Business Report: Global Aircraft Manufacturing Industry

  Executive Summary  4

1.  Introduction  4

2.  Description of the Aircraft Manufacturing Industry and its structure  4

2.1.  Suppliers  5

2.2.  Civil Aircraft Manufacturers  5

2.3.  Aircraft Leasing Companies  6

2.4.  Airlines  6

2.5.  Airports  6

2.6.  End user Customer  6

3.  Dominant Economic Characteristics of the Aircraft Manufacturing Industry  7

4.  Industry Competition  9

4.1.  Major Competitors  9

4.1.1.  Airbus  9

4.1.2.  Boeing  9

4.1.3.  Bombardier  10

4.1.4.  Comparison of the main competitors  10

4.2.  Competitive Forces Analysis  11

4.2.1.  Rivalry in the industry:  11

4.2.2.  Substitutes:  12

4.2.3.  New Entrants:  12

4.2.4.  Supplier s Power:  13

4.2.5.  Buyer s Power:  13

4.3.  Result of the Five Forces Analysis  14

5.  Driving Forces  14

5.1.  Lifestyle and Social Characteristics  14

5.2.  Product Innovation and Technology  15

5.3.  Globalisation  15

5.4.  Government  15

5.5.  Internet  16

6.  Key Success Factors  16

7.  Prospects for the industry  16

  Reference List  18

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Executive Summary

The purpose of this report is to analyse the attractiveness of the aircraft manufacturing industry. Research for this report includes information from journal articles, newspapers, and analysis of actions of the main competitors.

The major findings indicated that the aircraft manufacturing industry has undergone extensive changes since the late 1990’s. Despite the negative effects of environmental change like the terrorism acts of September 11, 2001 and diseases like SARS on air travel, the aircraft industry is still attractive for new entrants. The long-term growth rate caused by globalisation, governmental support, and general need for more mobility show that there is still a large demand for aircrafts of all sizes.

Due to the industry’s attractiveness, it is highly recommendable to enter the industry. Companies considering this should be aware of the high volatility in the market as well as the huge capital investments needed for the development process.

1. Introduction

Boeing and Airbus are attracting worldwide attention with their desire to become market leaders in the aircraft manufacturing industry. This report analyzes the aircraft manufacturing industry and offers recommendations for companies considering entering the industry.

2. Description of the Aircraft Manufacturing Industry and its

structure

To fully understand an industry, the whole backward and forward channel must be considered. The industry value chain in figure 1 shows the civil aircraft manufacturing industry from the suppliers of the raw material to the end user who demands the service of transportation.

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Figure 1: Industry Value Chain of the Civil Aircraft Manufacturing Industry

2.1. Suppliers

For the construction of an aircraft the companies need a variety of raw materials like steel plates or plastic parts. This can be purchased from many suppliers on the world market.

In addition the aircraft companies need a lot of parts they can only get from a small number of manufacturers like plane tires (Goodyear, Bridgestone, Michelin) or high tech components (Siemens, Honeywell).

Last and most important group are the suppliers that deliver components that have to do with the plane’s efficiency and nevertheless with its security. These are parts like the hull and the engines (Rolls-Royce, General Electric). 1 The aircraft manufacturers normally develop new planes together with these suppliers and form therefore lo ng-term strategic alliances.

2.2. Civil Aircraft Manufacturers

The aircraft manufacturers themselves perform all the steps from the R&D, production, and pilot training to the even sales for new aircrafts.

Up to 80% of the sales are carried out directly between the aircraft manufacturers and the airlines. 2 In addition, most of the companies’ trade used planes that are sold back to them from the airline companies. 3

1 Done 2004, p. 24

2 Daniel 2003, p. 21

3 Speednews 2004a

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2.3. Aircraft Leasing Companies

The 20% of the planes that are not sold directly by the manufacturers are bought by leasing companies. These companies collect money from private investors, buy the planes, and offer them to the airline companies for a fix leasing rate. 4 In the last few years, the business of leasing planes is still growing, which is enforced by tax reductions for the investors and higher uncertainties for the airlines. 5

2.4. Airlines

The over 300 airlines worldwide perform the service of transportation for the end customer. They have to do the air traffic planning, marketing and other end user related tasks.

2.5. Airports

The airports all over the world provide the necessary infrastructure and facilities for the customers to get to their destination. Therefore they charge the customers and airlines for their services, which have quite an influence on the end price.

2.6. End user / Customer

Last and most important part in every industry is the end user who consumes the service and decides if he is willing to pay the price or not.

4 GECAS 2004

5 Daniel 2003, p. 21

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