This is marketing research on the Aviation industry and can include information on the background, market structure, definitions, competitors, trends and developments of aviation and is related to other topics such as aircraft, flight, flying and airlines.

Table of Contents

Table of Contents

1 Background 
2 Market Structure 
3 Industry Definitions 
4 Market Metrics 
5 Industry Players 
6 Recent Trends and Developments 
7 Sources

Background

The aviation industry covers a aircraft manufacturing as well as aircraft parts (please see the separate article for aircraft parts). Aircraft manufacturing in turn includes both commercial and military aircraft such as for passenger carriers as well as defense department procurement.

Industry experts anticipate that the number of aerospace manufacturers will decline over the next few years through continued consolidation of companies. Key factors that will influence future global growth are rates of productivity, technological innovation, international competition, investment in research and development, improvements in aviation infrastructure, levels of defense spending, and support by governments for their aerospace industries. The high level of world sales and deliveries of aircraft and aerospace products in 1998 and 1999 is expected to decrease to a more normal level in 2000 and remain stable over the period 2001–2004.

Fluctuations in the global economy affect the U.S. aerospace industry because of the importance of the large civil aircraft sector to that industry. (Large civil aircraft account for about a quarter of the total aerospace industry’s output.) Changes in passenger travel historically have been proportional to changes in GDP, and demand for large civil aircraft is directly proportional to demand for passenger travel (often with a lag of 3 to 4 years).

Market Structure

Consolidation among major aerospace and defense companies has proceeded more rapidly in the United States than it has inother regions of the world, such as Europe. After numerous mergers and acquisitions, three very large companies—The Boeing Company, Lockheed Martin Corporation, and the Raytheon Company—have come to dominate the U.S. aerospace sector. This consolidation has placed enormous pressure on aerospace component suppliers. As those suppliers reposition themselves, they are being forced to improve economies of scale and reduce costs. Recent mergers among major suppliers include Honeywell–AlliedSignal and Hamilton–Sundstrand. Consolidation has been a two-edged sword. On the one hand, it has boosted the U.S. aerospace industry’s international competitiveness, better enabling U.S. companies to win contracts overseas. On the other hand, it has increased pressure to eliminate duplicative jobs. Several merged companies have announced layoffs.

Consolidation of the European aerospace industry is accelerating as national governments and aerospace manufacturers acknowledge the need to integrate their defense and commercial aerospace sectors to reduce operating costs and become more competitive with their U.S. counterparts. European aerospace companies are adopting strategies to streamline processes and increase their flexibility in outsourcing aircraft components. In 1997, the governments of France, Germany, and the United Kingdom agreed that there was an urgent need to restructure Europe’s aerospace and defense industries. In 1998, a plan was signed to transform the then four Airbus partners— British Aerospace PLC (BAe), Aerospatiale SA of France, DaimlerChrysler Aerospace AG of Germany (DASA), and Construcciones Aeronauticas SA (CASA) of Spain—into a single corporate entity (SCE) by 1999. This SCE is intended to enhance cycle times, productivity, profitability, and customer support by consolidating authority and responsibility for Airbus under a single corporate management. This transformation, which was set to take place on January 1, 1999, was postponed indefinitely because of the persistent challenges of accommodating the partners’ divergent cultural and political concerns, especially the French government’s resistance to privatizing Aerospatiale. Transport ministers from the United Kingdom, Germany, Spain, and France have called repeatedly for the four partners in Airbus to accelerate the transformation of the consortium into an SCE, noting that it would be easier for their governments to provide financial support for the development of the “super-jumbo” A3XX aircraft when the consortium is transformed into a single enterprise.

In response, a series of merger announcements were made in 1999. In October 1999, DASA and Aerospatiale-Matra agreed to merge to form European Aeronautic, Defense and Space (EADS). This followed earlier announcements of mergers between BAe and Marconi Electronic Systems from Britain’s General Electric Company, Aerospatiale and Matra Hautes Technologies, and DASA and CASA. These mergers may help facilitate Airbus’s transformation into an SCE. With the new makeup of Airbus as a German and French–controlled company as a result of the DASA– Aerospatiale-Matra merger, it is possible that BAe may seek to sever its partnership status in Airbus. Other European companies interested in joining Airbus are Alenia of Italy,Thomson-CSF and Dassault of France, and Saab of Sweden. The precise role of these possible new partners is unclear.

