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At the beginning of 2019, the U.S. government was in partial shut-down, interest rates were rising, stock markets were highly volatile, and a majority of business leaders surveyed by the Associated Press expect a recession this year. But you didn’t hear such doom-and-gloom from the aerospace community. In the final weeks of last year, Airbus Boeing Embraer
Airbus is building a new final assembly linePhoto credit: Airbus SES
All those orders translate to jobs. Airbus is seeking about 600 experienced aircraft structure/installation mechanics, aircraft cabin installers, and aircraft electricians to work on the assembly line it’s building in Mobile, Alabama, to produce A220 regional jets – formerly known as the Bombardier CSeries. A recent Washington state aerospace job fair drew more than 1,500 prospective candidates to meet with nearly 40 companies looking to hire. Plans to continue ramping up build rates will require more production efficiency from suppliers.
Airbus delivered 800 aircraft in 2018 (20 of those were A220s via Bombardier) with 747 net orders. (See commercial aircraft production table for comparison.)
Airbus is producing A320 family single-aisle jetliners at the rate of 52 per month, with plans to go to 60 or more.
For 2018,
Boeing booked 893 net orders valued at $143.7 billion – after finalizing 203 airplane sales in December, of which 181 were 737 MAX. Boeing increased production of the 737 in the middle of 2018 from 48 to 52 airplanes per month and plans an increase to 57 per month in 2019.
Ihssane Mounir, Boeing’s senior vice president of commercial sales and marketing, says, “Another year of healthy jet orders continues to support our long-term forecast for robust global demand that will see the commercial airplane fleet double in 20 years.”
Richard Aboulafia Vice President of Analysis, Teal Group The world aircraft market can today be characterized as two thoroughbreds and a herd of donkeys. Two segments – single-aisle jetliners and combat aircraft – are providing strong growth, even if the first of these have stumbled during the past few years due to production difficulties. The other segments are stubbornly staying in place.
Overall global aircraft output in 2018 rose just 1.9% by value over 2017 (using constant dollars). But according to our tentative year-end numbers, combat aircraft rose by 7.6%, and single aisle jetliners by almost 20%. Everything else dragged output down to that 1.9% level. Twin-aisle jetliners fell 6.3%. Regional aircraft fell by 6.5%. Business aircraft fell by 3.6%. Civil rotorcraft rose by a modest 4.7%, but the much larger military rotorcraft segment fell slightly. Military transports fell 5.2%.
Even more concerning is that all these trends look set to continue. Each of these underperforming segments lack identifiable growth drivers. The one possible exception is the business aircraft market, where conditions look set to produce a recovery in orders and deliveries. Yet we’ve seen these positive market conditions present several times during the last depressed 10 years, and they have yet to translate into better numbers.
Still, the thoroughbreds continue to perform. The fighter market, driven by global tensions, higher defense spending, and the F-35 Joint Strike Fighter production ramp, is in a long-term growth spurt, going from $16.6 billion in 2016 to more than $19 billion last year, and $30 billion in deliveries by 2023. Single-aisle jetliners, thankfully the largest single aviation industry segment, have at least three more years of growth ahead, following on to a remarkable 14-year super cycle, twice the normal duration of a boom market.
Overall, we see the aviation industry continuing to expand into the 2020s at a slow pace. But this slow pace reflects a strange combination of leaders and laggards.
Embraer’s
Boeing’s 787 Dreamliner, 777, and 737MAX offeringsPhoto credit: Boeing
For 2019, company officials forecast deliveries of 85 to 95 commercial jets, 90 to 110 executive jets (light and large), 10 A-29 Super Tucano military trainer aircraft, and two multi-mission KC-390 cargo aircraft. With corporate and government approvals in hand, officials expect its 20/80 commercial join venture with Boeing to close by year’s end.
In 2018, Bombardier
Douglas Royce Senior Aircraft Analyst, Forecast Int’l In its study, “The Market for Fighter Aircraft,” Forecast International
Production during the 2018-2027 forecast period will peak at 376 aircraft in 2022. Annual production will then decline through 2027, when production falls to 281 aircraft.
The Lockheed Martin F-35 will be the largest fighter program during the next decade, due to its selection as tactical fighter for the U.S. Air Force, Navy, Marine Corps, and export sales. Of the 3,290 fighters expected to roll off production lines during the next 10 years, 1,466 will be F-35s – more than 45% of the market.
The outlook for the remaining U.S. fighters – the Boeing F-15 and F/A-18E/F Super Hornet and Lockheed Martin’s F-16 – has improved. Uncertainty over the F-35’s capabilities and the high cost of early production aircraft are leading other countries to consider these legacy U.S. aircraft.
One key market for legacy aircraft from the U.S. and Europe is the Middle East. Orders from energy-rich customers in the region are helping to extend production lines at Boeing, Lockheed Martin, Dassault, and the Eurofighter consortium. Russian and Chinese fighters only occasionally compete with Western-built fighters in the international market.
