An introduction to the Aerospace Supply Chain
Aerospace Supply Chain Seminar & Knowledge Exchange Århus, 27. Nov 2012 Jens Peder Pedersen EXPERIENCE • INSIGHT AeroConsult ApS • CREDIBILITY • INNOVATION
AeroConsult – brief introduction
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60
0.04
0.005
Million cars produced per year
Million wind turbines produced per year
Million aircraft produced per year
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Key takeaways What’s “Aerospace”
Civil aviation market dynamics
Supply chain structure
Consolidation drivers
Relevance for Wind Power
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The definition of the ”aerospace market” can be very broad – today we will focus on a specific segment : Commercial Aviation Aerospace
Civil
Large aircraft
Est. Value : $180-200 bn
Est. Value : $130 bn
Approx. 800 aircraft
Military
Twin aisle
Est. Value : $35 bn
Approx. 3,500 aircraft
Space
Single aisle
Est. Value : $15 bn
Approx. 11,600 aircraft
Regional Jets Approx. 3,000 aircraft
Props Approx. 3,000 aircraft
GA/Corporate Approx. 45,000 aircraft
Helicopters Approx. 3,000 aircraft
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The basic metrics of the commercial aviation market : The market doubles every 15 years !
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Some interesting dilemmas in the marketplace right right now
Continued market uncertainties drive down the traffic growth and airline profits
Y/Y growth %
14%
Development in total passenger traffic and capacity YOY Growth
12%
Capacity (ASK)
10%
Passenger traffic (RPK)
Driving yet another round of cost down projects:
8% 6% 4% 2% 0%
- AND -
Order backlogs for aircraft have NEVER been higher than now
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…. but the market is inherently cyclic, and it will come back in due course
Peak – A/L profits
Peak – A/C orders
Period used to be around 10 years
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So in the midst of global financial turmoil, civil aircraft manufacturing is booming and pushing the supply chain very hard 700 600
Airbus #1 for 9 consecutive years
500
2012 cliffhanger
400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Est Airbus deliveries Boeing deliveries
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Basic view of the aviation supply chain - $100bn Tier 2/3 suppliers Pumps, motors, controls, actuators, sensors, cables/connectors, windows, filtration, oxygen Companies : Eaton, TransDigm, Diehl, etc
Tier 1 suppliers Structure, flight controls, hydraulic, pneumatic, fuel systems, landing gear, electrical power, interiors Companies : Safran, UTC, Zodiac, structure suppliers
Aircraft OEMs and Engine OEMs Design, assembly, integration Companies : Airbus, Boeing, Embraer, Bombardier, ATR, Comac, GE, RR, UTC/PWA, CFMI
Airlines, Lessors
Market value : approx. $60bn
Maintenance, repair and overhaul Aircraft maintenance, Repair and overhaul, Spare parts distribution, Flight hour services Companies: Tier 1/2/3 suppliers, Aircraft/Engine OEMs, Independent MRO’s and distributors
Estimated maintenance cost split
Market value : approx. $42bn
DO NOT UNDERESTIMATE THE IMPORTANCE OF THE AFTERMARKET Many aerospace suppliers make practically all their profits there ! EXPERIENCE • INSIGHT • CREDIBILITY • INNOVATION
There has been heavy consolidation of aerospace suppliers the last 10-15-20 years, driven by OEMs A/C OEMs Drive towards: • Systems integration • Risk sharing partners • Production rate enablement
1st Tier Sup Drive towards: • Full systems capability • Capacity • Economies of scale • Dominate category • Aftermarket services
2nd/3rd Tier Drive towards: • Unique technical positions • Engineering capability • Aftermarket positions
•
Aircraft OEMs acquiring service businesses to strengthen their participation directly in the MRO/aftermarket segment (examples: Boeing acquiring Aviall, Airbus acquiring Vector and Satair)
•
1st tier suppliers acquiring complementary technology companies to build strong systems competences (examples : UTC acquiring Hamilton-Sundstrand, Kidde Aerospace and Goodrich, Zodiac acquiring C&D, Monogram, Contour and Sell)
•
2nd/3rd tier niche specialists acquiring ”close fit” smaller companies (eg. TransDigm acquiring ArgoTech, Marathon)
•
Distributors acquiring complementary businesses (eg. BE Aerospace acquiring Satair OEM and Interturbine Logistics)
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So, why is all this talk of aerospace relevant for Wind Power OEMs and suppliers? The markets share many similarities Industrial markets, comparable volumes, high-tech Project industries Capital intensive Big MRO segments
Similar industrial supply chain drivers Risk sharing partnerships Rate enablement Dependency on single/dual source suppliers per product category A need to support innovation – both in product/technology and in processes Globalization
A precursor for the coming developments in Wind Power OEM-supplier structure and relationships Supplier specialization and consolidation Development of a tiered supply chain How supply challenges are tackled EXPERIENCE • INSIGHT • CREDIBILITY • INNOVATION
Recommended reading : Airbus GMF 2011-2030 - http://www.airbus.com/company/market/forecast/ Boeing CMO 2011-2030 - http://www.boeing.com/commercial/cmo/
Various materials courtesy of: Airbus, Boeing, PwC, ICF/SH&E, Satair, AeroConsult, Meridien Capital/Global M&A, IMAP/Clearwater
AeroConsult Slotsmarken 11, 1. floor DK – 2970 Hørsholm Denmark telephone : +45 2129 2848 skype : jpp.aeroconsult.dk e-mail :
[email protected] www.aeroconsult.dk
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