Industry Definitions

• Jet-engined aircraft - use jet engines rather than older piston engines

• Commercial aircraft - used for commercial purposes such as for carrying passengers or freight

• Military aircraft - used for military role for national defense or to deploy airpower beyond a border

• Reconnaissance aircraft - equipped with instruments for monitoring various optical and other kind of intelligence

• Helicopters or rotocraft: can hover stationary over one place or rise vertically if required. Suitable for use in lower heights. Used in police work, rescue operations, transport roles etc.

Market Metrics

U.S. Domestic Trends

The industry was expected to have a moderate to strong increase in the value of shipments made in 1999 compared with 1998. The total value of shipments by the U.S. aerospace industry in 1998 was $145 billion, a 2.2 percent increase over 1997. In the first half of 1999, compared with the same period in 1998, shipments increased 1.8 percent and new orders grew 0.8 percent. Deliveries of complete civil aircraft and engines reached $48 billion in 1998, an increase of 34 percent over the 1997 level. U.S. aerospace exports increased 27 percent in 1998 compared with 1997. U.S. defense procurement in fiscal year (FY) 1998 (including new buys, modifications, and parts) totaled $14 billion for aircraft and $3.8 billion for missiles and space equipment.

Defense Industry

Reversing 15 years of decline, total procurement from all industry sectors by the U.S. Department of Defense (DOD) in FY 1998 rose slightly to $128.8 billion, in comparison to $128.4 billion in 1997. The total outlay was significantly lower than the peak of $163.7 billion reached in 1985. The largest prime contractors in the U.S. defense industry— Lockheed Martin and Boeing—were each awarded over $10 billion in prime contracts in FY 1998. The third largest, Raytheon, received $5.7 billion in prime contract awards. Rounding out the list of the top 10 prime contractors in 1998 were General Dynamics, Northrop Grumman, United Technologies, Textron, Litton Industries, Newport News Shipbuilding, and TRW (with $1.3 billion). The largest military aviation development program is the multirole Joint Strike Fighter (JSF), which will be produced for the U.S. Air Force and Marines and the U.S. and British navies. Three thousand JSFs are planned for manufacture over several years to replace aging F-16s and other aircraft. Competition for the role of primary contractor for the JSF has been narrowed to Boeing and Lockheed Martin as the program enters the prototype and testing stages.

With the United States accounting for 46 percent of the world’s inventory of tactical combat aircraft, the export potential of the JSF is envisioned to be high, although it may not be available for exportation before the year 2010. Foreign competition would come largely from the newly developed Eurofighter Typhoon, Dassault’s Rafale or Mirage, and Russia’s MiG and Sukhoi combat aircraft.

Other aircraft in various stages of development include Lockheed Martin’s multi-billion-dollar F-22 Raptor program to replace F-15s, large transports to replace the C-130s, and new bombers, helicopters, and refuelers. Fearing that a single supplier could emerge in Europe and resisting further domestic consolidation, DOD is encouraging transatlantic partnerships. The Balkan war accelerated the impetus for U.S. partnerships with European industry stemming from concerns about the existing technology gaps and lack of interoperability that hindered NATO’s effectiveness. In 1998, deliveries of new military aircraft to foreign customers rose to $3.6 billion, an increase of 57 percent compared with 1997. U.S. arms exports as measured by agreements signed (actual deliveries can lag several years) totaled $7.1 billion in 1998. While the United States continued to dominate global export markets with almost a third of total military exports worldwide, the market is considerably smaller than the $37 billion in sales reached in 1993.

