Business Report. Global Aircraft Manufacturing Industry

Table Of Contents

Executive Summary

1. Introduction

2. Description of the Aircraft Manufacturing Industry and its structure
2.1. Suppliers
2.2. Civil Aircraft Manufacturers
2.3. Aircraft Leasing Companies
2.4. Airlines
2.5. Airports
2.6. End user / Customer

3. Dominant Economic Characteristics of the Aircraft Manufacturing Industry

4. Industry Competition
4.1. Major Competitors
4.1.1. Airbus
4.1.2. Boeing
4.1.3. Bombardier
4.1.4. Comparison of the main competitors
4.2. Competitive Forces Analysis
4.2.1. Rivalry in the industry:
4.2.2. Substitutes:
4.2.3. New Entrants:
4.2.4. Supplier’s Power:
4.2.5. Buyer’s Power:
4.3. Result of the Five Forces Analysis

5. Driving Forces
5.1. Lifestyle and Social Characteristics
5.2. Product Innovation and Technology
5.3. Globalisation
5.4. Government
5.5. Internet

6. Key Success Factors

7. Prospects for the industry

Reference List

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.

Abbildung in dieser Leseprobe nicht enthaltenFigure 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 long-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]

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.

3. Dominant Economic Characteristics of the Aircraft Manufacturing Industry

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Table 1: Dominant Economic Characteristics of the Civil Aircraft Industry (2003)^[6][7][8][9]

The short-term air travel, connected with the need for new aircrafts, creates a very volatile market. The growth of the market depends very much on the general economic situation. When income is depressed or uncertain, people tend to cancel or delay visits to friends or vacations. Even business trips, which make nearly 70% of the world travel, are postponed.^[10] As a result of an incredibly difficult environment caused by fear of terror attacks like Sept. 11 and diseases like SARS, the short-term market growth is negative (see Table 1).^[11]

In contrast, the long-term growth forecasts look very positive with an expected average growth rate of 5.1% and increase in revenue on passenger-kilometres (RPK) from 3,165.7 Trillions in 2003 to 8,473.4 in 2022 (see Figure 2).

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Figure 2: Long-term demand in air travel

Source: Airbus 2003, p. 12

Major drivers of the long-term air travel growth are general economic growth, globalisation, growing desire of people to travel, and the lack of substitutes for air travelling. The deregulation and liberalization of the airline industry led to lower prices for the customers and an additional interest in using aircraft travel for shorter distances.^[12]

[...]

^[1] Done 2004, p. 24

^[2] Daniel 2003, p. 21

^[3] Speednews 2004a

^[4] GECAS 2004

^[5] Daniel 2003, p. 21

^[6] Airbus 2004, p. 1

^[7] Boeing 2004, p.4

^[8] SpeedNews 2004b

^[9] Speednews 2004c

^[10] Boeing 2003, p. 6

^[11] Berman 2004, p.129

^[12] Boeing 2003, p. 6