Aviation Outlook: Composite aerostructures in General Aviation

Although the math is fuzzy and once helpful category distinctions are blurring, the forecast for this sector’s use of fiber-reinforced polymer remains strong.
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Forecasting can be a difficult business, especially in the aircraft world. Recently, the job has become even more difficult because some historic assumptions about the aircraft market are being challenged as significant change sweeps through a now truly global marketplace.

One assumption is that aircraft construction is a boom/bust market. But current order backlogs and resulting ramp-ups in production rates indicate that civil aircraft manufacturers are looking ahead with a great deal of confidence. Expected long-term growth in Asian and other developing economies accounts for a large proportion of the recently placed aircraft orders. As a result, many manufacturers already have backlogs amounting to several years of production for popular models. While some observers argue that the aircraft industry, as a result, has entered a “super cycle” or “a bubble,” investment banking advisor Trevor Bohn takes a slightly different view. A vice president at RSM EquiCo Capital Markets (Costa Mesa, Calif.), Bohn said at COMPOSITESWORLD Conferences’ 2008 Composites Industry Investment Forum (CIF) held in February that he preferred to describe the market as “stronger for longer.” With the growing number of aircraft orders and a resulting build up in aircraft delivery backlogs, the market for composite aerostructures in general aviation (GA) has been growing rapidly. According to the General Aviation Manufacturers Assn.’s (GAMA, Washington, D.C.) recently released 2007 year-end statistics, the industry grew 16.5 percent to a record $21.9 billion in aircraft shipments, compared to 2006. The group indicated that, globally, 4,272 aircraft were delivered in 2007, the most in more than a quarter century and up 5.4 percent over the previous year’s total of 4,053 planes. Moreover, deliveries of GA jet aircraft, for the first time in history, bested 1,000 last year.

Speaking at GAMA’s General Annual Industry Review and Market Outlook Briefing just a few weeks ago, GAMA chairman and chairman/CEO of Cirrus Design Corp. (Duluth, Minn.), Alan Klapmeier, told media that the record aircraft billings were the result of a strong worldwide market in 2007, especially outside of North America. “As these economies continue to expand, we expect general aviation to play an ever-increasing role in these regions,” he said, adding, “Manufacturer backlogs are strong, and we think this bodes well for 2008 and the years beyond.”

A second assumption is that aircraft manufacturing is somewhat static — that is, we assume that plane manufacturers, as the years go by, will continue to produce the same types of products for the same types of customers. Since the turn of the 21st Century, however, once straightforward distinctions between aircraft subcategories have eroded. For one, business aviation and general aviation aircraft often have been considered separately from each other, but the two markets are becoming less distinct — much like the eroding distinctions between builders of large commercial and 19-to-90-seat “regional” aircraft. Underscoring this point, nearly two-thirds of the 27+ million general aviation flight hours logged in each year are now reported to be for business purposes. Additionally, several key aircraft manufacturers produce models that are targeted to private and corporate customers. For these reasons, the traditional “business” and “general aviation” markets will be considered, for purposes of this forecast, under the single heading of General Aviation.

Equally problematic, “Experimental” aircraft, including prototypes, and “kit-built” or “home-built” airplanes, are often left out of aircraft production forecasts. This is partly a result of the challenge of keeping up with such a fragmented industry sector, dominated by small, privately held companies. Most home-builders take years to complete their projects, and a significant number are never fully completed or certified for flight. Nevertheless, estimates of the annual number of aircraft kits delivered to customers totaled about 3,100 planes worldwide last year. Many of these planes are built, at least in part, with composites, and an increasing number of builders are adding carbon fiber-reinforced polymer (CFRP) to improve performance and ease of assembly. As a result, the Experimental category represent a significant market for high-performance composite materials.

As defined here, then, the General Aviation aircraft market includes traditional factory-certified piston and turboprop aircraft, business jets (including future supersonic vehicles), the new class of Light Sport Aircraft (LSA) and Experimental aircraft. After the inclusion of Experimental aircraft production, estimates for the global GA market in 2007 approach 8,700 aircraft.

