Factors Making the Industry Attractive
There has been much advancement in the business and technology in the Aerospace Manufacturing Industry over the past few years. These advancements have enables domestic companies become connected to companies globally. When resources are available globally this can dramatically reduce costs and therefore increase revenues.
Communication networks are one of the obvious improvements that have advanced technologically with the wireless technology of the internet. Although the internet has been a huge part of the US for the past decade, this wasn’t that case in developing countries around the world. These developing countries have become a huge factor in the global business field and it is a huge advance in their societies that they are now familiarizing themselves with the World Wide Web. It is much easier for a business person to find out real-time information across seas with the use of the Internet, rather than having to make a long and costly trip to the other end of the world.
The improvement in the software markets and information technology has also offered great attractiveness to the Aerospace Manufacturing Industry. Many software companies have consolidated to be more compatible with one another, which allow the Manufacturers more of a common ground for competition and for mergers. Manufacturers such as Boeing and Honeywell recently teamed together their Research and Development teams to conduct an experiment to produce a renewable fuel resource out of a type of green plan. These two competitors have also worked on teams together when repairing the space station back in 2000. With the increased technological advancements in software it has made communicating information electronically much more convenient.
Business infrastructures have also been under a makeover in the industry in order increase their productivity. Improvements like this will pave the way to a very efficient business which with lower costs and higher revenues. With the documentation of problem solving and day to day activities, future problems will be handled with less complication and more ease.
Computer Aided design and Drafting CADD has offered the Aerospace Manufacturing Industry a great opportunity to product products much faster and cheaper than before. According to The Bureau of Labor Statistics, “Firms producing commercial aircraft have reduced development time drastically through computer-aided design and drafting (CADD), which allows firms to design and test an entire aircraft, including the individual parts, by computer; the drawings of these parts can be sent electronically to subcontractors who use them to produce the parts.”
Similar to most other industries, the economic downtime has cause for overall a very unattractive market. One of the most affected segments of the Aerospace Manufacturing Industry would be regional and business aviation. Many CEO s and Executives are forced by board members to rid the company of such luxuries at private and company jets. Business jet manufacturers are now faces with a large number of backlogs and are forced to revise their forecasted production for the future to lower their inventory costs.
While the large profitable manufacturers like Boeing and Airbus, weather the crisis quite well, the smaller suppliers in the industry are facing tough times. The smaller suppliers are unable to fund new R&D products and even production is increasingly difficult for these companies, in part because of the increased cost of financing and credit terms.
The constant consolidation and restructuring of airline companies has made is quite difficult for the smaller companies that are trying to grow a profit in the industry. Global manufacturers seem like they are going to be strong enough to make it through the tough economic times, but that is a whole new story for the smaller companies who feel that they don’t have enough funding to expand overseas.
The economic crisis has also put large constraints on the spending of the Department of Defense. The Department of Defense has been forced to find new alternatives to their spending new and maintaining the equipment that they already have purchased. These constraints along with others give the Aerospace Manufacturing Industry a very unattractive look.
This chart was found on the Aerospace industry Association and shows how sales increased across all major product groups in 2008, with many individual categories reaching record highs. Total sales increased 2% to a record $204.4 billion driven by increasing sales in nearly every other major product group.
Part of the recent increase in sales is due to the introduction of many major new aircrafts, both the civil and military. The new introduction should lead the industry to a substantial increase in production and in employment over the future.
As in the past the military aircraft and missiles portion of the U.S. industry has done much better than the civil portion, which may have some to so with the terrorist attacks and the fact that we are at war. The need for our Nation’s security will only continue to crow these two sectors of the Aerospace Industry. Many defense companies have been able to grow their cash reserves because of the high levels of government spending. Governments like the US continue to struggle to fuel the many financial bailouts and to contain spending. Projected growth of U.S. spending on social entitlement programs, and the cost the U.S. commitment overseas, will largely affect the new procurement programs. This type of behavior can increase operational spending, but won’t have the same affect on new weapons systems which will probably decline. Other countries such as the U.K., London, and France have also planned to reduce spending on defense which fill continue on to hit the Aerospace Manufacturing Industry.
Another downside of the US recession and credit crisis is how it has affected the airline industry greatly. This recession has forced profits down and will continue to do so until the economic situation of the US improves. The rise in the price of oil has also affected the airline industry over the past decade and will continue to do the same unless new renewable forms of fuel are found. With the average ticket prices over 50% higher than they were two years ago and profits for airlines not improving, airlines have found more ways to pass along the fees to their customers and decreasing the consumer’s willingness to travel by air.