Over the last five years, the Global Commercial Aircraft Manufacturing industry has managed to reach new heights. While the industry did firstly suffer from the global downturn, the scale of the decline was greatly eased by long lead times in aircraft manufacturing.
Specifically, in 2018 the global aerospace and defence industry recuperated and experienced an outstanding year. Passenger travel demand strengthened along with an increase of global military expenditure. The industry is expected to continue its growth in 2019, led by growing commercial aircraft production and strong defence spending.
However, aircraft order backlog remains at an all-time high in the commercial aircraft sector. Due to the high demand for next-generation, fuel-efficient aircrafts with the rise in oil prices. With this backlog at its highest, manufacturers are expected to ramp up production rates, therefore, driving major growth in the sector. Though, there is a strong potential for manufacturers to experience supply chain interruptions. As some suppliers may find it difficult to increase production in order to keep up with the rising backlog.
In the defence sector, there are three main factors in which are set to drive the global defence sector growth in 2019 and beyond:
- Heightened global tensions and geopolitical risks
- Recovery in the US defence budget
- Higher defence spending by other major regional powers such as China, India, and Japan
Commercial aircraft order backlog remains strong
As stated, the commercial aircraft order backlog is at its peak. With more than 14,000, and about 38,000 aircrafts expected to be produced globally over the next 20 years.
Manufacturers are ramping up production to accommodate growing aircraft demand. However, the demand for wide-body aircraft could weaken in 2019 as there is already a strong wide-body backlog and airlines are deferring upgrades as they wait for more efficient next-generation widebodies. Also, with the introduction of 737-8 and A321neo, the capabilities of narrow-body aircraft have expanded, further impacting wide-body demand.
As original equipment manufacturers (OEMs) increase production rates, there remains a risk of suppliers facing difficulties in increasing production. To overcome this, and to enhance productivity, manufacturers have started to consider expanding their focus on:
- Strengthening the supply chain
- Effective program management
- Use of advanced technologies
The rising demand for commercial aircrafts, has caused new production programs to emerge from outside the United States and Europe, particularly from Russia and China. In the long term, these new competitors could challenge the current duopoly. However, before they are accepted, there are a few barriers they need to cross:
- Procurement of orders from global airlines
- Managing cost and schedule overruns
- Certifications from regulators worldwide
- Establishing a safe and reliable track record
UK aerospace market
The UK aerospace industry generated £35bn in turnover in 2017, with £30bn in revenue from exports which grew 39% between 2012 and 2017. The sector employs over 120,000 people, many in highly skilled engineering roles.
No-deal Brexit impact
The aerospace industry which is highly specialised and dominated by multinational companies, depends heavily on participation in European and global supply chains. If the UK leaves the EU without a suitable deal in place, aerospace companies will face supply chain disruption and higher manufacturing costs if imports from the EU are subject to tariffs and restrictions.
In addition, if restrictions are placed on the movement of people and goods, this in turn will create logistical problems for many companies. Mainly due to a lack of readiness, along with both cost and delay resulting from additional customs and immigration checks. Noticeably, these factors will increase the time it takes to manufacture products, increase operating costs and creating new trade barriers. Therefore, hindering the UK sector’s global competitiveness.
“It is important that the UK aerospace industry is able to maintain its high value manufacturing, world-leading research and growing international trade without disruption,” states Colin Brown, Chief Executive of The Institution of Mechanical Engineers.
In addition, Automakers with manufacturing facilities in the UK have acted over concerns that a deal with the EU will not be achieved before 29 March. Rolls-Royce and Aston Martin recently triggered Brexit contingency plans over concerns that they might have difficulties acquiring components following a “disorderly” Brexit.
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