A Sector Under Pressure: Aerostructures, Insourcing and the Future of Composites

Since Counterpoint Market Intelligence (Cambridgeshire, U.K.) began tracking the aerostructures industry in 2004, one theme has remained remarkably consistent: Aerostructures has often struggled to deliver the level of profitability seen in other parts of the aerospace market. Companies have been bought, sold, merged, carved out or broken apart in the hope of creating more resilient businesses. Yet sustainable returns have frequently proved elusive.

The fate of the aerostructures sector has major implications for the composites industry. Aerostructures, which form the wings, fuselage, empennage and nacelle, is one of the largest end markets for composites by value.

However, the companies that manufacture many of these structures face a difficult set of economic realities. Despite advances in materials, automation and processes, much of the aerostructures supply base remains under pressure.

A challenging business model

Many of this sector’s challenges are inherent to the aerostructures business model. Unlike engines or aircraft systems, aerostructures generally has a limited aftermarket. Once a structural assembly is delivered, there are fewer recurring, high-margin opportunities than exist for engines or aircraft systems. Airlines tend to repair versus replace where possible. Demand is therefore highly dependent on aircraft production rates.

The asset base tends to be more specialized. A production line for a major aircraft structure is often designed, qualified and tooled around a specific aircraft program. Moving work from one site to another is feasible, but in practice it is expensive, slow and heavily constrained by qualification requirements. These limitations make rationalizing capacity or achieving synergies between different facilities difficult.

Aerostructures also tends to be less intellectual property (IP)-intensive than some other aerospace segments. A significant share of the IP sits with the aircraft OEM or the raw material supplier rather than with the company manufacturing the part. That does not mean aerostructures suppliers lack expertise. In fact, it’s quite the opposite. Manufacturing large, high-quality, certified structures is a significant challenge, and companies typically invest heavily to meet OEM demands and achieve proficiency. Yet the lack of IP means many structures suppliers struggle to capture the same value as businesses with more proprietary content, deeper aftermarket streams or higher switching costs.

A track record of low margins

Broader industry trends have amplified these structural pressures. Before the COVID-19 pandemic, successive cost-reduction initiatives from major OEMs had already pushed margins down across the supply chain and increased working capital demands. The pandemic then created a sharp drop in aircraft production rates, hitting aerostructures suppliers especially hard because of their dependence on new-build aircraft. Many companies reduced their workforce, leading to a loss of key skills. When production rates began to recover, suppliers had to rebuild capacity in a world of labor shortages, inflation, material constraints and fragile balance sheets.

The chart above (Fig. 1) shows profit margins from selected aerostructures players. The sample includes companies with accessible financial statements that are either pure-play (or mostly pure-play) aerostructures businesses, as well as companies that report an aerostructures segment separately. The metric shown is generally operating profit, although there are some differences in exact reporting definitions between companies. Due to data availability, the sample skews somewhat toward Europe, although it also includes North American and Asian players.

Before the pandemic, median operating profit margins in the sample generally hovered around the high single digits to low double digits. There is wide variation in profit margins across the aerospace industry depending on the market served, but that number is generally lower than the 15-20% average that we see across the industry. After the pandemic, margins fell sharply — in most cases into negative territory. There has been some recovery as production rates have improved, but several players remain under pressure.

Disappearing Super Tier 1s

This weak profitability has contributed to a reshaping of the industry. When Counterpoint first began reporting on aerostructures, the market contained a set of large independent players that were sometimes described as “Super Tier 1s” — suppliers with the scale, engineering and investment capability to take on major aircraft structures. In 2004, we counted six major players: Alenia, Goodrich, Hurel Hispano, Kawasaki, Mitsubishi and Vought. The transaction that created Spirit AeroSystems would not be completed until the following year, but that would create a seventh. This period coincided with Boeing’s 787 and Airbus’ A350 production, two programs that relied on significant outsourcing to Super Tier 1s, with the OEMs acting as integrators.

Over the past two decades, that Super Tier 1 landscape has changed substantially. Some companies have exited. Others have been absorbed into larger groups. Several have attempted to rationalize portfolios, only to find that the cost and complexity of transferring programs made restructuring more difficult than expected. Today’s landscape has so few remaining Super Tier 1 players that it may now be time to retire the term altogether.

