Category Archives: supply chain

Grow into the North American Aerospace Industry

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Launch into the Aerospace Market in the Southeastern United States – update # 3

The Global Market Forecast and the new Chief Commercial Officer, Eric Schulz, Chief Commercial Officer by Airbus anticipates 37,400 new deliveries over the next 20 years with a current fleet of 21,500!

The value of it …$5.8 Trillion aircraft value!A320

10,600 aircraft will stay in service from these days.

Interesting to know that 54% ($3.2 Tn) in value is expected from small body i.e. 230 seats and 3,000 nm range and 25% ($1.4 Tn) from medium body i.e. 300 seats and 5,000 nm range.

Also, a growth of 10% ($0.6 Tn) in large body and 11% ($0.6 Tn) in XL categories are expected as well.

Backlog market shares of Airbus is 88% in medium body (A321 LR and A330 neo), 54% in smaller airplane (single-aisle plane). For larger plane, the backlog is 52% for L – A 350 XWB and 35% for the XL segment (A 380, A350-1000).

Like its peer, Boeing Current Market Outlook (CMO) is dedicated to forecasting new airplane demand over the next 20 years. In many ways, it paints a picture of the future of flight.

B737

Although the numbers do not match the analysis of the trends is the same.

Based on the CMO from Boeing, it anticipates 41,030 deliveries over the next 20 years with a current fleet of 21,500!   

The value of it …$6.1Trillion aircraft value!

3,070 additional planes will be flying over the US to reach 10,130 planes in active duty.

In a nutshell see the executive summary of this Market Outlook as below:

Boeing Global Forecast 2017-2037

Do you want a “piece of the Business”? Question is more …how, right? Then, let’s check below first…

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

See the map prepared by The Georgia Electric Membership Corporation below:

aerospace SE map 2018

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

The graphic on the right below illustrates how aerospace exports in the Southeast have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace industry exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Exports Aerospce GA

Georgia Aerospace economic impact has been estimated at $63.8B by the Georgia Economic Development ,12% increase over 2013. 99,000 highly skilled workers are employed by 800 + Companies.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia: According to PWC, Georgia ranks #1 overall for aerospace manufacturing attractiveness. Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office? Finding a partner to penetrate the market? Direct sales?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert hands-on in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability. And passion!

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

Aircraft, Engine & Parts Manufacturing In the US: A Leaner, Quicker & Brighter Future

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The aircraft, engine and parts manufacturing industry is climbing due to rising fleet replacement and global air travel, which is driving demand for more commercial aircraft and associated parts.

Key Statistics Snapshot according to IBISWORLD:

key statistics 2018

Market Shares for key US players:

The Boeing Comp 33.9%
GE Aviation 8.5%
Lockheed Martin Corporation 7.7%
United Technologies Corporation 6.7%

Airlines around the world are seeking to upgrade their fleet to newer, more fuel-efficient models. In particular, economic growth in the U.S. and in emerging markets has increased global air travel traffic and enticed airlines to expand their fleets. Year-over-year passenger travel growth for the past five years has averaged 6.2 percent. Low air fares, higher living standards with a growing middle class in large emerging markets, and the growth of tourism and travel relative to total consumer spending in major economies are all driving strength in the demand for air travel.[1] As a result, Boeing and Airbus have surplus demand for aircraft, with combined backlog orders of over 9,000 commercial aircraft.

Breakdown of the total US revenue of $240 B

breakdown of 240B

Key External Drivers:

  • Demand from air transportation
  • Federal funding for defense
  • Non-Nato defense spending
  • Trade-weighted index (The trade-weighted index (TWI) measures the value of the US dollar against the currencies of its largest trading partners. A decreasing TWI leads to lower export prices and higher import prices.

The United States is prepared to soak up this demand. The U.S. is the largest aircraft manufacturer in the world, and is home to the leading companies in the large commercial aircraft, combat aircraft, helicopters, unmanned aerial vehicles and engines segments. In the commercial aircraft segment, Boeing dominates, as it is the only U.S. manufacturer of medium to large size airliners. Since U.S. companies like Boeing hold such a strong market position, any increase in demand by international airlines for new aircraft typically leads to increased demand for U.S. planes.

In a 2015 PwC report, the U.S. was ranked as the top location for commercial aircraft manufacturing. Countries were ranked on several variables, including costs, industry size, and infrastructure/stability/talent. The U.S. ranked first out of 142 countries, despite only moderate grades in the cost and infrastructure/stability/talent categories, because it’s the largest in terms of industry size.

