerospace manufacturers grounded.
“With the pent-up demand for both commercial and military airplanes, aerospace manufacturers are experiencing a skilled labor shortage that has become increasing exacerbated by the retiring baby-boom generation,” Owens says.
In recent research commissioned by ATS, 50% of aerospace manufacturers responded they were being “extremely” held back by the inability to hire the skills needed to grow their business. While close to one-third of the manufacturers felt they had ample capacity to handle demand short-term, less than 13% felt they could handle the forecasted surge in demand due to the skilled labor shortage.
The survey predicts the skills shortage during the next 5 years will cost aerospace manufacturers an average of $15 million in lost production.
Another study commissioned by ATS put the blame for the skills shortage squarely on the lack of investment in training. Owens says manufacturers blamed insufficient training for the inability to maintain product quality and high maintenance-and-repair costs due to mishandling of manufacturing assets.
Kim Choate, market director, mass transportation, innovative plastics for SABIC, sees four key trends influencing materials for use in aircraft interiors.
Lightweighting – Thermoplastic, foam-based materials are being developed to replace PVC/PMMA-based materials, and acoustic insulation made of polyetherimide fiber to replace glass-filled insulation.
Metal replacement – Carbon fiber composites have comparable strength and other advantages compared to aluminum when considering applications such as tray table arms and seating supports – and further lightweight an aircraft.
Greater design freedom – The airlines’ quest to create distinctive passenger experiences is the catalyst for the introduction of transparent materials that enable fresh approaches to interior design.
Additive manufacturing – Most small-volume parts now reside in hidden spaces, but the opportunity exists to use additive manufacturing for larger-scale parts in cabin interiors where compliant grades of polyetherimide and polycarbonate can play a role.
Kevin Deal, vice president, Aerospace & Defense at IFS North America, sees five trends impacting civil aviation maintenance, repair, and overhaul (MRO) in 2015.
Mobile comes of age – “We will see significant strides in the integration of mobile apps as part of a full information system (IS) across all MRO operations, with airline maintenance crews equipped with essential mobile apps to access relevant information at the time of need,” Deal says.
Wearable technology – Japan Airlines is running a trial of Google Glass in the maintenance process. The video-equipped glasses are worn by engineers working around the plane, with images sent to maintenance specialists for assessment, who then report any issues they see back to the engineers on the ground. Work is completed promptly, can be assessed in real time, and information is recorded to assess issues down the line.
Big data – Big data can be used for predictive analysis. By providing key data around asset failures, this abundant information can help inform and improve future designs, optimize usage, and lower the total life cycle cost.
Smaller vendors need to innovate – OEMs are shifting responsibilities for increased productivity and innovation to their suppliers, forcing smaller vendors to radically overhaul operating costs while driving innovation in order to protect relationships.
Modular information system (IS) solutions will allow smaller tier players to change their production processes, show more transparency in their production controls, and give instant visibility of their margins. Modularity allows them to pick and mix applications to meet their particular needs, and by deploying through the cloud, they can avoid expenses traditionally associated with ERP systems.
ROI from additive – AM contributed 10.2% to the industry’s $2.2 billion global revenue in 2012. All indications are that this will continue to grow. AM will reduce material costs, decrease labor, and increase availability of parts at point of use, dramatically impacting the supply chain.
Frost & Sullivan’s Plucker cautions, though, that the biggest limitation is AM’s lack of FAA and EASA approvals. Until there are improved testing and inspection methodologies, AM production will be limited to non-flight-critical components.
Robots on the rise
David Skidmore, a strategic solutions specialist at Concept Systems and a certified member of the Control System Integrators Association, says machine vision, robotics, and manufacturing intelligence are enabling the aerospace industry to automate tasks that pose safety risks for employees, are tedious, or time consuming – increasing production capacity and improving quality.
“Applications for intelligent robotics are becoming more prevalent,” Skidmore says.
Having a robot move a stack of parts allows the work cell to make active and intelligent decisions, identifying and processing the correct part rather than just pulling a part from the stack. Human interactions with robots are also a focus, with features to ensure movements, speeds, and torques for robots to integrate safely with workers.
Moving to the cloud
“Cloud deployment is one of the most dramatic, game-changing developments to impact the aerospace and defense industry in decades,” asserts Edward Talerico, aerospace and defense industry director at enterprise software company Infor.
“The advantages are simply too dramatic to pass up,” he adds. “Even the highly cautious and security-conscious Tier 1 manufacturers are discovering that cloud deployment is the right move.”
Making system changes is difficult due to the vast amount of legacy program data which must be retained. However, no company can afford to risk their operations on outdated systems. Cloud solutions are faster to implement, typically taking months, not years. Cloud deployment offers agile and responsive information technology solutions, important for companies competing in a global market.
During the last 20 years, every major commercial aircraft has been designed on the Dassault Systèmes software solutions. According to the company’s VP of Aerospace and Defense Michel Tellier, advancing the industry to the next level will be the responsibility of the supply chain. A new kind of alliance between primes and their suppliers will take place in 2015 for this to happen. Tellier gives his predictions for 2015 and beyond in this brief video at http://bit.ly/18I0q6N.
Advanced Technology Services
Aerospace & Defense at IFS North America
Control System Integrators Association (CSIA)
Frost & Sullivan
GE Capital Corp.
IFS North America
About the author: Eric Brothers is senior editor at Aerospace Manufacturing and Design, and can be reached at 216.393.0228 or firstname.lastname@example.org.