Developing countries, which can stage the fiercest competition among military suppliers, purchased some $4.6 billion of U.S. arms in 1998, compared with $2.4 billion from France and less than $2 billion each from Germany, the United Kingdom, and Russia. Middle Eastern countries such as Saudi Arabia, Kuwait, the United Arab Emirates, Egypt, and Israel continue to be some of the largest purchasers of arms. In Asia, Malaysia led with $2.1 billion in imports. The top recipients of arms deliver-ies in 1998 were Saudi Arabia, Taiwan, Singapore, and South Korea.

Aircraft

This sector consists of large transports, general aviation aircraft, rotorcraft, and unmanned aerial vehicles. Large Transports. The large civil aircraft sector includes commercial passenger and cargo aircraft with an operating empty weight greater than 15,000 kilograms and two, three, or four engines. Passenger aircraft in this category can accommodate at least 70 passengers. The Boeing Company is the only manufacturer of such aircraft in the United States.

Economic growth is expected to continue to be the main stimulus for aircraft demand. A decline in economic growth that followed the 1997–1998 financial troubles in Asia resulted in a decrease in airline traffic in that region. That decline had a negative impact on the airlines’ revenue and overall cash flow, resulting in a decreased demand for aircraft. However, nations such as India and China are expected to experience growth in air travel as they climb the economic development curve. In mid-1999, there were signs of economic recovery in Asia, especially South Korea, Singapore, and Thailand, as those countries began to emerge from the Asian financial crisis. China, Australia, and New Zealand continued to maintain stable economies, and U.S. and European economies remained strong. Air travel remains brisk, aging domestic fleets are being phased out and replaced with new planes, and overseas travel continues to grow. These factors are expected to spur demand for new aircraft over the next 5 years.

Industry experts foresee an overall production downturn in the year 2000. On the basis of announced manufacturing rates, 1999 was expected to be the peak year in total aircraft production, with the global industry delivering about 920 jets. The outlook for 2000 is estimated to be below 1999 levels, with about 800 jets expected to be delivered. U.S. production of large civilian transports was expected to reach about 620 aircraft in 1999 and about 480 in 2000.

In the early years of the twenty-first century, technology may take a back seat to efficiency. Rather than creating entirely new passenger aircraft that will fly faster, higher, and farther on less fuel, large aircraft manufacturers are more likely to modify existing designs; this will reduce production costs, pollutants, and noise and add more seats. Stiff price competition between Boeing and Airbus will continue.

U.S. government funding for aeronautical research and development decreased significantly with the cancellation in 1999 of the National Aeronautics and Space Administration’s (NASA) funding for the High Speed Research and Aviation Subsonic Technology programs.

One of the most significant new influences on twenty-firstcentury aircraft will be the environment. Next-generation and future aircraft will be required to meet new and increasingly more stringent environmental protection requirements for engine emissions in keeping with the U.S. Clean Air Act and the Kyoto Protocol.

Fair trade principles should stimulate new services in the twenty-first-century air transport market. Improved market access would promote greater freedom for developing commerce, particularly among the three largest trading partners: North America, Europe, and Japan (see Tables 21-4 and 21-5). Air traffic is expected to grow at an average annual rate of 5 percent through 2005.

The industry has had a gradual expansion, especially in productivity, increasing the number of firms approximately 7% in the 5 year period between 1997 and 2002, but shedding about 18,000 workers in the same period - or almost 19% (see chart below)

At the same time, the industry has experienced solid growth up until late in this decade. According to the U.S. Department of Commerce, the industry grew 11% in the five years between 1997 and 2002, reaching over US $64 billion in annual sales (see chart below).

General Aviation Aircraft

Manufacturers in the general aviation sector produce fixed-wing aircraft for regional airline service, business transportation, recreation, and specialized uses such as ambulance service, agricultural spraying, and pilot training. About 12 companies in the United States manufacture general aviation aircraft. The largest manufacturers, measured by number of aircraft produced, are Cessna, Learjet, Mooney, Piper, and Raytheon.