While many major engine and aircraft OEMs have routinely increased their annual 10-year production estimates, this author believes that rising fuel costs will start to impact global economies and result in a slight decline in other aircraft market forecasts toward the end of the next decade. But even with the damping effects of high oil prices figured in, the GA industry is forecasted to produce nearly 99,300 airplanes between 2008 and 2017.

The third assumption, of course, is that aircraft will be made of substantially the same materials, year after year. As the past few years have clearly demonstrated, we are in the midst of a materials paradigm shift. Like the regional and commercial jet transport manufacturers, makers of GA aircraft are rapidly turning to advanced composites in their new designs. Although aerospace aluminum manufacturing is a considerable component of current and several new GA aircraft models, one only has to look at the cover photos on popular aviation publications to see that CFRP is becoming commonplace on most of the new designs.

Ron Epstein, an aerospace and defense analyst at Merrill Lynch (New York, N.Y.), remarked at the recent CIF event that all-aluminum primary structures are rapidly losing favor among aircraft manufacturers as carbon fiber composites gain prominence. He expects that high fuel costs and lower maintenance expenses associated with CFRP designs will speed this transition. Epstein speculated that Cessna Aircraft Co. (Wichita, Kan.), would likely not produce any more new all-aluminum aircraft after the recently unveiled Model 850 Columbus — perhaps referencing Cessna’s recent purchase of Columbia Aircraft (Bend, Ore.), the manufacturer of the composite Columbia 350 and 400 aircraft. With the acquisition, Cessna might be signaling that a better business case can be made for already developed CFRP aircraft than for a new, aluminum turboprop program.

As Cessna’s Model 850 Columbus and Eclipse Aviation’s (Albuquerque, N.M.) Eclipse 500 jets demonstrate, demand for aluminum in the GA market is unlikely to decline too markedly. Indeed, Piper Aircraft Inc. (Vero Beach, Fla.) VP of sales Robert Kromer said, at the 2007 National Business Aviation Assn. meeting late last year in Atlanta, Ga., that its forthcoming PiperJet will use the same metalworking processes that it employs in the manufacture of all of its prop-driven aircraft. Accordingly, Epstein forecasts that aerospace aluminum consumption will level off.

What is important to point out here is that even “all-metal” designs make some use of composites in aerodynamic fairings and other secondary structures. Metal planes equipped with sophisticated avionics systems also require radomes, which are commonly made from glass fiber-reinforced polymers (GFRPs). Therefore, even among aircraft manufacturers that extol the benefits of aluminum alloys in primary aircraft structures, there is a market for composites that no forecaster can afford to discount.

Given the hundreds of factory-built and certified and Experimental aircraft models available for sale, some selectivity is necessary. Even so, the following composite demand forecast includes data from 88 different GA aircraft models produced by 27 manufacturers (not including Experimental), representing just under 3,000 aircraft or 34 percent of the 8,700 produced in the GA market during 2007. If we then estimate the “known-unknowns,” (to borrow a phrase from former Secretary of Defense Donald Rumsfeld), Experimental aircraft with at least some composite primary or secondary structural elements make up roughly two-thirds of all kit planes manufactured each year. When these Experimental aircraft are combined with the 3,000 factory-built planes, we can say that 57 percent of the general aviation airplanes produced last year incorporated some composites. At the end of this 10-year forecast, our calculations indicate that this figure will grow to 69 percent.

It is interesting to note that of the approximately 2,700 GA aircraft produced in 2007 that are not accounted for in this forecast, Cessna’s prop-driven aircraft, including the Skyhawk, Skylane, Caravan and Skycatcher, make up roughly one-third of the total — 890 airplanes. Hawker Beechcraft (Wichita, Kan.) delivered 268 Bonanzas, King Airs and Barons last year, which make no appreciable use of composites as built. Some, however, are good candidates for aftermarket modifications that could include, for example, add-on composite baggage compartments and performance-enhancing winglets.

