Airlines Will Seek Fuel-Efficient, Lightweight Airplanes

From the aircraft integrator's perspective, fuel-efficient and light-weight aircraft that adhere to environmental norms and have low operational costs are the key market drivers for global commercial aircraft programs. Airline operators have been under immense pressure to reduce operational costs and adhere to environmental norms, resulting in the systematic replacement of existing fleets. Aircraft integrators either replace an existing model or fill the gaps in their product line.

New analysis from Frost & Sullivan, "ROSM-Global Commercial Aircraft Programs-Revenue Opportunities and Stakeholder Mapping", finds that the market earned revenues of $2.35 billion in 2010 and estimates this to reach $27.59 billion by 2020. The market is likely to grow at a compound annual growth rate (CAGR) of 31.48 per cent during this period and the highest revenue is likely to be generated in 2020. The end-user markets covered in this research service are single aisle and twin aisle.

"Boeing is planning to start delivery of the 787 by the end of 2010, with around 50 per cent of the aircraft built from composites," says Frost & Sullivan Team Leader (Aerospace & Defence Practice) John Siddharth C.P. "Although it is meant to compete with Airbus 350 (A350), the B787 will have an edge due to its early entry into service three years before the A350."

Boeing B787

In the last decade, legislative norms have significantly impacted the aviation industry. The major norms include caps on emissions and noise reduction. Such stringent norms will drive this market as airline operators will be impelled to procure new, quieter and more fuel efficient fleets. However, the cash-in-hand (CIH) factor is gaining importance from the suppliers' perspective due to the development of a risk-sharing partnership model. The suppliers also prefer to get involved in risk partnerships to secure the higher margins given to risk-sharing partners by aircraft integrators in the first five to ten years of production.

"The cost of development of a new aircraft program costs billions of dollars," explains Siddharth. "Besides the allocated budget, the cost of development exceeds - referred as cost overrun, this has been a major challenge for the industry."

Airbus A350 Artist's Concept

Aircraft integrators other than Boeing and Airbus need to prove their credibility in terms of future models and attract suppliers for risk-sharing partnerships. As the market segmentation becomes more niche, airplane integrators should focus on their expertise. "Suppliers need to ensure higher margins in the initial years of new aircraft delivery so that there is optimum cash flow for continuous investments," concludes Siddharth. "Tier 3 suppliers and the design segment suppliers should also get equipped with greater CIH to sustain the change in business models."

FMI: www.aerospace.frost.com