The General Aviation Manufacturers Association (GAMA) reported that in 1998 its members had their highest billings ever at $5.9 billion, up 26 percent from the level in 1997. This was the third year in a row of record-setting sales and deliveries. Shipments of general aviation aircraft reached 2,213 units, up 42 percent from 1,569 units in 1997. Piston-powered aircraft shipments rose 56 percent, and those of turbine-engine aircraft, including seven Boeing Business Jets, increased 18 percent. Billings in the first half of 1999 reached $3.5 billion, an increase of 45 percent over the same period in 1998; unit shipments increased 13 percent in that period. Units exported in 1998 increased 19 percent compared with 1997 and remained steady in the first half of 1999 compared with the same period in 1998.

There are several programs to revitalize the U.S. general aviation industry. One is the Advanced General Aviation Transport Experiments (AGATE) program initiated by NASA in 1994. The AGATE Consortium is a cost-sharing industry-universitygovernment partnership—which includes the Federal Aviation Administration (FAA) as well as NASA’s Langley Research Center—to develop affordable new technologies, industry standards, and certification methods for airframe, cockpit, flight training systems, and airspace infrastructure for next-generation single-pilot, four- to six-passenger, near-all-weather light airplanes. The latest initiative is called the “highway in the sky,” a cockpit display system that includes a computer-drawn highway that the pilot follows to a preprogrammed destination. The displays and other equipment will provide intuitive situational awareness and enough information for a pilot to perform safely, with a reduced workload, in nearly all weather conditions. Business aviation, one of the most important segments of general aviation, consists of companies and individuals that use aircraft as tools to conduct their business. Business aircraft are used by all types of people and companies, from individuals who fly rented, single-engine, piston-powered airplanes to sales or management teams from the largest multinational corporations, many of which own fleets of multiengine, turbine-powered aircraft and employ their own flight crews, maintenance technicians, and other aviation support personnel. The number of flight departments in U.S. businesses grew nearly 25 percent from 6,747 in 1993 to 8,236 in 1998. Although the overwhelming majority of business aircraft missions are conducted on demand, some companies have scheduled operations, known as corporate shuttles, that essentially are in-house airlines. Most corporations that operate business aircraft use modern multiengine turbine-powered jets, turboprops, or turbine helicopters that are certified to the highest applicable transport-category standards.

Aircraft built specifically for business use vary from fourseat, short-range, piston-powered airplanes to two- and threeengine corporate jets that can carry up to 19 passengers nearly 7,000 miles nonstop. Some companies even use airline-type jets, including the Boeing Business Jet, which uses the fuselage of the 737-700 airliner and the wings and landing gear of the 737-800. A rapidly growing alternative to full ownership is fractional ownership, by which companies or individuals own a fraction of an aircraft and receive management and pilot services associated with the aircraft’s operation. Growth in this area has been phenomenal. In 1986, there were four owners of fractionally held aircraft; by 1993, there were 89. From 1997 to 1998, the number of companies using fractional ownership grew over 50 percent from 743 to 1,125.

World deliveries of turbine-powered business airplanes were expected to reach about 760 units in 1999 and increase slightly to about 770 units in the year 2000. Deliveries are expected to decrease each year through 2004 until they reach about 680 aircraft a year.

Regional Jets

A number of definitions for regional aircraft exist, from that of the FAA, which defines regional aircraft as aircraft with fewer than 60 seats, to the definition used by U.S. Regional Airline Association (RAA), which defines them as the aircraft used by “the 97 regional airlines in the United States provid[ing] short-haul scheduled passenger and freight service using turboprop and small turbofan powered airplanes connecting small- and medium-sized communities with larger cities and hub airports.” The RAA definition is more expansive than that of the FAA because it includes aircraft with up to 100 seats.

