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Clearer skies forecast for aerospace industry in 2014

Sep 30, 2013 | 08:00 PM |

Tags  aerospace, titanium, Airbus SAS, Embraer SA, Air Asia, Delta Airlines, Boeing Co., Jeff Carpenter aluminum

Aviation is experiencing a prolonged up market, driven by increased passenger travel, budget airlines and demand for fuel-efficient aircraft.

While the aerospace market for 2014 looks strong, it won’t be without some turbulence, with the aeronautics and defense sectors that typically dominate the market continuing to take a back seat to the commercial aviation industry.

With government projects from the U.S. Defense Department and the National Aeronautics and Space Administration shrinking due to federal budget cuts, commercial aviation is steadily moving further to the forefront of the aerospace market.

According to a 2012 report from Chicago-based Boeing Co., commercial aviation is experiencing a virtually unprecedented and prolonged up cycle, as demonstrated by recent increases in production by Boeing as well as French aircraft manufacturer Airbus SAS and Brazil’s Embraer SA. Three dominant forces are driving this up cycle: increased passenger travel, most notably in Asia; an increase in budget airlines; and the demand for more fuel-efficient aircraft.

The combination of the three factors has created a perfect storm for commercial aviation, transforming it into the driving force behind the aerospace industry, with between 27,350 and 34,000 commercial aircraft expected to be produced over the next 20 years.

The commercial aviation industry has weathered the recession-induced lull and resumed its long-term growth rate of 5 percent, with 2012 passenger rates rising 5.3 percent from the previous year. The increase in passengers has created a need for additional flights and aircraft, with many airlines ordering more aircraft to meet the rising demand.

“We expect to carry 43 million passengers this year,” said Tony Fernandes, chief executive officer of Asia’s largest discount airline, Air Asia. “Eleven years ago, the airline carried 200,000 passengers.”

While airlines and aircraft manufacturers appreciate the boom in business, there remains one major obstacle: fuel costs. “With fuel prices continuing to rise, the cost of fuel remains a significant financial concern to airlines. Consequently, it is incumbent upon us to design and produce fuel-efficient airplanes that meet our customers’ needs,” said Jeff Carpenter, senior manager for raw materials procurement, supplier management, for Boeing’s Commercial Airplanes unit.

“Jet fuel costs make up nearly 40 percent of our total annual costsÑit used to make up about 16 percent of our costs,” a spokesman for Atlanta-based Delta Airlines Inc. said, noting that Delta’s fuel costs jumped nearly 50 percent to $12.3 billion last year from $8.3 billion in 2009.

To profit from the travel boom, airlines want to make sure they are getting the most out of every ounce of jet fuel, and aircraft manufacturers are rethinking the way aircraft are designed, creating a major shift in the traditional aerospace supplier market.

The use of fuel-efficient jet engines on commercial aircraft is the first step in reducing fuel costs for many airlines, a less-expensive alternative to replacing entire fleets. Airlines are choosing to update their current aircraft with newer fuel-efficient engines, although longer-term it seems likely that older planes will be replaced by newer aircraft that feature both fuel-efficient engines and airframes.

Record low interest rates also will give the market a boost because second- and third-tier airlines, which traditionally have been limited to purchasing used aircraft, will be able to finance new aircraft.

As aircraft manufacturers try to create a frame that maximizes fuel efficiency, airframe designers are focusing specifically on materials that improve aerodynamics and weight, generating fierce competition among metal producers.

Composites appears to be leading the pack in the design overhaul. “Composites are the metals of the future because of their durability and weight. Carbon fiber is lighter than aluminum and stronger than steel, doesn’t rust, is chemical resistant and needs less maintenance,” said David Manger, compliance manager at Tacoma, Wash.-based Toray Composites (America) Inc., Boeing’s top carbon-fiber composite supplier. Composite-based aircraft are expected to last around 50 years, an unprecedented lifespan for commercial aircraft.

As the demand for fuel-efficient aircraft increases, so will the demand for composites. Manger doesn’t see this preference changing any time soon and anticipates that aerospace demand for composites will triple between 2013 and 2020 and Toray is expanding its work force to meet demand.

“The only thing holding back carbon-fiber composites is the cost and time it takes to manufacture them,” Manger said, but the problem isn’t going unaddressed. “Research and development is working on quicker and cheaper cure techniques to increase composite manufacturing. Right now it takes Boeing about a month to make 12 planes made from carbon-fiber composites. With newer curing techniques, we will increase this number to 40 to 45 planes a month.”

Once manufacturing problems are addressed through advancing technology, Manger believes composites will become the material of choice even in smaller, aluminum-intensive aircraft because the bang will finally be worth the buck.

Titanium suppliers also are benefiting from composite aircraft frames. Newer generations of large passenger aircraft, including Boeing’s 787 Dreamliner and the A380 and A350 from Airbus, are using more titanium because it is compatible with carbon fiber whereas aluminum is not.

Aluminum has taken a hit with the rise of composites and titanium. Aluminum demand is still expected to increase at a steady rate of 7 percent from 2012 to 2022, but it will trail anticipated growth of 9.7 percent by composites and 7.2 percent for titanium.

Aluminum is not out of the game entirely, however. “The outlook for aerospace aluminum remains strong and will remain strong throughout the next decade. In fact, the business case for aluminum solutions has never been more compelling,” said Tony Morales, Pittsburgh-based Alcoa Inc.’s global marketing director for aerospace and defense.

Aluminum producers aren’t counting on airline manufacturers sticking with traditional aluminum options, but they don’t expect them to replace aluminum altogether, either. Alcoa believes that advanced aluminum solutionsÑin particular aluminum-lithium, which is denser and stiffer than traditional aluminum alloysÑwill keep it in the game because they offer a complete package with which composite metals can’t compete, according to Morales. “Aluminum innovations deliver the most compelling combination of performance, cost, passenger comfort and risk that make the best business case for the airframer and the airplane operator.”

Perhaps the strongest argument in favor of aluminum alloys is that they are production-ready and already fit within the existing high-volume supply chain. “There is very low risk in terms of delivering on time,” Morales said.

Manger disagreed, saying that composites will replace aluminum on aircraft once the manufacturing costs and efficiency issues of composites are addressed. As for supply and delivery issues, “we have never missed a delivery,” he said.

Boeing acknowledges that when choosing materials, it really is about the whole package and each metal supplier is going to have to earn their way onto its new designs. “Our airline customers are interested in the most-efficient airplanes over the life of the airplane,” Carpenter said. “That means the cost of the airplane, the cost to operate it, its reliability and the cost to maintain it. All materials have to essentially earn their way onto the airplane.”

After various troubles with the composite-heavy Boeing 737 and the high manufacturing costs associated with composite metals, aluminum alloys still offer the better fit for some aircraft manufacturers. Designers of Mitsubishi Aircraft Corp.’s Mitsubishi Regional Jet opted to switch from its original composite-heavy design to a more aluminum-intensive frame after discovering that the benefits of composites would not balance out their high cost.


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