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Globalisation: A requirement for growth in the aeronautical industry

Today the aerospace and airport industry finds itself in an outstanding situation. Not only is it overcoming the financial crisis, but in addition it is also growing steadily.

International presence is one of the best ways to grow and the only means to survive as an industry.

The aeronautical industry’s features are highly unique. To begin with, it is an entirely globalised market. There are just four commercial aircraft manufacturers worldwide: Boeing, Airbus, Embraer and Bombardier. The parts needed to produce these airplanes are manufactured in factories spread out around the world. Additionally, airplanes land and take off every day at hundreds of airports whose aeronautical specifications are identical throughout the world. The passenger’s experience in Singapore, Rome or Santiago de Chile, either inside the airplane or in an airport’s departure lounge, is very similar. No other market is as globalised as the aeronautical market.

Furthermore, the aeronautical industry business cycle follows a long-term pattern. It is an industry that requires large investments with relatively slow production rates. Returns are therefore not immediate, but rather realised in the long term. The decision to develop a new aircraft or to expand an airport’s passenger terminal is a strategic decision involving 10, 15 or 20 years. There is too much at stake to be affected by mundane general elections.

These two factors – the world market and the lengthy economic cycle – are the reasons why the current economic crisis has not really affected this industry thus far. Downturns in the local market or in developed economies are being offset by the dynamic economic performance of emerging countries. Airbus may not be selling aircraft in Europe, but the Chinese, Indonesian, Indian or Brazilian markets keep growing. New airports are still being built in Asia and the Middle East. Forecasts indicate worldwide aircraft demand will double in the next 20 years. Few industries have such an attractive future outlook.

In this context, globalising companies in the aeronautical industry is absolutely necessary. Not only it is necessary in order to continue growing, but also, and more importantly, it is essential to secure their survival in the medium term. Past success is no guarantee for success in the future.

It must be clear to all of us that we should have an international presence, which is one of the best ways to grow and the only means to survive as an industry. In a globalised industry, product innovation, a presence in foreign markets and client diversification are absolutely necessary.

 

 

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14/07/2014

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