Just before the opening of the Paris Air Forum, Deloitte published the results of its second study into tendencies in the Aviation and Defence Industries (A&D). The study showed that civil aviation revenue grew by 3’4% in 2016.
The Deloitte study indicated that civil aviation broke production records and that this was, to a great extent, due to strong demand from airlines purchasing the latest generations of planes to increase or update their fleets. This was particularly noticeable in the emerging markets of Asia, the Pacific and Middle East where air traffic has grown considerably.
The forecast is that passenger and cargo traffic is set to grow by 4’6% and 4’4% respectively over the next 20 years with the subsequent effect of plane production. Plane manufacturers expect to deliver some 33,900 aircraft between now and 2034. To put this in perspective, air transport grew by 490% between 1981 and 2015 with an increase in passenger load factor of 25’9% (63’7% – 80’2%).
Targets for the future
Deloitte predict that defence spending in 2016 will take military aviation back to growth. In fact, the budget of the largest client for defence, the American Defence Department, is set to increase by US$ 13,000 million after several years of decline. This should benefit French industry as they will be competing for contracts in this attractive market. The current geopolitical situation and the surge in terrorist and cyber attacks has meant that several countries have increased their defence budgets.
Deloitte Consulting points out some of the challenges that the French A&D industries will have to face over the coming years:
- Innovation: the need to adapt all stages of the value chain to digital technology
- Finances: 2015 was a record year for M&A
- Talent management: the need to adapt personnel administration to changing needs.
France has to catch up on many aspects of modernisation of their production facilities which have fallen behind recently and adapt them to the requirements of the 4.0 factory. Value webs, dynamic networks of interconnected multi-sourced supply chains, are becoming ever more prevalent.
The value added by these webs is the proactive control of production and supply chains (suppliers, manufacturers, distributors and customers).
Another factor destined to take off in the near future is 3D printing. This market is predicted to grow from US$ 156’2 million in 2014 to US$ 776’8 million in 2020. Timid steps have already been made in 3D printing manufacturing, but the industry is developing quickly. Deloitte forecasts that the industry will create some 15,000 jobs over the next 5 years.
Manufacturers are still taking measure to improve the impact of contamination, both environmental and acoustic. Fuel consumption improvements have led to a fall from 4’02 litres/passenger/100Km in 2007 to 3’5 litres in 2014. There has been a fourfold decrease in engine noise since the sixties, but the target is for a further reduction of 65% by 2050. Lastly, new processes will be developed for MRO (Maintenance, Repairs and Operations); that is those services that coordinate the processes of the various operators involved in maintenance.
Cybersecurity and the value chain are intimately interrelated. The first protects the latter from attacks within the aviation and defence industries. The digital changes to the supply chain should be tied to a strengthening of safety in the context of production increases. It is, therefore, crucial to develop a management model that will guarantee this transformation throughout the supply chain and protect investments made by the smaller players.
All stakeholders in the industry should benefit from collaborative processes in cybersecurity. These will include: a common underlying basis of competence, techniques and services to which these specific tools can be applied. This would enable the various operators to use standard basic tools which can then be adjusted to the needs of Level 1, 2 or 3 stakeholders in both the civil and military industries. In short, the aerospatial and defence industries need to develop a new architecture and bespoke services that will lead to a sustainable, safe and efficient ecosystem.
Mergers & Acquisitions
2015 saw all records in M&A well and truly broken: a total of US$ 54’6 million compared to the US$ 9’65 million of 2014. This increase was fuelled by major players making strategic repositioning moves within the supply chain. In 2016, all stakeholders in the industry must continue with the rationalisation of their processes and product lines by restructuring, product transfers, sales and spin-offs.
The Aviation Industry Creates Jobs
2015 saw another record broken: 11,000 hires which meant a net increase of 3,000 jobs. Surprisingly, the aviation industry is always looking for craftsmen from trades that are in decline in general, trades like boilermakers, and people skilled in emerging technologies. Indeed, the A&D industries manufacture both production line equipment and bespoke items where many of the processes are still manual.
The industry needs to put into practice reconversion and training plans to keep personnel abreast of new developments. These processes should include on-the-job maintenance of automated production lines to minimise the impact technological changes on overall employment.
The Partner for A&D at Deloitte, Pascal Pincemin, pointed out that: “The Aviation and Defence industries are, more than ever, a strategic sector in France which should prove to be a positive influence on the creation of jobs. We wish to foster advances in these fields so that they become the powerhouses of development in these industries and promoters of sustainable and profitable growth”.
If you want to enter the aviation market in France do not hesitate to contact Júlia Farré in firstname.lastname@example.org.