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Commercial airliner demand keeps aerospace soaring

Apr 30, 2013 | 07:00 PM | Myra Pinkham

Tags  aerospace, Olivier Jarrault, Alcoa Inc., Boeing Co., China, commerical aircraft, Allegheny Technologies Inc., Dan Greenfield Airline Monitor


The aerospace market is still flying high on the back of skyrocketing backlogs and build rates for commercial airliners, which are expected to keep growing by leaps and bounds, but the overall growth rate seen in recent years is expected to taper off as defense projects disappear.

Olivier Jarrault, executive vice president and group president of engineered products and solutions at Pittsburgh-based aluminum producer Alcoa Inc., said he is very excited about where the market is going in both the short and long term, and what strong backlogs--8,500 commercial aircraft--mean to the industry’s metal suppliers.

“We really believe that the global aerospace market is a clear winner and will be a winner for years to come,” he said during a recent aerospace and defense industry conference. Given the need to replenish aging and less-fuel-efficient aircraft, Jarrault said airframe manufacturers will have to build about 34,000 commercial planes over the next 20 years, or about 1,700 per year.

Chicago-based aerospace giant Boeing Co. said in a recent market outlook report that about 68 percent of the total will be single-aisle planes, reflecting growth in such emerging markets as China and the continued expansion of low-cost carriers globally. But the company said the addition of 7,950 twin-aisle airplanes, allowing airlines to continue to expand into international markets, means the twin-aisle segment will expand to account for a 23-percent share of fleets vs. 19 percent currently.

Boeing also expects the global economy to grow by an average of 3.2 percent per year over the next 20 years, which will translate into approximately 5-percent annual growth in both passenger and cargo traffic.

“In response to market pressures, airlines are deploying capacity more strategically to help boost yields and cover higher fuel expenses,” Boeing said, noting that airlines are optimizing airplane utilization more closely to seasonal demand fluctuations, while passenger loads remain near historic highs. “The number of new-generation airplanes in the parked fleet remains low, indicating that airlines are shifting utilization to their most efficient assets,” which is expected to help the global airline industry achieve a profitable year despite below-average economic growth and oil prices that are likely to average in the triple digits.

Commercial aircraft deliveries last year were up a record 29 percent from 2011. “The only question is when the spigot will be turned off,” said Richard Aboulafia, vice president of Teal Group, Fairfax, Va.

Analyst Lloyd O’Carroll, senior vice president of research for Richmond, Va.-based Davenport & Co. LLC, said in Davenport’s first-quarter aluminum outlook that both Boeing and France-based Airbus SAS continue to receive orders at a rapid clip, especially for Boeing’s 737 MAX and Airbus’ A320 NEO aircraft.

“A key risk to rising delivery schedules is whether deliveries during the transition period, as new single-aisle models are introduced, will dip as airlines defer deliveries of the legacy models,” he said. However, he and several other industry observers predict that commercial aircraft deliveries will continue to rise through the end of the decade.

According to online information service Airline Monitor, aircraft deliveries are expected to increase 12 percent to 1,450 planes this year from 1,295 in 2012, and rise another 7.2 percent to 1,555 planes in 2014. This moderation in growth is not unexpected, Aboulafia said. “We have never before seen 29-percent year-on-year growth, and we will probably never see it again.”

And in a trend that favors greater metal content per plane, O’Carroll said a shift is occurring toward the new aircraft mix. “We expect (wide-body aircraft) to grow 10 percent per year from 2012 to 2017,” he said. “Meanwhile, narrow bodies are expected to grow only 3 percent per year.”

Another trend has been the application of next-generation engine technology, as well as slight airframe modifications to improve aerodynamics and weight, to current aircraft programs, said Ingrid Jšrg, senior vice president of global markets at Beechwood, Ohio-based Aleris International Inc.

For example, the 737 MAX and the A320 NEO, while not undergoing major airframe redesigns, are receiving more-efficient, hotter-burning engines that use more titanium and nickel-based superalloys, according to Dan Greenfield, vice president of investor relations at Allegheny Technologies Inc., Pittsburgh.

