Aircraft Engine & Parts Manufacturing
Description
Companies in this industry manufacture aircraft engines and engine parts; as well as fuselage, propeller and rotor, landing gear, electric and hydraulic control, and avionics systems. Major companies include GE Aerospace and Pratt & Whitney (both based in the US); as well as Kawasaki Heavy Industries (Japan), Rolls-Royce (UK), and Safran and Thales (both based in France).
Top destinations for exports from the US include Canada, Japan, Mexico, and the UK. The industry is dominated by large players that typically maintain manufacturing operations around the world. Demand for aircraft parts is driven by new orders for commercial, military, and general aviation aircraft, as well as maintenance, repair, and overhaul (MRO) services.
The US aircraft engine and parts manufacturing industry includes about 1,350 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $75 billion.
COMPETITIVE LANDSCAPE
Rapid changes in technology and geographic shifts in demand are affecting how and where aircraft engine and parts manufacturers compete. Amid passenger and cargo demand growth in emerging markets, companies are forging global partnerships to share risks, costs, and sales, and to increase their manufacturing and support services footprints. Technologies including additive manufacturing, the internet of things (IoT), and big data are increasingly important competitive differentiators. Engine and parts companies aim to leverage these and other technologies to reduce aircraft operating costs and improve their own cost structures.
Exports are an important source of revenue and include replacement parts for US-made airplanes that are being used and serviced abroad, as well as aircraft engines and parts. Top exporting countries include Canada, Japan, Mexico, and the UK. For imports, Francs, Canada, Japan, and Singapore dominate the market. The US industry is highly concentrated: the 50 largest US makers of engines and engine parts account for about 95% of segment revenue; the 50 largest US makers of other aircraft parts and equipment account for about 85% of revenue for that segment.
Competitive Advantages:
Risk Sharing - Aircraft engine and parts companies can better compete by forging collaborative relationships with customers and suppliers. Aircraft manufacturers want suppliers to share in the costs and risks inherent in developing new products.
Additive Manufacturing - Aerospace companies are making significant investments in additive manufacturing to reduce development and production costs and to improve product design and quality.
Global Reach - Aircraft engine manufacturers are investing in global networks of maintenance, repair, and overhaul (MRO) facilities to service their engines and enhance product life cycle revenue. Asia, particularly China and India, is a key focus of MRO operation expansion.
Data Analytics - Aircraft engines and parts manufacturers are improving efficiency and adding value by leveraging machine learning and advanced analytics. Sensors built into components collect data that can be used to anticipate repairs earlier in the maintenance cycle, which decreases airline customer downtime and provides additional product lifecycle revenues for manufacturers.
Companies to Watch:
CFM International, a joint venture between General Electric and France's Snecma (part of Safran), manufactures a line of six aircraft engine models. GE manufactures CFM International's engine cores and assembles roughly half of its engines; Snecma makes the fans and rotors and assembles the rest of the engines.
GE Aviation is one of the world's largest providers of jet engines and services for commercial and military aircraft. It also offers replacement parts and maintenance, repair, and overhaul (MRO) services.
Pratt & Whitney, a division of United Technologies (UTC) manufactures and maintains commercial, military, and business jet engines. Commercial air giants Airbus and Boeing are the company's largest commercial engine customers. Military offerings include engines for the F-35 Lightning II and the C-17 Globemaster III military transport.
Rolls-Royce Holdings makes commercial and military engines for a broad customer base, including airlines, corporate and utility aircraft and helicopter operators, and armed forces.
Safran manufactures aircraft/rocket/space engines and propulsion systems for fixed-wing aircraft and rotorcraft. The company serves both the civilian and military sectors, working alone or in partnership with other major companies.
PRODUCTS, OPERATIONS & TECHNOLOGY
Makers of engines and engine parts typically get the bulk of their revenue from parts and accessories for civilian aircrafts, accounting for about 30% of the industry revenue. This is followed by military aircraft engines (about 40%) and aeronautical services on aircraft engines (about 10%). Other products also include maintenance and repair for aircraft (about 5%).