U.S. companies are seeing enormous opportunities to partner with foreign firms in hopes of gaining market shares in new regions. U.S. manufacturers across the supply chain – from makers of engines to electronics and communications systems to airframe parts – have already made quick strides to partner with emerging aviation manufacturers, but this looks to be simply the beginning of a much more globalized industry.

Expansion in global markets carries numerous risks, including but not limited to intellectual property protection, talent recruitment, training, and retention.

Finding a right partner for manufacturing in dollars might be a huge opportunity to drive your global business further.

COGNEGY has successfully worked with foreign companies in advanced industries who want to enter the U.S. marketplace. COGNEGY’s Atlanta, Washington, Philadelphia locations, staff of C-level executives and extensive experience provides foreign firms with a hands-on, trusted partner well versed in the local business climate to map out an partner search and acquisition or a customized plan for corporate growth.

Please contact COGNEGY with any questions you might have: e-mail phil.jafflin@cognegy.com  or call +1 (404) 917-7100 extension 903

 

[1] Boeing Current Market Outlook, 2017-2036, page 7

[2] http://usblogs.pwc.com/industrialinsights/2014/01/20/globalization-pressures-lessons-from-the-us-aircraft-industry/

Competitive Manufacturing

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Summary
How things change… A new BCG study released on April 25, 2014 throws away out-of-date perceptions on which countries have the lowest manufacturing costs. If China is still ranked #1 in terms of global competitiveness, its position is now under pressure with the United States a close second. The world is not divided anymore between “low cost” emerging countries and “expensive” advanced economies.
What does it mean for investors and decision makers? Where should your next production plant be located?

Manufacturing Cost Competitiveness (MCC)
BCG’s study tracked 25 major exporting countries, accounting for close to 90 percent of global exports of manufactured goods. Their MCC index is built on four pillars of manufacturing competitiveness: wages, productivity growth, energy costs and currency exchange rates. Adjustments were made to take into account other drivers influencing a nation’s competitive position, such as available infrastructure, security issues, ease of doing business, corruption level…

Ranking and evolution
Apart from China and the USA, the final Top Ten MCC ranking includes the U.K. (4), the Netherlands (6), Belgium (9) and France (10) but this “photo finish” doesn’t tell the full story. A clearer picture is offered when classifying the countries in four categories, reflecting the trend of their competitive position. Highlights:

   Under Pressure: Rapidly deteriorating competitiveness affects Brazil, Russia, China, Poland, Czech Republic…
   Losing Ground: High cost countries coping with rising energy costs, high wage costs and no productivity gains. Belgium, France, Italy, Sweden…
   Holding Steady: Countries maintaining their position relative to the global leaders: Netherlands, U.K., India, Indonesia.
   Rising Stars: Increased competitiveness with gains in all four index components: U.S.A., Mexico

Click here for the press release on the BCG study.

What are the implications for business leaders?
The first message is that decision makers need to keep track and adjust to dramatic and rapid changes. Old (as in ten-years-old) perceptions stand in the way of new realities. “Overall costs in the USA are 10 to 25 percent lower than those of the world’s ten leading goods-exporting nations other than China”, the report says, and on par with Eastern Europe.
Entrepreneurs do not move their production facilities based on the latest trend or hype. Such a move has huge implications, is very costly and requires an economic horizon of at least one, usually two decades. This is true for medium sized firms as much as for global corporations.
This is why managers and investors should base such a strategic decision on solid cost structure evidence and the analysis of long term trends. Just like when buying shares on the stock exchange, if you follow the mainstream opinion, your late move is likely to end up in painful losses.

Where should your production plant be located?
Whether looking at added capacity or transplanting production, the decision of where your new plant should be built is obviously the subject of a careful strategic analysis. You will make a first selection of countries where wages, energy costs, productivity and currency all point in the right direction, and where the other drivers (ease of doing business, infrastructure, stability, rule of law…) are consistently positive.
Each firm is however a unique case, only partially influenced by macroeconomics. After all, your first concern is with your market, your customers, your people and your identity. This is why you will also want to consider a broad range of company-specific criteria, such as:

  • Competitive sourcing and efficient supply chain
  • Location and dynamics (growth, innovation) of your main markets
  • Availability of skilled labor and qualified specialists
  • Ease of adjustment to the local culture
  • Global market prestige and local market access
  • Access to local funding.

Building a production plant in a distant, foreign country, is a major strategic decision, one that might ensure growth and profitability for decades to come, if done right. When deciding where to move, take a new look at today’s evidence and tomorrow’s evolution, not at yesterday’s performance.