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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
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