INDUSTRY FOCUS MILITARY, AEROSPACE & DEFENCE
Aerospace &
defence industry trends in 2019
John J. Kenkel, vice president of strategy and marketing for
Cyient’s aerospace & defence business unit, looks at the five trends that will shape the aerospace and defence industry in 2019
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riven by a keen focus on innovation and digital transformation, as well as geopolitical situations such as the unknown implications of
Brexit, the global aerospace and defence (A&D) business landscape is undergoing significant disruption. 2018 finished with a continued, upbeat industry outlook, with both
the commercial and defence sectors witnessing robust growth – a rare situation as these markets have historically and empirically known to be counter-cyclical. The growth of commercial aerospace is primarily being driven by the
increasing number of passengers. Deloitte research estimates the commercial aircraft order backlog to be at its peak, standing at more than 14,000 orders, with about 38,000 aircraft expected to be produced globally in the next two decades. In the defence sector, growth is being driven by rising geopolitical tensions, natural recapitalisation cycles, a greater high/low mix of assets, a focus on aligning solutions to local requirements, and the increased demand for affordable, off-the-shelf equipment. In addition, the recent recovery in defence budgets of major economies is expected to push the growth of the defence industry in 2019 and beyond. Given this background and from the perspective of manufacturers,
suppliers and technology experts, the A&D industry is likely to experience the following five trends in 2019:
1. STRONGER FOCUS ON THE ASIA-PACIFIC REGION AND DEVELOPING CLOSER ENGAGEMENTS WITH THE A&D SUPPLY CHAIN In the past five years, the APAC region has seen nations undertaking comprehensive reassessments of their defence strategies and resources. There is a growing network of commercial research, design, production and operational support by defence equipment manufacturers in the region as governments work toward building a local industrial base for both economic reasons and greater security amidst stressed geopolitical conditions. A large part of the increased traffic and spend in the commercial
aerospace segment stems from greater traffic demand, which has led to an increase in demand for airplane deliveries. Boeing forecast the need for 42,730 new jets to accommodate the growing passenger traffic and upcoming aircraft retirements. APAC leads the way here with 40% of the demand accounting for 16,930 deliveries – this makes for a service market of $3,365 billion. The A&D industry has been active in responding to this increased demand,
and local talent in the APAC region now plays an essential role in the development of better aircraft and defence equipment. The maintenance, repair and overhaul (MRO) market has grown in Asian countries, with
30 FEBRUARY 2019 | DESIGN SOLUTIONS
Airbus predicting that MRO solutions would increase at a yearly rate of 4.5% in the region as compared to 3.7% worldwide. While the high growth being experienced in the Asia-Pacific region –
especially China, India, Japan and the Middle East – is not new, 2019 will see industry players increasingly deepening their engagement with the regional supply chain. The old models of driving engagement exclusively from a centralised or regionalised location will transform to industry players working closely with the Asia-Pacific supply chain to provide value-for- money products that fit in with their specific needs, rather than a repurpose of equipment meant for other markets.
2. CONTINUED DIGITAL TRANSFORMATION BUT WITH A FOCUS ON LOW-RISK INNOVATION WITH TRUSTED PARTNERS Standing at just 4.1%, the A&D sector has one of the lowest innovation intensity percentages (the percentage of sales earmarked for R&D). With new technologies including robotics/autonomous systems, artificial intelligence, additive manufacturing and sensor technologies taking centre stage, the industry will see an increased push toward the adoption of digital innovation. However, the A&D digital innovation strategy will follow a disciplined approach where trusted partners will be sought to develop low-risk solutions that balance the inherent complexity of new technology adoption with the need to increase capability at the lowest possible costs. One of the significant challenges to innovation in the A&D sector is
that the industry is not rewarded for internal R&D as much as more consumer-oriented markets. With a much smaller customer base, high-risk investments do not always pay off as there are fewer potential end users. Digital transformation is one such area. Despite efforts to more closely adopt commercial technologies and standards into the sector, the process is slow. While there is a massive opportunity over the next several years, the near-term focus for 2019 will be on developing the right technologies and finding test cases to prove a scalable concept. The focus in 2019 will incline further toward artificial intelligence (AI),
augmented and virtual reality (AR/VR), data analytics, advanced sensors, and IoT. Data analytics is most likely to emerge as the most important ‘digital’ solution for 2019 for the end-user community as the use case is proven, implementation costs are relatively low and the amount of data being created by the industry is overwhelming. More capital-intensive solutions such as AI, AR/VR and other tools will take more time to scale as the technologies and use cases continue to develop and mature. From an internal process perspective, however, we will see greater growth in the digital domain as there is less risk involved in adoption. 2019 will see
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