by: Jenna Beard On: 19, Nov 2019
The past year has seen unprecedented change for Aerospace & Aviation. Global challenges include the political upheaval of Brexit and Trade Wars, international competition, safety and customer experience. Opportunities exist in the form of technology, rapidly growing demand for passenger flights and wider reach than ever before.
However, which trends and changes will have the biggest impact – and how can airlines, MROs and OEMs weather and take full advantage of them?
Challenges & Market Predictions 2019
International Trading Relationships
As of September 2019, US President Trump imposed tariffs on more than $360billion of Chinese goods, and China responded with tariffs on more than $110bn of US products. America has introduced three more tariffs in the past year, and China has again responded with tariffs up to 25% on American goods. More tariffs have been planned for the last few months of 2019, which could result in high tariffs on all Chinese goods imported to the US.
China manufactures a large number of aircraft parts, and has long-term partnerships will industry leaders including Airbus. A350 XWB capabilities are being extended and the Airbus Tianjin A320 Family Final Assembly Line are set to increase production by 50% by the end of this year. Airbus’ Global Market Forecast predicts that China will require some 7,560 new aircraft over the next 20 years.
Any impact from the Trade Wars would The Trump/China relationship could also threaten the export of parts from China to other manufacturers around the world and have a knock-on effect on Aviation providers across continents.
Geographical Shift
Production plans and cross-continental partnerships could see permanent geographical change:
- China – More than 500 million travellers pass through China’s 220 commercial airports every year, and international traffic from the country has doubled in the past decade. China aims to supply 10% of the domestic commercial aircraft market by 2025, and one of the country’s goals is for its own jetliners to account for 20% of the global market in the next five years.
- Wider Asia Partnerships – In November 2019 Istanbul Airport signed agreements with international airports based in China and South Korea. Incheon International is the 18th largest airport in the world with over 68 million passengers, and flights from Turkey to South Korea have recently risen by one third. The partnership aims to drive passenger growth from China to Turkey to 1million by 2023 and cement a mutually beneficial European-Asian travel network.
Brexit
As 25% of UK companies currently employ staff from the EU, and with Brexit still to take place, Britain’s exit from the European Union will undoubtedly cause much confusion and change for both the UK and its European neighbours.
British and European Aerospace stands to be affected significantly by new trade agreements. In 2016 £178billion of goods were shipped by air between the UK and non-EU countries, accounting for more than 45% of the UK’s non-EU trade. Aerospace investment currently pledged or planned for the near future could depend entirely upon the Brexit deal agreed in 2020.
The UK’s Aerospace sector contributes £22billion to the UK economy and provides almost 1million jobs for workers from the UK, EU and around the world. As the second largest Aerospace industry in the world, the UK’s airline sector would also have a notable impact on the European sector, placing more pressure on European countries to fulfil rapidly increasing passenger demand worldwide.
A No-Deal Brexit would mean that the UK’s Civil Aviation Authority would no longer be bound by EASA legislation and practices. If no contingency plans were agreed, the UK would need to quickly reinforce safety and maintenance standards and ensure that these matched up to European and global standards. Communication between Aviation leaders in Britain and the rest of the world would become paramount.
The UK election set for December 2019 could cause further disruption:
- The Labour Party pledge to increase airport capacity in the South East whilst reducing noise pollution, air quality and global climate change obligations by ‘working with the European Union’s Highways of the Sea programme and by negotiating to retain membership of the Common Aviation Area and Open Skies arrangements’.
- The Liberal Democrats have committed to restoring the Department of Energy and Climate Change (DECC) and introducing a frequent flyer tax to cut carbon emissions.
Zero carbon targets, airspace modernisation and the Heathrow expansion could all be subject to change under new political leadership.
Skills Shortages
Boeing forecasts global demand for 800,000 new pilots – double the current available workforce – and 98,000 new business aircraft pilots in the next 20 years. At the 2019 Paris Air Show, CEO Dennis Muilenburg stated that the lack of skills is “one of the biggest challenges” facing the industry. Simultaneously, pilots are retiring more rapidly than ever before. Half of United Airlines pilots nearing the mandatory retirement age of 65, the second-largest American airline will need to recruit 10,000 new pilots in the next decade to meet demand.
The pilot shortage has already seen significant impact to many big names. British Airways lost 3000,000 passengers after strikes at London Gatwick and Heathrow this summer, and this month Balpa narrowly called off a five-day walkout at easyJet.
The lack of skilled pilots will also have a negative impact on private flight. Airlines will run more aggressive recruitment campaigns and private jet providers will find it difficult to compete with the more regular and predictable working lifestyles of commercial pilot jobs.
Boeing also predict a significant shortage of technicians as manufacturing and production increase to meet global demand. Muilenburg continued, ‘If you look at those 44,000 new airplanes [needed] over the next 20 years, to go along with that we need about 800,000 new pilots, 750,000 new technicians and so building that talent pipeline for the future is really important.’
42% of industry leaders identify a labour shortage in the maintenance technician field as the most urgent challenge they face. Global demand for skills is set to overtake supply in the next decade, as the current generation retire, and smaller numbers of younger generations enter the workforce. Industry leaders and hiring managers will need to invest in new training programmes and employee engagement initiatives to promote rewarding careers and attract Millennials and Gen Z into the sector.
