Paulo Franklin - AEROSPACE DAY SEMINAR - Spotlight: Transformações na cadeia global de valor e oportunidades no Brasil

0icfi.com/aviation |
Global aerospace supply chain
dynamics and implications for
regional aerospace cluster
strategies
São José dos Campos, Brazil
September 9th, 2016
Prepared for: Centro de Apoio ao
Desenvolvimento e Inovação – CADI/FATEC

ICF is one of the world’s largest and most experienced
aviation and aerospace consulting firms
 51 years in business (founded 1963)
 100+ professional staff
− Dedicated exclusively to aviation and aerospace
− Blend of consulting professionals and experienced aviation executives
 Specialized, focused expertise and proprietary knowledge
 Broad functional capabilities
 More than 10,000 private sector and public sector assignments
 Backed by parent company ICF International ($937M 2013 revenue)
 Global presence –– offices around the world
Airports • Airlines • Aerospace & MRO • Asset Advisory
joined ICF in 2012
joined ICF in 2011
joined ICF in 2007
New York • Boston • Ann Arbor • London • Singapore • Beijing •
Hong Kong

Our team and infrastructure is located around the world to
provide high-quality support to our global client base
INTRODUCTION TO ICF
ICF aviation full-service offices
ICF aviation bases
ICF headquarters / ICF aviation base
ICF global offices
* ICF has 50+ offices in North America
Geraldine
Atlanta
Singapore
London
Boston
New York
Washington/Fairfax
Ann Arbor
Chicago
Florida
Mexico
City
Lima
Beijing
Rio de Janeiro
Sao Paulo
Hong Kong
Nairobi
Manila
Bangkok
New
Delhi
Moscow
Brussels
Warsaw

INTRODUCTION TO ICF
Four specialized aviation practices collaborate together
and with our clients to effectively address their business
challenges
AirportsAirline
Advisory
Aerospace &
MRO
Aircraft
Operational and
strategic support
for owners,
operators,
regulators, and
developers
Strategy and
marketing
advisory, and
transaction
support for
OEMs, MROs,
and investors
Operational ,
strategic and
transaction
support for
airlines and air
transport
businesses
Industry-focused
support for
aviation
equipment
transaction
activities
ICF provides aircraft operators, manufacturers, financiers, lessors, and owners, maintainers, airports,
and related businesses with world-class advisory, implementation, and improvement management
consulting services.

INTRODUCTION TO ICF
Our strategic clients span the breadth of the aviation and
aerospace industry
Aftermarket / Services Airports
Airlines & Operators Aerospace / OEMs
 Air China
 American Airlines
 Bristow
 British Airways
 Cathay Pacific
 Copa Airlines
 Etihad
 NetJets
 United
 AgustaWestland
 Airbus
 Alcoa
 AVIC
 Boeing
 Embraer
 Eurocopter
 General Electric
 United Technologies
Governments/Agencies
 AAR
 BBA Group
 Chromalloy
 Delta TechOps
 Lufthansa Technik
 Mubadala
 Rockwell Collins
 ST Aerospace
 Vector Aerospace
 Beijing Capital
 Dallas Fort Worth
 Delhi International
 GACA
 Fraport
 London Gatwick
 Massport
 Moscow Sheremtyevo
 Tampa
 CAA Singapore
 European Commission
 IATA
 IFC
 Nigeria CAA
 United Kingdom MOD
 United States EPA, FAA, DOT
 World Bank
Lessors
 AerCap
 AeroTurbine
 Avolon
 GECAS
 GE Engine Leasing
 ILFC
 Jackson Square
 MCAP
 Willis Lease

INTRODUCTION TO ICF
Our distinguished professional staff come from private and
public sector aviation organizations worldwide
Airlines, Operators, and Aviation Services Providers
Consulting & Advisory Airports Governments/Agencies
Aerospace & MRO

Agenda
 Tectonic Shifts
 Relative Size of LA fleet
 Examples of Aerospace Clusters
 Process to Establish a Successful Aerospace

Before 2000, aerospace OEMs conducted nearly all value
chain activities in their home market
TECTONIC SHIFTS
The Value Chain
Most
manufacturing in
home market with
selected sourcing of
complete
components from
foreign suppliers
(e.g., components,
aeroengines)
Engineering and
R&D was almost
exclusively in the
home market
Primary MRO and
service parts
distribution facilities
in home market, with
some secondary
international service
centers
Human Resources / Infrastructure
Engineering / R&D
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
& MRO
Human Resources / Infrastructure
Engineering / R&D
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
& MRO
Source: adapted from Porter (1985)