Over the next 10 years, the proportion of GA aircraft that will make appreciable use of composites is expected to change from 57 to 69 percent — a very significant trend. For the 88 factory-built models included in this forecast, the average flyaway composite aerostructures content was 244 lb/111 kg in 2004. By 2007, the average had increased to 330 lb/150 kg. By 2017, that figure will grow to 475 lb/216 kg per plane.

Growing delivery figures multiplied by increased usage per plane can equal only one conclusion — the demand for composite aerostructures and the resulting impact on related supply chains are also growing. In fact, this somewhat conservative market analysis indicates that the volume of GA composite aerostructures (both CFRP and GFRP, including Experimental aircraft) totaled 4.1 million lb (1,860 metric tonnes) in 2007 (not including interiors, repair, overhaul and modifications), worth approximately $700 million — a 50 percent increase since 2004! Over the next 10 years, this market is expected to grow at an average annual rate of 4 percent — although composites demand is expected to peak in 2014. Most of this growth will occur over the next three years, with demand volumes predicted to grow a total of 31 percent during that period.

Looking at which companies will most drive demand, our “Top 10” general aviation aircraft manufacturers, ranked by flyaway weight requirements (see chart at right), constituted 64 percent of the industry’s total structures requirements in 2007. Number one on the list, Cirrus Design, is forecasted to have produced the largest volume of composite structures, having built 712 composite aircraft last year. Combined, the company’s SRS, SR20, and SR22 (including variants) required an estimated 864,000 lb (392 metric tonnes) of finished composite structures. Diamond Aircraft (London, Ontario, Canada) comes in second, having produced an estimated total of 572,000 lb (259 metric tonnes) of aerostructures for the approximately 475 airplanes that it built during 2007. Many of the remaining “Top 10” should be familiar. Hawker Beechcraft produces the Hawker 4000 and Premier 1, each with fiber placed CFRP fuselages. Dassault Aviation’s (Saint-Cloud, Cedex, France) business jets include composite empennages. Grob Aerospace GmbH (Tussenhausen-Mattsies, Germany) produces only composite aircraft. By virtue of its industry-leading production rates, the use of composites in secondary flight structures for most of its jet aircraft and the output from Columbia Aircraft, Cessna is now the fourth largest consumer of GA composite structures.

Two companies on the “Top 10” list that might surprise many are Flight Design (S. Woodstock, Conn.), which produces composite LSAs, and Epic Aircraft (Bend, Ore.). Though small in size, Flight Design’s CT is seeing dramatic sales growth. The company currently produces more than 100 aircraft per year, proving that even small applications can have a big impact in volume. Epic Aircraft, with its recent $200 million cash infusion from Kingfisher Airlines (Bangalore, India), is the wild card in this forecast. The company has transitioned from a designer of kit planes to a developer of certified, factory-built jets and turboprops. By partnering with international companies, Kingfisher hopes to bring aircraft manufacturing to India. Although Epic’s production forecast is speculative, the company has the greatest growth potential of any in this forecast. Based on Epic’s previous production of kit planes and early production of factory-built aircraft, Epic produced an estimated 41,000 lb (18.6 metric tonnes) of structures for the 20 planes it delivered during 2006. A production ramp-up drove this to an estimated 130,000 lb (59 metric tonnes) in 2007. By 2017, the company has the potential to build more than 600 aircraft each year, requiring as much as 670,000 lb (304 metric tonnes) of CFRP.

Although the “fuzzy math” that goes into creating market forecasts indicates that production of composite aerostructures will see robust growth commensurate with forecasted market expansion and materials usage trends, history rarely unfolds exactly as predicted. Forecasters invariably get things wrong. This forecast is built upon a series of iterative improvements compiled over more than a decade. While 2007 production and delivery volumes for most aircraft were very close to those forecasted in prior year outlooks, there were a few significant and unanticipated changes.

