Current Size
The aerospace industry mainly comprises civil and military aircraft which have become part and parcel of modern-day life. It is estimated that the global aerospace industry is worth US$ 700 billion. This comprises the sectors of commercial aerospace, defense, space, and general aviation The United State of America is estimated to have spent US$253 billion in the year 2008 alone in military investments.
The commercial aviation industry involves a considerable amount of money and is dominated by Boeing–Airbus duopoly. The status is, however, changing as other foreign companies are entering the market which is estimated to be worth an excess of $200 billion. The number is still expected to rise at a rate of 3.5% over the next 15 years. Most airlines now prefer to replace their old aircraft with new ones, as opposed to maintenance, repair, and overhaul (MRO). In the year 2011, US airlines replaced their fleets with a preference for Airbus. The orders made by the company reached a record of 1750 aircraft. (Electronic Subscription Service, 2005)
On a local level, the industry giant Boeing announced its plan to move out of Wichita, Kansas City, citing increased operational costs. With the aerospace industry generating revenues to the tune of US$ 2.1 billion, this move will lead to unemployment for more than 2000 employees working for the company and loss in revenue (Carlos, 2012).
Growth Potential
The global aerospace industry had several years of sustained growth even after the global economic crunch of 2008. In spite of a number of factors undermining the overall global economy, the industry showed considerable strength in the same year. Total sales of aerospace products and parts were 15.5 billion, an increase of 3.5% over 2007, according to the U.S. Bureau of Census.
The defense industry has adapted new and different business models in a bid to meet the industry’s requirements. There have been concerns about the energy requirements and the need for data capture which has ultimately led to new market opportunities for this sector. However, underinvestment from the Department of Defense in R and D may lead to a situation where the industry will lack the facilities to come up with new technologies and products.
Industry Trends
As mentioned above, the U.S airlines began replacing their fleet in 2011. This is because the current trend in the aerospace industry is to cut down costs on fuel. Fuel accounts for about one-third of operational costs, and considering a 12% increase in oil prices translates to 0.4% point reduction in global economic growth, it was probably the best decision (Electronic Subscription Service, 2005). Technological advancements have given the aerospace industry opportunity to grow beyond expectations.
The national security spacecraft, for instance, wished to have the ability to be able to launch on-demand. In response, the Department Of Defense and the commercial industry are currently working together to come up with a set of guidelines intended to ensure operationally responsive launches. The telecommunications sector encouraged further growth in the aerospace industries as more satellites needed to be launched into space.
However, the late 1990s downturn saw an overproduction of the equipment which led to reduced launch prices. The ease with which components can be bought from the internet has increased sales within the aerospace industry. However, this also promotes the purchase and production of counterfeit parts as it is very difficult to verify the authenticity of a product online. In this case, the internet undermines the integrity of the whole program and can even have disastrous effects if the components are used in commercial and military aircraft.
Other Characteristics
There are several factors that influence the aerospace industry including, but not limited to, counterfeit parts or components, regulatory compliance, and human resources. Counterfeits: For many production companies within and without the aerospace industry, counterfeit goods are a major financial setback. The decision by some original equipment manufacturers (OEM) to do away with some components saw the rise in counterfeit goods to seal the very large gap left.
Users are forced to get a replacement for parts from the counterfeit market. Regulatory compliance: Major players in the industry are forced to adhere to the strict rules which in turn slow down production and increases operational costs. This is in an effort to promote sustainable development. Human resources: In an era where companies are forced to lay off workers in a bid to reduce operational costs, it becomes increasingly difficult to ensure the growth of the industry.
Taking into account the fact that professionals in this industry are highly educated and require good salaries, companies are faced with the dilemma of maintaining a balance between workforce and profit-making.
The aerospace industry is a multibillion-dollar sector with after-tax profits of about $15.5 billion. This is even after a decline of 16.5% over the year 2007 (Carlos, 2012). Wichita, in Kansas City, is the region within the U.S. where the aerospace industry is most active. This is the home of Boeing, the aerospace industry titan.
Distribution Channels
The main distribution channel for the aerospace hardware industry is the internet. The latest parts and components are advertised online and potential buyers use catalogs to order for their preferred products and pay using their credit cards. Buyers can also go through directories that list all manufacturers and suppliers of aerospace hardware.
References
Carlos Gomes (2012). “Aerospace”, Industry trends-aerospace. Web.
Electronic Subscription Service (2005). Aerospace Dynamics. Web.