Fairchild Aerospace (which acquired Dornier of Germany) and Raytheon Aircraft are the only U.S. manufacturers of regional aircraft. Raytheon’s 1900 turboprop aircraft covers the market for regional aircraft with 19 seats. Fairchild Aerospace, based in San Antonio, TX, manufactures a range of aircraft produced both in the United States and in Germany, including the Metro 23 and Dornier 228, turboprops that seat 19 passengers; the Dornier 328, a turboprop that seats 32 passengers; and Fairchild jets seating 32, 44, 55 to 63, 70 to 85, and 85 to 105 passengers, depending on the model and configuration. Competing against the two U.S. manufacturers are Bombardier of Canada (Regional Jet and the Dash 8-100/200), Embraer of Brazil (EMB-120 and the ERJ145), Aerospatiale of France and Alenia of Italy (ATR72 and ATR42), and BAe of the United Kingdom (BAe146/RJ85, the J31/32, and the J41). The U.S. market for regional aircraft has changed markedly in the last decade, especially after the introduction of Bombardier’s Regional Jet (RJ), which provided regional airlines with an aircraft that offered the opportunity to service longer routes at greater speeds. Pairing turboprops with regional jets has sparked the expansion of regional airlines, as has the strength of the U.S. economy and the reliance of many U.S. airlines on a hub-and-spoke network. The overall outlook for regional aircraft is optimistic, although demand for smaller aircraft in the 15- to 39-seat range is expected to decline over the next 20 years. Steady growth is anticipated for turboprop aircraft in the 60- to 99-seat category. Demand for jets in the 40- to 59-seat category is expected to continue the current strong growth. The strongest growth is predicted in the 70-seat jet class as larger regional aircraft capture the medium- and longhaul route segment of the U.S. market.

Rotorcraft or Helicopters

Rotorcraft include helicopters—vertical takeoff and landing aircraft (VTOL)— and tiltrotor or other aircraft that can take off vertically as a helicopter and fly horizontally as an airplane. Some of the special uses of VTOL aircraft are oil rig and pipeline construction, power line construction, logging, transporting crews to offshore oil rigs, law enforcement, fire fighting, search and rescue, emergency medical service (EMS), and electronic news gathering (ENG).

In 1998, U.S. manufacturers shipped 363 civil helicopters— 294 piston and 69 turbine—valued at $252 million, up from 346 units worth $231 million in 1997, an increase of 9 percent. The helicopter industry faces a number of problems, including access to heliports, high operating costs, an increasing shortage of realistic access to airspace, the release of surplus military helicopters in the civil marketplace, and the use of helicopters owned by public operators, which compete for services provided by private operators. Despite these handicaps, the helicopter industry is likely to grow because of its outstanding safety record, the variety of missions unique to helicopters, newly improved models, corporate mergers and acquisitions, strong sales of new and used helicopters, and a new focus on controlling maintenance and operation costs.

In February 1999, The Boeing Company sold its light helicopter product lines to MD Helicopters Holding, a subsidiary of RDM Holding of the Netherlands. The Federal Trade Commission had objected to Boeing’s previous attempt to sell those programs to Bell Helicopter Textron.

Bell Boeing delivered the first production V-22 Osprey tiltrotor aircraft to the U.S. Marine Corps in May 1999. It was the first of 11 V-22s to be assigned for pilot training; the balance of the 360 Ospreys will be delivered later. After the second aircraft is delivered, production will shift from the facility near Fort Worth, TX, to a new factory near Amarillo, TX. The U.S. Air Force’s Special Operations Command has ordered 50 V22s, and the U.S. Navy plans to buy 48. The U.S. Army may be reconsidering its 1987 decision to drop out of the V-22 program. The Osprey is more survivable than, carries twice as many troops as, and is twice as fast as the UH-60 helicopter. Unlike the V-22, the nine-passenger Bell Agusta BA609 (a U.S.–Italian joint venture) civil tiltrotor is pressurized to travel above the weather. The first delivery is expected in the 2004–2005 time frame. After the first four prototypes are completed, production will shift to the new plant near Amarillo. Unmanned Aerial Vehicles. A number of unmanned aerial vehicles (UAVs) exist, both domestically and internationally. Their payload capability, accommodations (volume and environment-temperature maintenance, electrical support, and sensors provided), mission profile (altitude, range, and duration), and command, control (how much control is required by operator and how much of its operations can be preprogrammed), and data acquisition capabilities vary significantly. DOD promoted research on UAVs in the late 1980s and well into the 1990s as reconnaissance platforms to prevent the risk of death or capture of a flight crew. Routine civil access to these various UAV assets is at an early stage.

