Agile aerospace suppliers able to respond quickly can benefit from unprecedented growth and opportunity
The aerospace market has experienced unprecedented growth in the past five years, and the future outlook remains extremely favorable, observes Scott Porter, vice president at investment banking firm Moss Adams Capital LLC in Seattle. Moss Adams Capital serves more than 300 aerospace clients and Porter is seeing some interesting market trends.
“There is no better industry than aerospace, especially commercial aerospace, right now,” Porter recognizes, noting a “positive industry outlook and further growth expected over the next five years.”
| News from the I-90 Aerospace Corridor Engineers and executives committed to creating a better aerospace future assembled in Coeur d’Alene, Idaho, at the I-90 Corridor Aerospace Expo, hosted by the Idaho Aerospace Alliance, Inland Northwest Aerospace Consortium (INWAC), and American Manufacturer Network. The aerospace community in Spokane – a major city and home to Fairchild Air Force Base in the I-90 corridor – generates roughly $680 million in revenue and employs approximately 12,000 people annually, analysts report. Industry analysts also predict that aerospace manufacturing will grow by 20 percent over the next decade. The information in this article was presented at the I-90 Corridor Aerospace Expo. For more, visit: http://www.intelligent-aerospace.com/_search?q=I-90+corridor&x=0&y=0 |
Aerospace orders will continue to grow; production will increase at unprecedented rates, bringing opportunities for those in the supply chain able to respond quickly, Porter continues. “Growth brings challenges and opportunities. It’s a negative for those unprepared.”
Economic indicators illustrate that Africa, Asia, and South America – emerging markets – are leading the growth, Porter says. Asia represents 38 percent of all new orders over the next five years, he predicts.
2015 saw a 6.7 percent increase in passengers, driving the need for 900-plus new aircraft. The market, including demand for single-aisle and wide-body aircraft, is resilient to external shocks.
Airbus and Boeing officials expect deliveries to increase year-over-year going forward. Boeing deliveries are predicted to increase from 728 in 2016 to 935 in 2020; Airbus is expected to grow deliveries by roughly 25 percent over five years.
The aerospace community is not without its challenges, however. Challenges center around:
- competitive pricing and volume expectations,
- transformation in the supply chain,
- OEMs cost-cutting, driving the need for innovation in aerospace manufacturing
“Unprecedented growth and opportunity [exists] over the next five years for suppliers able to move quickly,” Porter explains. “Readiness, flexibility, and capacity” are key.
“Airlines, sick of waiting, are putting pressure on airframe manufacturers, who in turn are partnering with suppliers able to deliver quickly,” Porter says. There is a need, he says, for partnerships and integration:
- horizontally, by ramping up production with friendly competitors, and
- vertically, with suppliers and customers up and down the supply chain.
Porter urges increased participation in aerospace associations, and partnering with financial organizations/buyers. He also predicts greater industry integration with mergers and acquisitions, and through partnering with competitors to expand capabilities, reach, etc.
Precision Castparts Corp. (PCC) in Portland, Oregon, is a great example of an aerospace supplier success story following the principles laid out above, Porter suggests. The company focused on vertical integration in 2006, establishing and benefitting from a closed-loop ecosystem, he describes. Since that time, PCC has made 37 acquisitions, is a top supplier today, and benefits from operating margin growth of up to 12.6 percent, and greater access to and control over supply chains, he summarizes.
Lastly, it is “critical that aerospace [organizations] be involved in policies that affect them,” Porter stresses. “Don’t worry about the politics; get involved in policy – and the industry will grow more rapidly.”
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Global Aerospace Technology NetworkIntelligent Aerospace, the global aerospace technology network, reports on the latest tools, technologies, and trends of vital importance to aerospace professionals involved in air traffic control, airport operations, satellites and space, and commercial and military avionics on fixed-wing, rotor-wing, and unmanned aircraft throughout the world.
Courtney E. Howard | Chief Editor, Intelligent Aerospace
Courtney enjoys writing about all things high-tech in PennWell’s burgeoning Aerospace and Defense Group, which encompasses Intelligent Aerospace and Military & Aerospace Electronics. She’s also a self-proclaimed social-media maven, mil-aero nerd, and avid avionics and space geek. Connect with Courtney at [email protected], @coho on Twitter, on LinkedIn, and on Google+.