The recent closure of two high-profile GA manufacturers prompted a dramatic cutback in anticipated GA composite materials demand. Although Adam Aircraft (Englewood, Colo.) had achieved FAA certification for its A500 turboprop, was well on its way to certification of the follow-on A700 jet and had managed to build an order backlog measured in billions of dollars, the company filed for Chapter 7 bankruptcy in mid-February. Coincidentally, another Englewood-based startup, Aviation Technology Group (ATG), the developer of the Javelin business jet/military jet trainer, suffered its own financial setbacks and ceased all activities in December 2007. It’s important to note that neither company is entirely off the GA map yet. As this issue went to press, HPC received word that Adam Aircraft’s assets have been purchased and the company could reopen within a month (see the News item on p. 12). Meanwhile, the still active ATG board of directors is considering submitted bids for purchase of the company. For purposes of this forecast, however, their previously projected production figures are absent.

In Adam’s case, the negative impact is significant: Over the five-year period between 2007 and 2011, the company had been expected to build 670 planes, requiring more than 1 million lb (454 metric tonnes) of CFRP. A more modest impact than the loss of Adam Aircraft, ATG had been thought likely to require nearly 160,000 lb (73 metric tonnes) of composite aerostructures for 50 Javelin jets during the same period. Should the companies re-enter the market, of course, their activities would inevitably boost our already strong growth figures.

These “near-successes turned sour” stories are nothing new in the aerospace world. In the past 30 years, many have tried to enter the market and spent billions of dollars in the process, only to suffer setbacks due not to a deficiency in design or problems associated with the use of composite materials but rather a lack of financing. It is encouraging, therefore, that most of the growth forecast in this outlook is based on programs spearheaded by established OEMs. Hopefully, with hundreds of orders already in hand, other prospective market entrants — Epic, Spectrum Aeronautical (Carlsbad, Calif.), Honda Aircraft Co. (Greensboro, N.C.) and Aerion Corp. (Reno, Nev.), which has taken orders for almost two dozen supersonic business jets — will avoid financial pitfalls and deliver their new planes to market. But because the potential for failure is still very real for each, some of the demand figures — especially those for the new light jets and supersonic aircraft — have been tempered in this forecast.

Assuming, then, that GA aircraft production rates and the resulting demand for composite aerostructures conform to our adjusted expectations, general aviation composite aerostructures, which represented $700 million in business during 2007, is expected to grow 16.7 percent to $817 million this year. At its peak in 2014, our calculations indicate that the GA composites market will be valued at more than $1.1 billion.

A large portion of this business is currently kept in-house by the OEMs. As the industry is evolving, however, many of the companies that have embarked on ambitious new programs are beginning to seek strategic partnerships to minimize financial risks. This should provide growth opportunities for a host of Tier I, Tier II and Tier III subcontractors and is likely to fuel mergers and acquisitions activity as well.

To this point, the composite aerostructures forecasts in this report have been presented, for the most part, without regard to specific materials. But questions about how much carbon fiber or glass fiber will be needed to support aerospace composite manufacture are often posed at meetings and conventions related to composite materials, so it would be remiss to leave them unanswered. To that end, the following breakdown should be helpful: In this forecast, CFRP accounts for 72 percent of the total estimated sales value and 66 percent of the total tonnage for the composite aerostructures manufactured during 2007. The balance of these structures were constructed of GFRP materials, with the exception of a few small applications featuring aramid fiber reinforcement. To create the prepreg fabrics needed to build these aerostructures in 2007, material processors consumed an estimated 1.94 million lb (880 metric tonnes) of raw carbon fiber, representing about 15 percent of global aerospace and defense market for the fiber.

Material processors are estimated to have consumed almost 1.6 million lb (725 metric tonnes) of glass fiber reinforcements. In 2008, demand for carbon fiber is expected to climb to 2.4 million lb (1,090 metric tonnes) while glass fiber demand inches up to just short of 1.68 million lb (760 metric tonnes). By the end of the forecast, annual carbon fiber demand related to general aviation aircraft production should swell by 35 percent to 3.26 million lb (1,480 metric tonnes). Yearly demand for glass fiber will rise to almost 1.82 million lb (824 metric tonnes).

Over the entire 10-year period, total aerostructures output is expected to be nearly 54 million lb (24,494 metric tonnes) of finished composites for general aviation planes, worth an estimated $10.5 billion in 2007 dollars.