Embraer’s E-195-E2 jet in low-cost carrier Azul colors. A Boeing-Embraer joint venture will seek to compete in the regional jet market.Photo credit: Embraer
As aerospace manufacturers look to new materials and processes to improve performance, shops will use more nonmetals, such as ceramics, that deliver exceptional heat resistance without sacrificing strength. Aerospace manufacturers will increasingly move toward high-mix/low-volume (HMLV) production strategies that require a modular approach to grinding technology.
In response, manufacturing technology providers have developed grinding machines that can handle multiple processes in a single setup – reducing process time by half for parts such as turbine vanes or compressor blades. Modular machines feature larger tool magazines that support multiple jobs, offering milling and drilling, as well as 5-axis movement. For continuous operation, the expanded tool changer can be loaded with backup wheels and tools for replacing consumables.
As part families and job numbers grow, modularity enables manufacturers to rapidly switch between jobs with a HMLV strategy. When the job changes, production can shift with a change in programming and tooling as opposed to requiring a new production cell design.
By radically reducing the number of setups required to produce parts, manufacturers have cut their labor requirements by as much as 60%. And every setup operation eliminated from a process means sharply reduced risk of scrapping parts.
With modular machines, United Grinding is supporting aerospace manufacturers in their quest to optimize production and meet the challenges of the 21st century without sacrificing the need for part and process validation to eliminate liability concerns.
Bob Kipps Managing Director, KippsDeSanto The number of aerospace merger & acquisition (M&A) deals in 2018 increased 35% to almost 150 transactions with valuations near record highs. Six factors will influence aerospace M&A in 2019.
Growth: 7+ years of increasing aircraft backlogs and air travel demand growth rates of 7% underpinning valuations.
Mega corporate mash-ups: The mergers of Boeing/KLX, United Technologies/Rockwell Collins, Safran/Zodiac, Harris Corp./L-3 Technologies, and TransDigm/Esterline Technologies will drive others to consider their strategic future and compel suppliers to merge to gain negotiating leverage.
U.S. defense budget increases: President Donald Trump may recommend increasing the budget from FY2019 to FY2020, perhaps by 4.7%, to $750 billion. Healthy growth and improved backlogs have heightened expectations for aerospace and defense.
Aerospace composites manufacturing: Projected to grow 8.5% annually, composites aren’t just for airframes – aircraft engine manufacturers are using composites in fan blades, cases, and shrouds. Acquirers are seeking to purchase composite capabilities across all aerospace sub-segments. Albany Int’l, Hexcel, and Applied Composites are active purchasers of composite companies.
Platform presence: Purchasers are seeking to establish or expand presence on key aircraft platforms with years of backlog and growth, such as the F-35, Boeing 737, and Airbus A320. Platforms with a bright, clear future are desirable and command premium valuations.
2020 presidential election: With 23 presidential candidates in 2016, the road to the presidency remained obscured until the end. Uncertainty about the potential change in 2020 may begin to affect expectations and, in turn, M&A valuations.
5 trends affecting 5-axis machining CNC control maker Heidenhain The skilled labor gap. Machine tool makers and their technology partners are developing solutions to help, including easier-to-use controls and programming functionality such as:
Touchscreen controls allowing operators to scroll/swipe through long lists, programs, tables Easier programming for complex cuts with clearly arranged support graphics Dynamic collision monitoring that senses, stops impending collisions Increasing global competition. Machines that easily and efficiently feed data to enterprise systems and machine monitoring programs can offer visibility and analysis to increase competitiveness and profitability.
Greater automation and safety challenges. Manufacturing environments increasingly demand that humans work alongside robots safely and efficiently. European Union countries already require functional safety; regulations are being considered in the United States.
New processes and tools for complex geometries, tough-to-machine materials. Trochoidal milling uses a constant circular interpolation movement for more efficient removal of material in scallops and pockets. It decreases wear on machines and tooling. Adaptive feed control can reduce cycle time by increasing feed rate during air cuts and reducing it as the cutter meets the material.
Evolving industry needs. Aerospace has increasingly stringent demands: consistently high surface quality, reliable compliance with tight tolerances, high machining speeds, and documentation/validation of processes accompanying production.
Gregg Wildes Ph.D., Innovation Leader, Business Development, DornerWorks Open software architectures; lower size, weight and power (SWaP); and accelerated data processing are three 2019 technology trends.
Open architectures enable system development to a technical standard available to all software developers, defining modular design with component interfaces. Interfaces let components communicate, enhancing interoperability and reuse. Open architecture systems promote competition and accelerate innovation.
Lower SWaP is enabled by the availability of smaller, higher-performance avionics and mission computer processors. Advance RISC [reduced instruction set computer] Machine (ARM) processors offer higher performance capabilities than Power Architecture and are positioned to grow market share in the DO-254 certified aerospace and defense computing market. System on chip (SoC) products with integrated ARM processors offer another avenue to computing performance.
