U.S. Aviation Industry Poised to Enter Second Golden Age, According to PwC US and The Manufacturing Institute

Three most pressing barriers to continuing U.S. leadership: globalization, talent shortfalls and innovation challenges

Source PR Newswire

Dec. 10, 2013

7 min read

NEW YORK, Dec. 10, 2013 /PRNewswire/ -- While all signs point to a second golden age for the U.S. commercial aircraft industry, there are several headwinds that may impact this resurgent trajectory, according to a new report launched today by PwC US in conjunction with The Manufacturing Institute titled, Aviation's second golden age: Can the US aircraft industry maintain leadership?

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The report highlights pressing issues, including three top-of-mind that U.S. aerospace companies must address to maintain their leadership positions and competitive edges: globalization pressure, talent management shortfall and innovation challenges across a complex supply and product chain.

"Emerging foreign competitors are ramping up their capabilities and technological advancements in their home markets, and are even expanding their manufacturing footprint here in the U.S. in ways that will likely alter the industry's competitive landscape through this decade and beyond," said Scott Thompson, PwC's U.S. aerospace and defense leader. "This is a critical time for the U.S. aviation industry. Aviation manufacturing is the U.S.'s leading net exporter, with nearly $100 billion in annual exports. To continue its global leadership, the industry needs to encourage collaboration among the private sector, educational institutions and government to re-tool an industrial workforce with the skills and technologies to compete and innovate in the 21st century."

Globalization
Growth in new markets is altering today's world of commercial aviation, according to PwC's report. Shifts in air traffic demand and the geographies where fleets will be needed to satisfy that demand is changing the model that has existed for decades. Going forward, Asia Pacific is expected to lead in air traffic growth while being supported by the rapid development of their air transport infrastructure to accommodate the expected increase in demand. In addition, emerging aircraft manufacturers such as those in China, Canada, Brazil, Russia and Japan are all planning to capitalize on the shifts by grabbing a larger share of the global commercial aviation industry.

"Globalization is the driving force behind the aviation renaissance, and U.S. aerospace manufacturers are benefitting from global growth," continued Thompson. "Partnering with emerging aircraft manufacturers could present significant opportunities for U.S. suppliers, but it could also carry risks including intellectual property protection. The potential risks of forfeiting their competitive edges are leading some companies to reconsider the advantages of domestic production. Policy makers need to promote the skills and policies that will support investment in U.S. growth."

Talent
Commercial aviation's rapid global expansion also has the potential to outstrip the availability of talent needed to support growth and demand. In addition, the industry is already challenged to find the resources to support current volume.

"The availability of skilled resources is a real problem to support growth, especially engineering and skilled manufacturing resources. Unless the U.S. can provide the skilled workforce needed, companies will be forced to off shore jobs - not for labor cost, but simply for availability of skills," said Jennifer McNelly, President of The Manufacturing Institute.

To meet the demand for the next generation of more efficient, sustainable aircraft, in addition to satisfying today's backlog demand for aircraft, the industry is attracting other types of engineers including materials engineers, computer engineers, electrical and electronic engineers and civil engineers. Non-engineering aviation jobs such as skilled manufacturing are also forecast to rise in demand, according to the report.

Innovation
As the U.S. commercial aircraft industry continues to focus on producing more fuel-efficient, lighter and smarter aircraft, companies are pushing for innovation including "green technologies" to gain the competitive advantage as demand for these newest aircraft increases. "The sector is pursuing innovation to cut costs and increase production scale, in addition to lowering manufacturing-related energy consumption," added Thompson.

The report outlines various types of innovation that are currently taking place in the industry.

Composites: Aircraft manufacturers are continuing to expand the use of carbon and glass fiber composites and ceramic and metal matrix composites to make lighter and more fuel-efficient aircrafts. Some aerospace organizations are even acquiring composite businesses as they become more integrated into new aircraft. Automated production and assembly: This method is being implemented as the unprecedented backlogs for large commercial aircraft have exerted pressure on suppliers to ramp up production, ensure quality and cut lead times to fulfill current orders and secure more in the future. Potential benefits of automation include cost reductions, fewer employee injuries and greater productivity. 3-D printing: Also known as additive manufacturing, this is another technology that is making inroads into the aerospace industry manufacturing value chain, and is forecasted to have an increasing number of applications in the near future. Digitizing flight: Communications and avionics systems are increasingly going wireless and reliant upon computers and software, with the number software code building intelligence into aircraft dramatically increasing. Big data holds the potential for significantly improved predictive maintenance. Renewable bio-fuels: The aviation industry has stepped up to help develop the jet bio-fuels. A PwC Airlines Themes study highlights that the estimates on the amount that bio-fuels will replace jet fuel by 2035 range widely from 40 to 70 percent.

For a copy of PwC's Aviation's second golden age: Can the US aircraft industry maintain leadership? please visit: http://www.pwc.com/us/aircraftfuture

About The Manufacturing Institute
The Manufacturing Institute (the Institute) is the 501(c)(3) affiliate of the National Association of Manufacturers. As a non-partisan organization, the Institute is committed to delivering leading-edge information and services to the nation's manufacturers. The Institute is the authority on the attraction, qualification and development of world-class manufacturing talent. For more information, please visit www.themanufacturinginstitute.org.

About PwC's Global Aerospace & Defense practice
PwC's Aerospace & Defense practice is a global network of professionals who provide industry-focused assurance, tax and advisory services to leading Aerospace & Defense companies around the world. This Aerospace & Defense expertise and experience is enhanced by that of our Public Services practice with professionals focused on assisting federal, state, and local governments, international agencies, and healthcare entities.

About PwC's Industrial Products practice
PwC's Industrial Products (IP) practice provides financial, operational, and strategic services to global organizations across the aerospace & defense (A&D), business services, chemicals, engineering & construction (E&C), forest, paper, & packaging (FPP), industrial manufacturing, metals, and transportation & logistics (T&L) industries. For more information please visit: www.pwc.com/us/en/industrial-products

About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2013 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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SOURCE PwC US