A new generation of composites-intensive aircraft designs promises to dramatically accelerate the growth of a market currently valued at more than $7 billion (USD). Readers of this column know the advantages of composites: high strength-to-weight ratio, excellent fatigue and corrosion resistance, good impact resistance, design flexibility and lower part count. Weight savings are particularly important in a market environment characterized by high fuel prices and the prospect of ever-more stringent aircraft emissions standards. The air transport sector has increased composites usage over the last few decades — Airbus’ A320 in the late 1980s and the Boeing 777 that followed increased the per-plane use of composites to 10 to 15 percent of total structural weight. New technologies and process innovations, such as automated tape laying, have decreased costs and are responsible for increased use of composites on Airbus’ new A380 and the Boeing 787 Dreamliner, as well as the recently revamped Airbus A350 XWB.
The market for aerospace composites, encompassing both production and maintenance, repair and overhaul (MRO) services, is by AeroStrategy’s 2006 estimate worth $7.3 billion. Production of finished composite components and structures for new aircraft — mostly carbon fiber-reinforced polymer — accounts for three-quarters of that figure, or $5.5 billion. The air transport production sector accounts for $3.3 billion of the total while military aircraft production is valued at $1.6 billion. Business aircraft and civil helicopters make up $600 million, a figure that reflects lower market penetration and smaller aerostructures. Demand for MRO service of composite components, such as repair of thrust reversers, radomes, nacelles, control surfaces, structural components and cabin interiors, is sizable at $1.8 billion, and it’s growing.
That’s the present, but what about the future? We predict that the increasing percentage of composites in new transport aircraft and continued growth in the demand for MRO services will combine to nearly double the aerospace composites market. We believe the market will reach $14 billion (in constant 2006 dollars) within a decade at a compound annual growth rate of nearly 7 percent. The source of greatest growth will be air transport OEMs, which, as a group, will expand at a sizzling annual rate of 9.5 percent.
How big can the aerospace composites market get? As Nobel Prize winner physicist Niels Bohr once quipped, “Prediction is very difficult, especially about the future.” Nevertheless, I’m willing to venture that in the 2016 to 2026 timeframe, the market may double again to $30 billion. This figure assumes that future transport aircraft, including the much-anticipated redesign versions of the narrow-body B737 and A320, will integrate greater percentages of composites, mainly by bringing them into primary structures. It also assumes that penetration of composites into business aircraft will increase significantly. In any case, the trend is clear: over the next two decades, transport aircraft production will drive overall market growth, followed by composite MRO services.
This growth will reshape the aerospace supply chain as it shifts away from the “metal bending” paradigm that has been in place since the 1920s. Aircraft OEMs appear to be pursuing an automotive industry strategy, focusing on final assembly and systems integration while cutting back on internal production. In practice, this shifts commercial and technological risk to supply chain partners. A good recent example is Boeing’s divestiture of its Wichita and Tulsa fuselage production facilities (now Spirit Aerosystems). Consequently, the market available to aerostructures firms will grow faster than overall aerospace production. At the other end of the supply chain, raw material suppliers are adding capacity for aerospace-grade carbon fiber. However, short supply will likely persist through the end of this decade, which could open opportunities for new market entrants or permit additional growth for commercial-grade suppliers Mitsubishi Rayon, SGL and Zoltek.
This composites-oriented environment will challenge Tier II suppliers, especially those with annual revenue of less than $100 million. Among the challenges: shifting distribution channels from OEMs to Tier I companies, a process that will upset long-standing business relationships; developing composite capabilities; and competing with a wave of new Tier II suppliers in regions where labor is less expensive, such as eastern Asia. These factors will produce turmoil and consolidation with considerable fallout. The MRO supply chain will see similar changes with additional pressure on MRO firms to find workers skilled in composites-related tasks.