Accelerated data processing continues to be in high demand, driven by sensor data (video, radar, LiDAR) for avionics and mission computing. SoC products offering field programmable gate array (FPGA) with embedded ARM or RISC-V processors offer significant algorithmic acceleration, often 5x to 80x the performance of traditional processors. Programmable solutions expand computing platform options for designers, providing processing to power performance not previously available, and are used in a growing number of A&D systems.
F-35As at Hill Air Force Base, Utah. Lockheed Martin continues to increase Joint Strike Fighter production rates and lower unit costs. Photo credit: U.S. Air Force
Dave Opsahl Vice President of Corporate Development, Tech Soft 3D For the technical software solutions industry, the pace of acquisitions and industry consolidation will continue. The pace of acquisitions in 2018 dwarfed that of recent years and shows no signs of slowing. The private equity market and corporate buyers have record cash reserves and historically low capital costs. Acquisitions (as measured by volume and value) should equal or exceed 2018.
Digital transformation becomes the dominant marketing message. In 2019, expect to see most solution providers cast their value in terms of how it enables digital transformation, as evidenced by the messaging on their websites.
Simulation Process and Data Management (SPDM) will be the next new thing. SPDM is turning the way we think of the role of computer-aided engineering (CAE) and simulation on its head. The goal is to democratize the use of analysis and simulation data, which will enable process improvements across multiple disciplines. Expect to see a host of new offerings coming in the SPDM space in 2019.
John Kenkel Vice President - Head of Strategy & Marketing, Cyient Five trends to watch in 2019:
Stronger focus on Asia-Pacific, closer engagements with the A&D supply chain. A network of commercial research, design, production, and operational support by defense equipment manufacturers is growing in the region as governments work to build a local industrial base for economic and security reasons.
Modernization of legacy systems, SWaP-C. Reducing size, weight, and power, plus cost (SWaP-C) is driving a focus on commercial off-the-shelf/modified off-the-shelf (COTS/MOTS) solutions combined with innovative design.
Digital transformation. At 4.1%, the A&D sector has one of the smallest percentages of sales earmarked for research and development (R&D). Industry will push adoption of digital innovation. Reliable partners will develop low-risk solutions that balance the intricacy of new technology with the need to increase proficiency at the lowest possible costs.
Artificial intelligence (AI), augmented and virtual reality (AR/VR), data analytics, advanced sensors, and the industrial internet of things (IIoT) will grow.
More-electric aircraft (MEA). All-electric aircraft (AEA) are still years away due to challenges in power density, efficiency, safety, and environmental sustainability. MEA integrates today’s components and systems into current aircraft. The shift toward MEA will reduce operating costs, fuel burn, and environmental impact.
Mergers and acquisitions (M&A). Not since the 1990s have we seen such consolidation. This cycle is being fueled by rising cost pressures, need to access new technologies and proof of concepts, emerging global opportunities and threats, and stakeholders’ demand for value. Strategic repositioning and engagement with trusted partners will be critical to optimize market share, become more competitive, and fill internal capability gaps while addressing new markets and opportunities. (See Cyient feature, pg. 20
In 2019, we expect Airbus and Boeing to experience further growth in production rates, with Boeing enjoying a slightly higher year-on-year production increase (8%) compared to Airbus (6%). Both manufacturers are to continue expanding production, until at least 2021, when we foresee a plateau. This will continue to put pressure on their supply chain to deliver on-time, while also considering the ongoing transition from the Boeing 737NG to 737 MAX and from Airbus A320ceo to A320neo. A major threat comes from the increased likelihood of a no-deal Brexit, which will have a major impact on supply chains, particularly on Airbus.
Industry consolidation will intensify. The past years have seen the emergence of major aerospace players, such as Collins Aerospace and Safran, partly dictated by the production rate ramp-up at Airbus and Boeing. We expect announcements of at least three major aerospace merger and acquisition deals in 2019, all among the upper tiers of manufacturing (system integrators).
Verticalization efforts by Boeing and, to an extent, by Airbus will continue in 2019. A key, internal, beneficiary of verticalization is information services, since owning systems and components provides access to big data on which to build valuable optimization solutions for customers. We also expect original equipment manufacturers (OEMs) to continue making partnerships and acquisitions in their rapidly growing services divisions.
Another important trend is the evolution of operations data platforms, delivered by Airbus’ Skywise, Boeing’s AnalytX, and GE Aviation’s Predix. OEMs are focusing on growing their solutions portfolios linked to these platforms and signing up as many airlines as possible. Airbus is more aggressive in this regard, with plans to grow its client base from 28 to 100 airlines by year end. Competition in this space will grow, as more OEMs and maintenance, repair, and overhaul (MRO) operations bring proprietary platforms and optimization solutions to market. Frost & Sullivan values this market at more than $1.5 billion in 2018, growing about 15% annually.
