Preparing for the Commercial Aerospace Boom

The recent iBase-t Excelerate Conference featured an illuminating presentation by Tom Captain from the Captain Global Advisory. He covered trends and challenges to be faced by the commercial aerospace industry. The bottom line: get ready for one of the biggest booms in history.

Load factors are at an all time high of 80%, and global travel demand is growing at 4.7% per year, twice the rate of gain of global GDP.  Revenue Passenger Kilometers (RPKs) are up a staggering 800% since 1981 with 4 billion enplanements now occurring every year.

It is an unprecedented era of exponential growth. Passenger enplanements were only 100 million back in 1960. They broke the billion mark in 1987, and didn’t pass 2 billion until 18 years later (2005). It took only 7 more years to reach 3 billion (2012), 5 years to pass 4 billion (2017), and they are forecast to exceed 5 billion by 2020. Captain predicts we will reach 10 billion by 2030. He noted that the commercial aerospace market is displaying similarities to the way the internet, cell phones and other technologies were suddenly embraced across the world over the past couple of decades.

But while the glory days of cell phone adoption are passed (sales trends are flattening), the best years lie ahead for the airline industry. Asia Pacific especially is likely to be the industry’s growth engine for the next twenty years. Its vast populations are discovering the planet in greater and greater numbers. As a result, China is likely to be the largest aviation market by 2024, with India moving up to number three behind the USA by 2025.

Those are some of the ongoing mega-trends. But a few other more sobering ones were pointed out by Captain. Average passenger revenue per RPK has been steadily trending down for decades, with a 47% decrease since 1990 when adjusted for inflation. That has caused airlines to adopt practices for greater efficiency, to embrace pricing engines, and to find ways to reduce costs. They have largely been successful. Operating expenses per RPK have dropped 26% in a decade.

This has been due to many factors. Industry consolidation along with lower fuel prices, and more workable cost structures have heightened profitability and raised margins. Route expansion and fleet upgrades are ongoing. The number of aircrafts produced in the past ten years has doubled. 1500 to 2000 planes per year is the current pace.

Despite this, there is a delivery backlog of 15,000 units. As that is the equivalent of a 10-year waiting list, OEMs are working hard to boost production and output. That will result in the total number of aircraft in service growing from 24,000 today to 49,000 by 2037. The majority of that growth will be in single aisle units.

Consider all the planes in service today. Less than 6,000 of them will remain in service by 2037. The current forecast is for more than 40,000 aircraft to be built over the next twenty years for a value of $6.3 trillion.

Commercial aerospace, then, is very much a growth business. But with the industry becoming more commoditized, price has become the major differentiator. To survive, costs must come down even more. That can only be achieved via digitization, and automation. By transforming into a digital manufacturing enterprise via process advances and the Internet of Things (IoT), production labor can be greatly reduced while raising efficiency and enhancing profitability.

iBase-t can assist those in aerospace to design and manufacture parts, systems and final products that are more innovative and less costly. iBase-t Solumina software solutions facilitate digital manufacturing for complex discrete manufacturers by filling in the gaps that between PLM, ERP and other enterprise systems. The iBase-t Digital Manufacturing Suite integrates engineering and business systems to establish the Real-Time Integrated Digital Manufacturing Enterprise.

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Defense Spending Upswing Ahead

In tandem with a major surge in commercial airline production, the global defense sector is in for a long period of expansion. Captain Global Advisory expects steady growth in military spending over the next decade – anywhere from 3% to 5% per year through 2027.

That’s good news for those operating in a specific set of countries: USA, China, Saudi Arabia, Russia, India, France, UK, Japan, Germany, and South Korea collectively make up 73% of all global spending on defense ($1.27 trillion). The U.S. leads the pack with $610 billion, nearly three times more than China’s military spending at number two. China spent $228 billion. U.S. military spending is greater than the next seven biggest military spenders combined.

This growth is being driven by a more contentious global arena. The U.S., China and Russia are jockeying for position in various theaters. They are either seeking expansion or to reinforce their position around the globe. The U.S. president not only placed greater focus on increased military spending, he is pressuring NATO and other allies to raise defense budgets. Meanwhile, Chinese ascendency in Asia is being flanked by growing interest in Africa and Australasia. Across the planet, regional conflicts have forced many others to seek stronger military resources.

The geopolitical situation is paralleled by an increase in terrorism, as well as cyberthreats that can cripple military systems, undermine infrastructure, and paralyze a nation. Further trends influencing military spending include the advent of nextgen weapons, and an abundance of obsolete or worn out equipment, some of it a relic of the Cold War. In addition, the appearance of cheaper air platforms, drone technology, and emerging economies in the developing world have added a new dynamism to the sector.

Money is being spent on a great many areas. This includes equipment, manpower, training, drones, R&D, cybersecurity, and replacement of aging fleets of ships, tanks, and aircraft. OEMs and suppliers can anticipate positive revenue growth in the coming years.

But not everyone will benefit. The need to reduce costs, streamline operations and boost efficiency has necessitated a change in approach. Those who succeed will forge resilient partnerships and alliances. Mergers and acquisitions are likely to increase. Every supplier must grapple with how best to achieve economies of scale. Corporate strategy must embrace these shifts and come to terms with new ways of doing business.