Aircraft parts manufacture is generally high-precision and high-technology, where the performance of a part is often more important than its price. Much like the automobile industry, the aircraft industry consists of a few large OEMs, like Boeing, that design, assemble, and sell aircraft, and a large number of subcontractors that manufacture the parts. OEMs supply the designs and specifications for many parts.
Most companies specialize in producing specific parts for a particular airplane ("platform") and often hold requirements contracts that commit buyers to purchasing from that supplier all their needs for a particular part. Such exclusive contracts compensate the supplier for the investment in capital equipment often needed to produce a specific part. Because of the many parts in the many different aircraft in service, even relatively small companies may manufacture a very large number of different parts or subassemblies.
The operations of most parts manufacturers are located in a single facility and involve forging, forming, fabricating, machining, finishing, painting, and similar types of manufacturing activities. The processes often require greater precision and use higher-grade materials, such as aluminum, titanium, and specialty steel alloys, than in other manufacturing processes. Specialized operations like chemical milling -- removing excess metal with acids -- and stretch forming are characteristic. Investment in expensive machinery, often with computerized controls, is common.
Raw materials are usually readily available from a number of vendors. Parts are produced according to designs and specifications furnished by the OEM. The manufacturing process for most aircraft parts must be approved by the OEM, or by the Federal Aviation Administration (FAA) through a Parts Manufacturer Approval (PMA), and usually requires extensive testing and other control steps. Quality control is a major concern for manufacturers, requiring a large number of quality control personnel.
In addition to new plane production, there is a large aftermarket for replacement parts and special equipment such as avionics, which are electronic communications and sensing systems. The FAA mandates that certain kinds of parts be replaced after a specified number of takeoffs and landings. This requirement spurs the aftermarket segment, which can be significant for parts makers.
The FAA must approve all replacement parts. Parts are sometimes produced under license from the OEM or original manufacturer. The replacement part market is sizable because of the long useful life of many aircraft. The active US aircraft fleet includes about 7,000 commercial aircraft, more than 13,000 military aircraft, and 210,000 private planes.
Top destinations for exports from the US include Canada, Japan, Mexico, and the UK. The industry is dominated by large players that typically maintain manufacturing operations around the world. Demand for aircraft parts is driven by new orders for commercial, military, and general aviation aircraft, as well as maintenance, repair, and overhaul (MRO) services.
The US aircraft engine and parts manufacturing industry includes about 1,350 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $75 billion.
COMPETITIVE LANDSCAPE
Rapid changes in technology and geographic shifts in demand are affecting how and where aircraft engine and parts manufacturers compete. Amid passenger and cargo demand growth in emerging markets, companies are forging global partnerships to share risks, costs, and sales, and to increase their manufacturing and support services footprints. Technologies including additive manufacturing, the internet of things (IoT), and big data are increasingly important competitive differentiators. Engine and parts companies aim to leverage these and other technologies to reduce aircraft operating costs and improve their own cost structures.
Exports are an important source of revenue and include replacement parts for US-made airplanes that are being used and serviced abroad, as well as aircraft engines and parts. Top exporting countries include Canada, Japan, Mexico, and the UK. For imports, Francs, Canada, Japan, and Singapore dominate the market. The US industry is highly concentrated: the 50 largest US makers of engines and engine parts account for about 95% of segment revenue; the 50 largest US makers of other aircraft parts and equipment account for about 85% of revenue for that segment.
Competitive Advantages:
Risk Sharing - Aircraft engine and parts companies can better compete by forging collaborative relationships with customers and suppliers. Aircraft manufacturers want suppliers to share in the costs and risks inherent in developing new products.
Additive Manufacturing - Aerospace companies are making significant investments in additive manufacturing to reduce development and production costs and to improve product design and quality.