Airport Capacity
After hitting 94% of its maximum passenger handling capacity in 2018, Mumbai airport has reached saturation point, and many airport systems worldwide will be full by 2030. Between 2019 and 2024, the in-service fleet is predicted to grow annually at 3.9 percent. Air traffic growth will increase by 4.3% in the next ten years, meaning manufacturers will be at the forefront of aircraft innovation to solve fleet expansion challenges.
Dubai, Thailand, Helsinki and the UK’s South End are just some of the locations with airport expansion plans for the next five years.
Sustainability
The Aviation industry currently accounts for around 2% of the world’s emissions, and ever-increasing demand for business and leisure travel means the sector is set to be one of the largest sources of carbon dioxide emissions in the next two decades. The industry is under pressure to reduce emissions, with 65 countries representing over 85% of global air traffic committed to the UN’s Corsia Scheme to offset any rise in international aviation emissions from 2021.
The UK’s Director of the Aviation Environment Federation recently sent a letter to the UK Government calling for officials to prioritise the global climate emergency over airport expansion for the near future. Rapidly increasing green investment is focused around testing biofuels, designing lighter airframe components and reducing fuel consumption.
Compliance
With the extension of IR35 legislation to the private sector, any non-compliant contract/freelance workers across industries will be fined considerable amounts in additional tax. HMRC estimates that it could recover £1.3billion in additional tax from contractors in the next four years.
IR35, and wider legislation around the world, could have a marked impact upon business leaders as well as the sector’s contractors. Compliance changes will require businesses to invest time, costs and resources into processes and payroll, and could see a shift to the very make-up of the Aerospace workforce.
Safety
After 2017 saw the safest year in flight history, civilian plane crash deaths heightened by 15% the following year. Although the chances of being involved in a fatal plane accident have dropped to an unprecedented one in 16million, plane design has also been under scrutiny this year following the Boeing 737 Max crashes that killed almost 350 people in Ethiopia and Indonesia. The accidents reportedly involved the jet’s MCAS flight control system and the plane has spent months grounded throughout an investigation.
In response to the 737 Max disasters, America’s industry regulator is looking to overhaul certification processes and become much more heavily involved in the design of new aircraft. Malaysia has implemented a task force to regain its safety rating after being downgraded by U.S. regulators, and airlines, MROs and OEMs around the world are ramping up technological investment to continuously improve safety standards.
Market Competition
Global travel group Thomas Cook followed numerous start-ups and well-known providers into administration earlier this year. Since 2017, Monarch, Germania, FlyBMI, WOW Air and Adria Airways were amongst those that filed for bankruptcy, grounded all flights and collapsed. The mass carrier collapse of the carriers was due to a multitude of causes including rising fuel costs (which spiked to 23.5% of total expenses in summer 2018), passengers compensation, rapid growth and unclear or noncompetitive positioning in a flooded market.
The increasingly narrowed playing field sees global leaders taking even more market share, whilst the frequency of smaller start-ups going bust could deter new players from entering the sector. However, the departure of so many airlines leaves a gap for an innovative new carrier to take the stage.
Technology Revolution
Innovation through technology has the power to mitigate against safety risks such as drones and malfunctioning parts, and provide opportunities to travel more quickly, efficiently and enjoyably.
Project Sunrise, the ambitious campaign to fly from London to Sydney direct in one continuous flight aims to go where no airline has gone before. Qantas aims to launch commercial Project Sunrise flights from 2023, following a test with a near-empty plane from London Heathrow. If all goes to plan, Qantas’ initiative could pave the way for multiple ultra-long-haul routes to Australia from Europe and North America.
Britain’s first electric-powered plane is set for launch in 2022.The hybrid-electric plane will be powered by cutting-edge battery technology to cut carbon emissions and stretch environmentally-friendly travel possibilities.
Current and planned innovations in technology across the globe include:
- Training pilots and cabin crew with Virtual Reality (VR) and Augmented Reality (AR), currently used by France’s Military
- Maintenance training with software that gives a detailed view inside a jet engine, enabling technicians and engineers to examining individual aircraft parts
- Artificial Intelligence (AI) such as LG’s check-in robots at Incheon
- Robotic car parks at London Gatwick to increase car parking capacity by over a third
- Improved screening systems that provide greater visibility over luggage, enhancing security and enabling passengers to take liquids onboard
- 5G networks for greater connectivity and customer choice
Artificial Intelligence in the Aerospace & Defense market is projected to hit $2Million by 2025, with tech giants Google and Microsoft competing to deliver the best customer experiences.
The Next Decade: Combatting Challenges & Harnessing Solutions
With so much change ahead, how can carriers, MROs and OEMs prepare for the coming years?
- Recruiting from wider talent pools – Whilst less than 5% of Europe’s pilots are female, Asia is fast making use of this talent pool: the fastest-growing domestic air capacity in the world, India increased the average female pilot percentage to 13% and SpiceJet has committed to a 33% female pilot representation by 2022. High training costs are also restricting applications from many geographical locations and socio-economic backgrounds. Tapping into diverse talent pools and increasing support
- Partnering with a Specialist Recruitment Provider – Technical recruitment agencies will have a deeper understanding of the details of every Aviation position, what the role needs and how best to meet business requirements. Staffing companies specialising in the Aerospace sector can help your organisation address employee shortages, plan to reduce business risk, and grow your workforce to anticipate increased demand.