NEW YORK, July 5, 2012 (GLOBE NEWSWIRE) -- Following a boom in commercial aircraft orders in 2011, a year which saw the successful launch of the Airbus A320 NEO and the Boeing 737 MAX, the aerospace industry is now faced with having to deliver a huge backlog. According to a study of the aerospace and defense industry released today by global business advisory firm, AlixPartners, the industry must increase production rates by 45% in volume by 2015 if it is to meet demand, representing the industry's biggest challenge in the coming years. <\/p>\n
Looking at the aerospace and defense industry as a whole, the study finds that it is in better shape than last year. The commercial aircraft sector has rebounded, driven by approximately 5% growth in airline and cargo traffic globally and the acceleration of old-aircraft replacement with fuel-efficient alternatives. <\/p>\n
However, the future profitability of the airline industry remains uncertain, says the AlixPartners study, with fuel price instability (despite some stabilization of late) and degrading economic drivers weighing on outlook. The study found that net profits for the airline industry globally have been squeezed to an all-time industry average low of 0.5% of revenues -- due to fierce competition, overcapacity-related revenue pressures and rising operating costs. <\/p>\n
The study also shows a real contrast in the growth rates globally between OEMs and suppliers, with the former lagging by nearly five percentage points on average -- and this gap looks set to widen. In 2011, suppliers globally saw average sales growth of 10.4%, compared to just 1.0% on average for OEMs. <\/p>\n
In the business jet market, while there is no significant upturn as yet, China remains an untapped opportunity with significant under-representation, says the study. In the defense sector, while sovereign spending cuts have received significant attention this year, AlixPartners predicts continued impacts going forward on the industry in the U.S. and Europe, mitigated somewhat by growth in the BRIC countries and other emerging markets. <\/p>\n
Eric Bernardini, managing director at AlixPartners and head of the firm's global Aerospace & Defense Practice, said: \"Right now, beneath the surface, every level of the aerospace & defense supply chain is scrambling to accelerate in terms of performance, on-time delivery and service levels. The success of more fuel-efficient commercial aircraft by Airbus and Boeing will eventually drive increased financial performance. In the meantime, however, supply chain pressures may drive a period of further consolidation amongst Tier 2 and Tier 3 suppliers, especially in segments where fragmentation is still high, such as aerostructures components. The other side of the coin is that some \"super-Tier 1\" suppliers may have become so big that they represent a risk which needs to be addressed by the OEMs by getting \"under the hood\" of all their suppliers, and their suppliers' suppliers. Companies need to ask a lot of questions in order to make sure they are in total control of the ramp-up and have the insight to anticipate any issues.\" <\/p>\n
Commercial supply chain: Ramp-up under heavy stress <\/p>\n
Airline leadership teams have so far addressed operating cost pressures by ramping up orders for new, more advanced, aircraft, notes the study, as companies shoot for a 20% improvement in fuel efficiency to help them remain competitive. However, the challenge with these new aircraft is that they incorporate new technologies -- for instance in engines -- that add further strain to the supply chain. According to the study, a 45% increase in production is expected by 2015 although taking into account the greater complexity of the new models, the increase could be upwards of 70%. <\/p>\n
According to the study, while order books look healthy and Tier-1 equipment suppliers are expected to do well, OEMs should be worried about whether their supply chains will be able to keep up. OEMs, such as Boeing and Airbus, and engine suppliers such as GE\/Safran, Rolls and Pratt & Whitney, will need to considerably ramp-up their supply chains. To mitigate their risk, AlixPartners says OEMs should be driving greater integration of their \"operational environments\" -- working far more closely with suppliers, putting in place early-warning systems to improve response time to issues and getting ready to provide operational and financial support to suppliers -- even for acquisitions as a last resort. <\/p>\n
MRO Market: Growth ahead - but winners and losers <\/p>\n<\/p>\n
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Aerospace Supply Chain Faces Harsh Reality of Having to Deliver Huge Backlog of Orders Following a Boom in Commercial ...<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" NEW YORK, July 5, 2012 (GLOBE NEWSWIRE) -- Following a boom in commercial aircraft orders in 2011, a year which saw the successful launch of the Airbus A320 NEO and the Boeing 737 MAX, the aerospace industry is now faced with having to deliver a huge backlog. According to a study of the aerospace and defense industry released today by global business advisory firm, AlixPartners, the industry must increase production rates by 45% in volume by 2015 if it is to meet demand, representing the industry's biggest challenge in the coming years. Looking at the aerospace and defense industry as a whole, the study finds that it is in better shape than last year Continue reading