Global Reach - Aircraft engine manufacturers are investing in global networks of maintenance, repair, and overhaul (MRO) facilities to service their engines and enhance product life cycle revenue. Asia, particularly China and India, is a key focus of MRO operation expansion.
Data Analytics - Aircraft engines and parts manufacturers are improving efficiency and adding value by leveraging machine learning and advanced analytics. Sensors built into components collect data that can be used to anticipate repairs earlier in the maintenance cycle, which decreases airline customer downtime and provides additional product lifecycle revenues for manufacturers.
Companies to Watch:
CFM International, a joint venture between General Electric and France's Snecma (part of Safran), manufactures a line of six aircraft engine models. GE manufactures CFM International's engine cores and assembles roughly half of its engines; Snecma makes the fans and rotors and assembles the rest of the engines.
GE Aviation is one of the world's largest providers of jet engines and services for commercial and military aircraft. It also offers replacement parts and maintenance, repair, and overhaul (MRO) services.
Pratt & Whitney, a division of United Technologies (UTC) manufactures and maintains commercial, military, and business jet engines. Commercial air giants Airbus and Boeing are the company's largest commercial engine customers. Military offerings include engines for the F-35 Lightning II and the C-17 Globemaster III military transport.
Rolls-Royce Holdings makes commercial and military engines for a broad customer base, including airlines, corporate and utility aircraft and helicopter operators, and armed forces.
Safran manufactures aircraft/rocket/space engines and propulsion systems for fixed-wing aircraft and rotorcraft. The company serves both the civilian and military sectors, working alone or in partnership with other major companies.
PRODUCTS, OPERATIONS & TECHNOLOGY
Makers of engines and engine parts typically get the bulk of their revenue from parts and accessories for civilian aircrafts, accounting for about 30% of the industry revenue. This is followed by military aircraft engines (about 40%) and aeronautical services on aircraft engines (about 10%). Other products also include maintenance and repair for aircraft (about 5%).
Aircraft parts manufacture is generally high-precision and high-technology, where the performance of a part is often more important than its price. Much like the automobile industry, the aircraft industry consists of a few large OEMs, like Boeing, that design, assemble, and sell aircraft, and a large number of subcontractors that manufacture the parts. OEMs supply the designs and specifications for many parts.
Most companies specialize in producing specific parts for a particular airplane ("platform") and often hold requirements contracts that commit buyers to purchasing from that supplier all their needs for a particular part. Such exclusive contracts compensate the supplier for the investment in capital equipment often needed to produce a specific part. Because of the many parts in the many different aircraft in service, even relatively small companies may manufacture a very large number of different parts or subassemblies.
The operations of most parts manufacturers are located in a single facility and involve forging, forming, fabricating, machining, finishing, painting, and similar types of manufacturing activities. The processes often require greater precision and use higher-grade materials, such as aluminum, titanium, and specialty steel alloys, than in other manufacturing processes. Specialized operations like chemical milling -- removing excess metal with acids -- and stretch forming are characteristic. Investment in expensive machinery, often with computerized controls, is common.
Raw materials are usually readily available from a number of vendors. Parts are produced according to designs and specifications furnished by the OEM. The manufacturing process for most aircraft parts must be approved by the OEM, or by the Federal Aviation Administration (FAA) through a Parts Manufacturer Approval (PMA), and usually requires extensive testing and other control steps. Quality control is a major concern for manufacturers, requiring a large number of quality control personnel.
In addition to new plane production, there is a large aftermarket for replacement parts and special equipment such as avionics, which are electronic communications and sensing systems. The FAA mandates that certain kinds of parts be replaced after a specified number of takeoffs and landings. This requirement spurs the aftermarket segment, which can be significant for parts makers.
The FAA must approve all replacement parts. Parts are sometimes produced under license from the OEM or original manufacturer. The replacement part market is sizable because of the long useful life of many aircraft. The active US aircraft fleet includes about 7,000 commercial aircraft, more than 13,000 military aircraft, and 210,000 private planes.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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