The commercial aviation industry is poised for intense growth, particularly in emerging economies. But it is also rapidly becoming more competitive. From outside the U.S. and Europe, manufacturers such as Bombardier (headquartered in Montreal), Comac (Commercial Aircraft Corporation of China), and the United Aircraft Corporation (from Russia) are preparing to challenge the long-standing Airbus and Boeing duopoly. At the same time, the supply base has become more concentrated.
A clear understanding of the industry structure, as it reaches a new equilibrium in each supplier market, is thus essential for making strategic decisions. One major capability that is becoming critical is faster, more intensive innovation. The industry is already beginning to see a shortening of the product launch cycle and an increase in R&D spending.
The service life of aircraft could be reduced as airlines opt to buy newer, less expensive narrow-body aircraft, rather than further extend the lifespan of their existing fleet. This means that suppliers will also see a shorter services stream on their installed base. Suppliers that can aggressively manage these shorter life cycles, and handle changes in demand, will be in a much stronger position. For example, Boeing and Airbus are under pressure to respond to the new aircraft challengers with their own designs for narrow-body airframes. To do this, they need efficiency improvements and other innovations. Many of those will come from the supply base. There are significant opportunities for suppliers with strong capabilities in research and innovation.
Author Profiles:
- Jono Anderson is a principal in Los Angeles.
- Randy Starr is a partner in Florham Park, N.J.
- For the 2012 Booz & Company Aerospace & Defense Industry Perspective, see booz.com/ad-2012.