NASA, through its Dryden Flight Research Center, is involved in the Environmental Research Aircraft and Sensor Technology (ERAST) program, which has been developing high-altitude and long-endurance UAVs that will go slower, higher, and longer. The goal of ERAST is to develop aeronautical technologies that will lead to a new family of UAVs that will fly at subsonic speeds—as slow as 24 kilometers per hour—at altitudes as high as 30 kilometers for continuous missions as long as 96 hours. A recent product of this program is a solarpowered UAV with a 75-meter wingspan that is designed to remain in the stratosphere for months at a time.

Growth and Trade Projections for Aircraft

While 10- and 20-year forecasts look good for the world aircraft market, the next 5 years do not hold similar promise. The value of U.S. aircraft shipments was expected to increase 8.8 percent in 1999 over 1998 and then decrease 20 percent in 2000 (see Table 21-6). Shipments are expected to decline about 2 percent a year from 2000 through 2004. In part, this is due to a lack of growth in economies in northeastern Asia, which is a major market for twin-aisle (wide-body) commercial aircraft. Regional jets (those with fewer than 100 seats) are in strong demand for new routes and are replacing single-aisle commercial and turboprop aircraft on current routes. Since U.S. manufacturers represent only a small share of the regional jet market and capacity, they could be affected adversely by Asian airlines’ decisions to reduce aircraft size as they purchase new aircraft. U.S. helicopter and general aviation production also seemed to be peaking in 1999.

Top Airlines Carriers

Industry Players

Boeing: Boeing is the world's leading aviation company and the largest manufacturer of commercial jetliners and military aircraft combined. Additionally, Boeing designs and manufactures rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems. As a major service provider to NASA, Boeing operates the Space Shuttle and International Space Station. The company also provides numerous military and commercial airline support services. Source:Boeing

Airbus Industry: Airbus is one of the world's leading aircraft manufacturers, and it consistently captures approximately half or more of all orders for airliners with more than 100 seats. Airbus' mission is to provide the aircraft best suited to the market's needs and to support these aircraft with the highest quality of service. The Airbus product line comprises 14 aircraft models, from the 100-seat single-aisle A318 jetliner to the 525-seat A380 - which will be the largest civil airliner ever when it enters service. Source:Airbus

United Technologies: United Technologies Corporation (UTC) is a diversified company who not only manufactures Pratt & Whitney aircraft engines and Sikorsky helicopters, but also their products include Carrier heating and air conditioning. Add to that other products such as Hamilton Sundstrand aerospace systems and industrial products, Otis elevators and escalators, UTC Fire & Security systems and UTC Power fuel cells. Source:United Technologies Corporation

Lockheed Martin: active in aeronautics, electronic systems, information systems & global services and space systems. Source:Lockheed Martin

AMR/American Airlines: AMR is the parent company of American Airlines and American Eagle Airlines. American Airlines is the world's largest airline. American, American Eagle and the American Connection regional airlines serve more than 250 cities in more than 40 countries and territories with approximately 3,900 daily flights. The combined network fleet numbers more than 1,000 aircraft. Source:American Airlines

United Airlines: United Airlines operates more than 3,600 flights a day on United®, United Express® and TedSM to more than 210 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. Source:United Airlines

Recent Trends and Developments

Shipments of aerospace products were expected to increase in value about 7 percent in 1999 over the 1998 level and decrease about 12 percent in 2000 compared with 1999. Aerospace shipments are estimated to increase about 3 percent per year from 2001 through 2004. U.S. defense procurement in FY 1999 was expected to increase 22 percent for aircraft and 11 percent for missiles and space vehicles from FY 1998 levels. An increase in military procurement in FY 2000 suggests that the decline in defense spending has stopped and that such spending will climb through FY 2004.

Sources

U.S. Department of Commerce

U.S. Economic Census

Corporate Websites