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Home » Navigating Not So Friendly Skies to Find a Silver Lining

Navigating Not So Friendly Skies to Find a Silver Lining

February 8, 2022
Oren Ben-Zeev, SCB Contributor
Conditions are showing improvement in the aerospace and defense industries, even as Covid-related uncertainty remains the prevalent theme. In the current morass lie opportunities for companies to capitalize on.

Commercial aerospace has seen an encouraging but limited rebound from months past. Air carriers are still not ready to return to the rapid route growth and aircraft fleet modernization bonanza seen pre-pandemic. Instead, they are focusing on cost-cutting measures and maximizing aircraft loading to return to profitability. As a result, new aircraft manufacturing rates remain persistently unstable, and suppliers are making difficult decisions on how to honor incoming orders.

Defense aerospace on the other hand has been relatively more stable, with government defense spending and foreign military sales remaining strong. However, political churn on budget funding priorities raises question marks for many programs, especially for newer ones.

The bottom line is that suppliers whose products are defense- or dual-use oriented likely have weathered the pandemic-driven storm, whereas those who purely service commercial air have likely seen their financial health decimated with no recovery in plain sight. Even with assistance from original equipment manufacturers (OEMs), they may be unable to restart their operations and meet new demand.

Industry Newcomers

Despite difficulties in commercial and defense aerospace, the industry overall is experiencing a wave of innovation from two smaller yet vital sectors: space and advanced air mobility (AAM).

The race to space is alive and well with the privitization of crewed and uncrewed missions to the International Space Station (ISS), the moon and beyond. Along with budding commercial space tourism, the sector is a gem to be mined. These highly visible endeavors have been fueled by significant privately funded investments, as well as a growing range of smaller, less visible players making big contributions like microsatellite technology and launch vehicle affordability and performance. 

The AAM sector — air transportation for small units of people and cargo within or between population centers — has also seen a tremendous surge in interest, with opportunities in both civil and defense applications.

The boom in these two sub-sectors has opened the door for industry newcomers to participate as OEMs or suppliers of technologies like connectivity and integration; digital additive manufacturing; data processing and visualization; artificial intelligence and machine learning; and others that will be critical to both space and AAM. Diversification into these new markets may be helpful in navigating and weathering future downturns. 

Outlook:

The aerospace industry continues to face the Covid-related challenges befalling other industries, and a focus on resilience is growing. Long term — buoyed by sustained resurgence in air travel demand and growth in space and AAM — the industry will take innovation to new heights.

Oren Ben-Zeev is director of global supply chain consulting at Tata Consultancy Services (TCS).

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