While quality, schedule performance, and functionality remain vital, cost has taken center stage. Fixed price contracts are becoming more frequent. Gone are the days of cost overruns, missed deadlines, and unrealistic promises about equipment performance.

Program management must take advantage of digital technology to establish real control over delivery schedules and end-to-end supply chain synchronization. This will enable complex discrete manufacturers of defense systems to deal with geographically dispersed operations spanning multiple business units while maintaining full traceability. Any component or system issue or failure across the entire equipment lifecycle can be tracked back to the exact cause and remedied rapidly.

This cannot be achieved by continuing to operate with disparate systems for Product Data Management (PDM), Computer-Aided Process Planning (CAPP), ERP, Manufacturing Execution Systems (MES) and Quality Management. The demands of the market require that users no longer must jump from screen to screen to stay on top of work processes. Lack of system integration, manual rekeying of information, and manually exporting data from one system to another have no place in the modern digital manufacturing enterprise.

Requirements for component serialization demand a watertight system where every item within the supply chain has a specific ID that can be traced from source to end of life. Data must be trustworthy at the point of installation on the assembly line. The marrying up EBOM with MBOM, or as-designed with as-built and as-maintained documents should be done automatically at a system level in real time. Faulty parts or systems sent for replacement or repair can no longer become lost in administrative inefficiency.

The only way for this to happen is via an end-to-end enterprise digital transformation. A digital thread should exist so data can seamlessly traverse the supply chain throughout the entire product lifecycle. iBase-t’s Solumina software is the way to institute this in the enterprise. Design specifications, engineering models, as-builts and operational data can be easily reconciled. A digital thread can be established that offers the opportunity to streamline product and service design, increase product quality significantly, build closer relationships with supplier and asset owners, and increase profitability.

The digital thread, with its emphasis on digitized records, 3D models and digital twins, then, represents the way forward for anyone in the defense industry. Contact iBase-t today to find out how Solumina can help you establish the Digital Thread in your business.

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Virgin Galactic Success Foreshadows a New Space Race

Virgin Galactic’s recent test flight took its SpaceShipTwo vehicle into outer space – well at least to an altitude more than 50 miles above the Earth. The spaceliner flew above the Mojave Desert and reached a speed of over 2,000 miles per hour. It is one of many private endeavors intent on making space travel, space freight, or space tourism into a commercially viable activity. Perhaps we are seeing the second space race.  

According to Tom Captain of Captain Global Advisory speaking at the iBase-t Excelerate User Conference, the space industry has awakened from a long slumber. It is set to experience significant growth in the next five years due to a number of factors.

Private firms such as Virgin Galactic, SpaceX, and Blue Origin are helping to take the technology beyond the constraints of government. At the same time, the regulatory picture has grown more favorable for the emergence of this new arm of the space industry. That has accelerated demand and led to new applications.

Virgin Orbit, for example, spun off from Virgin Galactic with a focus on the launching of satellites. Like its Galactic cousin, Virgin Orbit utilizes an airborne launch via planes carrying rockets to a height a little over seven miles before releasing them. Instead of the lengthy lead times that currently plague satellite launches, Virgin intends to disrupt the industry with the ability to launch within 24 hours.

Space tourism, too, is seen as a major growth area. Hundreds of people have already forked out a lot of money to hitch a ride in a Virgin spaceship. It’s likely that many more will be willing to do so once routine flights are established. Captain noted that greater involvement in space has reduced lower earth orbit (LEO) costs by several orders of magnitudes.

The demand for greater connectivity around the world is another important driver. Some envision satellites as a more sustainable way to providing half of the planet with phone and internet access than setting up cellular towers every few miles across landmasses such as Africa and Asia. Businesses are going after this market and they need a lot of satellites in space to make this dream a reality.

And then there are other opportunities such as cleaning up the large quantities of junk flying around in our obit, refueling of space ships and high-altitude aircraft, and military initiatives in outer space. Captain noted that military interest has become more acute. However, to enter that market, governments and their associated contractors will have to change their ways if they wish to compete with this new wave of private innovators.

The U.S. Space Shuttle program, for example, cost around $20,000 per Kg for LEO flight. The SpaceX Falcon 9 cut that down to less than $2,000 per Kg. This is being achieved by the introduction of emerging technologies, new materials, better practices and latest digital systems that streamline operations.

The traditional powers of the aerospace sector, therefore, must learn from the actions of these new players if they are to remain competitive. Yes, SpaceX figured out how to reuse launch rockets. But even more fundamental are the IT systems and workflows in place to manage costs, control workflows, and streamline efficiency.

In some ways, it may be like the seventies and eighties when the U.S. dominance of the auto industry was threatened by the influx of low-cost vehicles from Asia, and better engineered cars from Germany. That was a long, hard lesson for U.S. carmakers. The transition is likely to be smoother for the aerospace sector. But only if they are willing to embrace new ideas.

Central among them are the digitization of the supply chain, more effective program management, and the use of advanced technologies. Digitization of systems, in particular, opens the door to tighter software integration, heightened collaboration, and greater profitability.   

iBase-t Solumina can facilitate the journey to supply chain digitization for complex discrete manufacturers in aerospace and defense. As well as filling in the gaps that between PLM, ERP and other enterprise systems, it offers a way to modernize systems and processes in order to compete with new players intend to capturing market share from incumbents.  

Virgin Orbit Success Story