Trends toward insourcing

OEM strategies have also changed, with the pendulum swinging away from the high levels of outsourcing seen two decades ago to bringing key structures capabilities back under direct control (Fig. 2). For Airbus, part of this strategy has been the formation of Airbus Atlantic (combining Stelia with the Montoir-de-Bretagne and Nantes facilities) and the rolling of Premium Aerotec into Airbus Aerostructures GmbH. Both produce large sections and components for fuselages and wings along with other key airframe capabilities across multiple platforms. As the company commented in its 2023 business update call, “Long story short, we decided 4 years ago that aerostructures are core, that aerostructures will bear a lot of innovation, that it’s all about the physical infrastructure but also the digital infrastructure. And to deploy a digital infrastructure that is common for the whole plane, we wanted to own aerostructures ... [so] we have decided to go for a model where we are in ‘make’ [as opposed to purely ‘buy’], but we are still organized in a way that we have dedicated companies and organizations to take care of it … This has been designed to prepare for the next generation of planes, as the aerostructure will embed much more integrated functions.”

For Boeing, the largest shift has been the acquisition of Spirit AeroSystems. Boeing completed the acquisition in December 2025, bringing significant production capability back in-house. Airbus simultaneously took ownership of several former Spirit sites and work packages supporting Airbus programs, including activities in Kinston, Saint-Nazaire, Casablanca, Belfast and Prestwick. For Boeing, however, this in-sourcing follows a wider trend. The wing for the 777X aircraft, for example, is manufactured by Boeing in Everett, Washington, in contrast to its outsourcing in the original 777 program to a consortium of Japanese aerostructures suppliers.

If we compare the level of outsourcing from over two decades ago to today, we see a steady rise in the value of aerostructures being outsourced. Following the Spirit AeroSystems transaction and taking into account Airbus’ own companies, the pendulum of outsourcing is shifting back toward in-house production. And it is likely that the level of insourcing will only increase in the near term.

Forecasted strategies and adaptations

Where does the industry go from here? We at Counterpoint see three considerations.

First, it is worth noting that we expect financials to continue to improve as production rates increase. Single-aisle aircraft have seen a good recovery post-pandemic, and twin-aisle aircraft, which were lagging behind, have now also rebounded with further increase expected in the coming years. For an industry that is highly rate-dependent, that will offer some relief.

Second, we expect aerostructures providers to adopt a range of strategies that will help improve their position. Our analysis at Counterpoint suggests there is no dominant, one-size-fits-all strategy, but instead depends highly on the legacy program sets, geography and capabilities of the company. Some players, such as Montana Aerospace, have had success with vertical integration, controlling the supply chain from extrusions to finished assemblies. Others have specialized around different production technologies or aircraft components. ST Engineering MRAS, for example, has had success with composite materials and nacelles. Others have tried to shift the most labor-intensive work to lower-cost regions and/or increase automation over time and where it makes sense [see CW’s tour of FACC AG, Jakovlje, Croatia].

And although we expect more work to move in-house, we believe appetite still remains for OEMs to continue outsourcing large pieces of work. Aerostructures suppliers still provide a valuable source of expertise, capability and investment. For new programs like next-gen single-aisle (NGSA) aircraft, where that investment will be widespread and significant, this will be critical. Saab, for example, is actively looking at composite technologies to position themselves for next-generation opportunities.

Finally, we expect mergers and acquisitions to continue to play a role in the industry as suppliers adapt and reshape their portfolios to remain competitive. Particularly as the industry awaits these new clean sheet single-aisle programs from Airbus and Boeing.

What does this all mean for composites?

The composites industry should watch these changes closely, as they present both risks and opportunities. Future aircraft are likely to need more advanced composite structures, not fewer. While much of the industry is focused on how and where composites will be used, we believe it is also important to understand who will industrialize them, who will invest in the required capacity and who will earn an acceptable return for doing so.

For those further upstream in the value chain, these changes can impact product and process development and how buying decisions are made within the industry. They also can affect how companies choose technology partners and what role those partners might have on future programs.

Aerostructures has always been a demanding business. It sits at the intersection of advanced engineering, capital-intensive manufacturing and complex production schedules. The next generation of aircraft will create a major opportunity for composites, but that opportunity exists in a supply chain that is poised to look rather different from the one we see today. Counterpoint continues to watch this sector with great interest, and we remain hopeful that the industry charts a path to a more sustainable financial footing going forward.