Aerospace Market Drivers
Below is a summary of the commercial and military aerospace industry growth drivers, including government-subsidized programs. Notably, underperforming aerospace segments lack these drivers.
Commercial Aerospace Drivers
- The commercial aerospace industry's growth is being driven primarily by the increasing number of passengers, particularly in the APAC region, due in large part to the need for fast transportation to handle the demands of globalism, business, and tourism.
- This increase in passengers is directly correlated to the growth of a thriving middle class with disposable income in many countries, again with special reference to the APAC region.
- Consequently, Boeing estimates that there will be a global need for 44,000 new airplanes over the next 20 years. APAC will account for 40% of global demand for new aircraft, totaling an estimated "16,930 deliveries — this makes for a service market of $3,365 billion."
- The industry rebounded quickly after the 2009 market crash, with the main drivers being "consolidation, revenue passenger kilometer and airline capacity discipline, along with low fuel prices, and more revenue sources."
- Consolidation, in turn, is driven by the inability of smaller aerospace firms to "meet the rising financial, managerial, technical, risk-taking, and investment requirements needed to survive in a borderless world of growing competition."
- In some regions, like the Russian Federation, with high foreign-born populations, the aerospace industry is bolstered further by VFR (visiting friends and relatives) air travel.
- The increased demand for aircraft, in turn, drives the maintenance, repair, and overhaul (MRO) market, which is growing at a CAGR of 3.7% globally and 4.5% in the APAC region.
- Airbus has indicated that the development of new technologies and materials is driving a trend towards outsourcing MRO, especially in the component and engine market.
Government Initiatives as Drivers
- India's Ude Desh Ka Aam Nagrik Regional Connectivity scheme, or UDAN-RCS, "is a government initiative designed to make domestic flying more accessible to the Indian population, by making it more affordable and convenient," stimulating both India's air travel industry and the general economy.
- China's Belt and Road Initiative (BRI), which launched in 2013, aims to connect Asia to the Middle East, Africa, and Europe via a vast transport and logistics network. As noted by Satair, "The initiative already appears to have had a positive impact on air travel to and from China for countries participating in the program."
Defense Aerospace Drivers
- The defense side of the aerospace industry is driven "by rising geopolitical tensions, natural recapitalization cycles, greater high/low mix of assets, focus on aligning solutions to local requirements, and the increased demand for affordable, off-the-shelf equipment," all of which contribute to a general rise in military expenditures.
- The race to develop hypersonic weapons illustrates how global competition to develop more advanced weapon and defense systems drives the defense segment of the aerospace industry: Washington is concerned that Beijing may have their first hypersonic weapons platform, the DF-ZF, online before any equivalent American system. The DF-ZF, in turn, was "largely catalyzed by concerns that US advanced missile defense systems ... are severely undermining if not abrogating China's strategic and conventional nuclear deterrent."
Underperforming Segments Lack Drivers
- In 2018, the output of single-aisle jetliners rose 20% and combat aircraft rose 7.6%, but losses in regional aircraft, business aircraft, military transports, and larger military rotorcraft dragged overall output growth to just 1.9%.
- As noted by Aerospace Manufacturing & Design, "Each of these underperforming segments lack identifiable growth drivers."