Globalization of Commercial Aircraft Manufacturing

1
Globalization of Commercial Aircraft Manufacturing

• Dr. David Pritchard
• University at BuffaloJanuary 9-13, 2005

2
In 1960s, the Three US Commercial Aircraft
Manufacturers had over 90 Market Share, Today
Airbus has over 50 Market Share

• Who will be the next Airbus?
• The manufacturers from Russia, China and India?

3
Product Life Cycles for Commercial Aircraft Spans
Over 30 Years
4
US Passenger Aircraft ModelsNo Longer in
Production
5
Boeings Airframe Product Life Cycles by Model
6
Comparison of Commercial Aircraft Backlog _at_
9/30/04

• Airbus
• A318 70
• A320 series 914
• A300/310 61
• A330 166
• A340 68
• A380 129
• A350 N/L
• Total 1408

• Boeing
• 717 33
• 737 784
• 757 2
• 767 24
• 777 152
• 747 36
• 7e7 52
• Total 1083

7
The World Fleet is Expected to Double by 2019
8
Asian Region will Average Over 6 Traffic Growth
9
Foreign Governments will Influence Aircraft
Purchases
10
Continued Downward Trend for US Aerospace
Employment
11
US Aerospace Market is Not as Attractive to
Younger Workers as Other Industries
12
US Aerospace is Losing its Technological
Employment Base
13
US Trade in Commercial Aircraft/Parts
14
727/777/7e7 Foreign Content
15
US Commercial Airframe Prime and Subcontractor
Integration
16
CIS evolution into western aircraft manufacturing

• Russian Regional Jet with western certification
• Boeing (Moscow) design center and material
  sourcing
• Airbus subcontracting with Kaskol and Irkut for
  components
• Possible co-production of the Embraer series of
  aircraft
• Russian/CIS Commercial Aircraft Programs
• New Programs

17
Russian Regional Jet

18
RRJ-Sukhoi Civil Aircraft

• Three models- RRJ60, RRJ75 and RRJ95
• Basic and Long Range Versions
• Pricing is targeted to be 15- 20 lower than
  western manufacturers
• Market outlook is 800 aircraft over 20 years
• 60 international and 40 domestic
• First flight in 2008 and first delivery in 2009

19
RRJ Customers and Regional Linkages/Relationships

• India Airlines
• Malaysia Airlines
• Air France and Lufthansa
• Alitalia
• Aeroflot and Sibir

• Co-production Su-30s
• Sale of fighter aircraft
• EADS cooperative agreements
• Italian fighter trainers
• Government supported programs

20
RRJ Competitive Advantages

• Aircraft design on Catia design stations
• Western engines and avionics
• Supershell airframe assemblies-highly automated
• Low cost labor and raw materials
• JAA certification

21
RRJ Production Sites

• KnAAPO-Komsomolsk-on-Amur
• Wing manufacturing and fuselage assembly
• Hindustan Aeronautics Ltd.-India
• Subcontract for empennage

22
Why would China and India Purchase Western
Aircraft?
23
China and India will Develop its Commercial
Aircraft Manufacturing Capability

• The same way as they do with their military
  aircraft by co-production and licenses

24
China Aircraft Offset Programs
25
ARJ-21China Regional Jet
26
ARJ-21 Market Outlook

• Two versions 78 and 105 seats
• 500 ARJ-21s in 20 years-35 ordered
• Initially target domestic market
• Selling price is 10 to 15 less expensive than
  western regional jets
• Avoids 23 import tax on regional jets

27
ARJ-21 Features

• Chinese Design (with western design software)
• Western engines
• Western flight controls and avionics
• Cockpit designed for easy transition from 737
  platform

28
ARJ-21 Interior

29
ARJ-21 Cockpit Configuration

30
ARJ-21 Production Sites

• Shanghai Aviation-final assembly and stabilizer
  section
• Chendgu Aircraft Factory- nose assembly
• Xian Aircraft -wing assembly and fuselage
• Shenyang Aircraft tail section

31
ARJ-21 Suppliers

• Contracted Suppliers
• GE -CF34-10A engines
• Rockwell Collins -Communication and navigational
  electronics
• Honeywell/Parker Hannifin-Primary flight control
  system
• Antonov Design Bureau-Ukraine-Critical wing
  design and testing

32
World Market Share for Commercial Aircraft
Manufacturing in 2020?

• Boeing 35 (aircraft gt150)
• Fleet 777, 7E7 and 737X
• (not in production 717, 737, 747, 757, 767)
  
• Airbus 65 (aircraft gt150)
• Fleet A380, A320x and A350
• (not in production A300, A310, A320, A330,
  A340)
• Canada, Brazil, Russia and China 90 (aircraft
  lt150)
• Regional Jets
• Expand co-production of western regional jets
• Possible co-production in China of A320

33
Conclusions

• -Continued US factory consolidation/sell off.
• -Long-term downward trend for US aerospace
  employment.
• -Boeings movement away from a parts/assembly
  manufacturer to a system integrator of aircraft.
• Emerging markets producing aircraft which sell
  for 20-40 below western pricing
• Further offset or co production agreements for
  older western jet models

34
University at BuffaloCanada-United States Trade
Center

• Research Papers
• Outsourcing US commercial aircraft technology and
  innovation Implications for the industrys long
  term design and build capability
• Industrial Subsidies and Politics of World Trade
  The Case of the Boeing 7e7
• The International Decentralization of US
  Commercial Aircraft Production Implications for
  US Employment and Trade
• http//www.geog.buffalo.edu/custac/current_researc
  h.html

35
Contact Information

• Dr. David J Pritchard
• 210 Sagewood Terrace
• Williamsville, NY 14221 USA
• Telephone/Telefax 716-632-5657 (USA)
• web site www.pravco.com
• newsletter www.pravcoaviationreview.com
• email davidjpritchard_at_adelphia.net

36
Final Thought
Then I think you are outsourcing and I think you
are ultimately going to export both your
knowledge base within your company, your
intellectual property and youre re going to you
are forestalling the inevitable. Because if your
only advantage is on cost of labor, I dont think
youve got much of an opportunity strategically
and you are going to get outthought,
outmaneuvered and out hustled by foreign
competition.
Lou Dobbs tonight