More titanium also is being used in some newer airframe models because it tends to be more compatible with the carbon fiber composites that have seen increased use in new planes, and the landing gears on bigger planes are largely titanium, said Jeff Wise, vice president of sales and marketing at Titanium Industries Inc., Rockaway, N.J. Nevertheless, while titanium companies continue to perform well, they have seen an 8- to 10-percent year-on-year decrease in consumption, although Wise said there could be some improvement as Boeing ramps up 787 Dreamliner build rates.

But even though some next-generation aircraft could possibly use more alternative materials, including carbon fiber composites, with airframe manufacturers looking for any way to save it seems as if aluminum will continue to be the material of choice, said Bob Mraz, vice president of sales and marketing at O’Neal Steel Inc. subsidiary TW Metals Inc., Exton, Pa.

That kind of thinking was questioned when Boeing first announced its 787 Dreamliner, which is about 50 percent composite materials. But the rocky road to getting the 787 in the air, including several years of delays as well as high-profile problems with the aircraft’s lithium-ion batteries, might highlight the risk of using new technologies and new materials, Aboulafia said.

Bill Sales, senior vice president for nonferrous operations at Reliance Steel & Aluminum Co., Los Angeles, said that while he doesn’t think Boeing is giving up on composite materials, its various issues could change the company’s thinking about their use in the future, especially for single-aisle planes. Aboulafia agreed, noting that Boeing and Airbus are now focusing on lower-risk projects and lowering development costs.

Jšrg said that re-engineered aircraft will predominantly use aluminum in their primary components, except in the empennage; however, composite materials might be considered in larger airplanes’ outer wing box. Also, future fuselage applications could be based on advanced or even low-density aluminum alloys, particularly for single-aisle jets.

“Advanced conventional 2000- and 7000-series alloys have been selected for various aircraft programs since they offer improved structural performance in terms of strength and damage tolerance without significant cost increase,” she said, while new-generation low-density alloys, including aluminum-lithium and aluminum-magnesium-scandium, offer improved properties along with advanced, cost-efficient manufacturing methods. “They may offer a step-change in aircraft design and are extremely competitive against composite-based solutions, in particular for fuselage applications.”

All eyes are currently on what materials will be used in Boeing’s 777X, which is expected to go into production in 2018-19. While no decision has been made yet, Aboulafia said that it likely will have an aluminum body with composite wings.

Jarrault said that even composite-intensive aircraft contain a lot of aluminum. “Our content on the Boeing 787 is 80-percent higher than on the legacy Boeing 767 aircraft that it is replacing and is three times the aluminum content on the Boeing 737,” he said.

O’Carroll said in Davenport’s recent aluminum aerospace plate report that he expects to see major growth in the heat-treated aluminum plate market over the next several years, reaching 742 million pounds in 2017, up 48 percent from 500 million pounds in 2012, with most of that growth coming in 2013 and 2014. He predicted that overall aluminum shipments to the aerospace market will increase 9.6 percent to 731 million pounds this year and another 8.2 percent to 791 million pounds in 2014.

But despite optimism for the commercial airline sector, it is a very different story for defense aircraft, which is facing significant downward budgetary pressure and was already hurting before the sequester.

“Sequestration is just the tip of the iceberg,” said Dan Stohr, spokesman for Arlington, Va.-based trade association Aerospace Industries Association of America, who called it a long-term issue.

According to Aboulafia, three jet programs--the F-15, F-16 and C-17--have been kept alive thanks only to exports, the F-22 program is dead and it is uncertain whether the FA-18 can continue as U.S. demand for that plane is winding down. “Right now, the F-35 Joint Strike Fighter is the only game in town,” he said.

Mraz said fighter jet programs likely will be under extreme scrutiny with the sequestration cuts. “They will continue to build planes, but not at the volumes originally forecast,” he said, although that is largely speculation.

“There is just a lot of uncertainty about what the effect of the sequestration will be, and it will continue to be so until they actually start kicking in,” Greenfield said.

Also uncertain: how much of the cuts will be in aircraft investment vs. personnel. Should they be in personnel, the already-strong unmanned drone business could get even stronger, Sales said. “The nation needs the same level of security even with fewer feet on the ground.”

But overall, the next two years look to be solid for aircraft and aircraft metal demand, Aboulafia said. “There are relatively few short-term risks. However, the massive increase we saw last year will not be repeated.”




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