TECTONIC SHIFTS
To assess the changing nature of Globalization, ICF
profiled activity by over 180 leading OEMs And MROs
 What major investments are
OEMs making in their value
chains?
 What is the motivation for these
investments?
 Which value chain investments
are most popular and why?
 Which locations are receiving
the most investments?
Globalization
database: 1000+
investments for 180+
major aerospace firms

2000 – 2003: OFFSHORING RAMPS UP
Aerospace firms ramped up their offshoring in the early
2000s
2000-2003
Major
Program
Launches
• A380
• Superjet 100
• A400M
• Falcon 7X
• Global 5000
• Mustang
Global
Aircraft
Production
$B
2000 2002 2004 2006 2008 2010 2012 2014
 Sss
 Airbus launched the A380
 Manufacturing began to migrate to low cost
countries
 Some OEMs set up their first offshore
engineering centers
 Aircraft manufacturing declined by 15% in
the wake of 9-11 and the subsequent global
recession
0
50
100
150
200
2000 2001 2002 2003
Sources: Secondary research, Teal Group

…and Mexico had the most manufacturing investments of
any country
0
2
4
6
8
10
12
Mexico USA China Brazil Japan Russia South
Africa
Belgium
* Includes joint ventures and organic investments for over 180 OEMs and service providers; excludes acquisitionsSource: ICF International
2000 – 2003: OFFSHORING RAMPS UP
EU Total: 6

2004 – 2007: RISE OF THE BRICS
Several new programs were launched 2004-2007 timeframe
and global aircraft production exceeded $100B
2004 - 2007
Major
Program
Launches
• CRJ 1000
• C Series
• A350XWB
• 747-8
• Mitsubishi RJ
• Challenger 605
• Phenom 100/300
Global
Aircraft
Production
$B
2000 2002 2004 2006 2008 2010 2012 2014
 Global aircraft production roared back to life
following the early decade recession,
exceeded $100B for the first time in 2005
 Several major programs were launched
including the C-Series and the A350XWB
 Mitsubishi, a longtime aerostructures
supplier, entered the commercial aircraft
business and launched the MRJ
 Several new business jets were also
launched, Embraer’s Phenom family
0
50
100
150
200
2004 2005 2006 2007

The BRIC countries became a favored destination for new
engineering centers
0
1
2
3
4
5
6
7
8
Russia India USA China Brazil Germany Mexico Singapore
* Includes joint ventures and organic investments for over 180 OEMs and service providers; excludes acquisitions
Source: ICF International
BRIC -= Brazil, Russia, India, China
EU Total: 10

Major Aerospace Engineering Centers In
Bangalore, India
In the 2004 – 2007 period, India emerged as a major
engineering center – particularly for software
Source: Company websites
Select Engineering Investments In India

BRICs also joined the US and Mexico for the most
manufacturing investments
0
2
4
6
8
10
12
14
16
18
USA Mexico China India Russia Brazil Germany Singapore
BRIC -= Brazil, Russia, India, China
EU Total: 8

2008 – 2011: ENTER THE DRAGON
The reengining phenomenon took flight in 2008 – 2011
2008-2011
Major
Program
Launches
• A320neo
• B737 MAX
• C919
• MC-21
• KC390
• G280 & G650
• Legacy 500
• Latitude
Global
Aircraft
Production
$B
2000 2002 2004 2006 2008 2010 2012 2014
 High fuel prices, low cost of capital and new
aeroengine technology contributed to the
launch of the A320neo in 2010; Boeing
followed with the 737MAX in 2011
 Irkut announced the MC-21 program and
Embraer committed to the military transport
market with the KC390
 Aerospace production powered through the
Great Recession to approach $150B by 2011
0
50
100
150
200
2008 2009 2010 2011

By 2011, China developed a broad base of Western
aerospace suppliers
 By 2011, China boasted a
broad base of aerospace
suppliers in country to
compliment AVIC and
COMAC
 China leveraged
comparative advantage in
labor costs, combined with
its status as one of the
largest markets for
commercial aircraft
 Major programs such as the
C919 were also a draw for
investment
Selected Aerospace Investment in China

China challenged the US for the most manufacturing
investments in 2008 - 2011
0
5
10
15
20
25
30
USA China Mexico India Russia UAE Brazil Australia France
Major Aerospace Manufacturing Investments*
2008 - 2011
EU Total: 14

The US, China, India, and the EU continued as major draws
for engineering investments
0
1
2
3
4
5
6
7
8
9
10
USA China India Canada Russia Mexico Australia Brazil Israel UK
EU Total: 8

Selected Aerospace Investments In North Africa
New clusters emerged in other parts of the globe, including
North Africa
 Several SAFRAN businesses
have invested in Morocco for
manufacturing, engineering
and MRO activities
 EADS and Mubadala (a UAE
investment company) are
developing composites
manufacturing capability in
Algeria
 Morocco, Algeria and Tunisia
benefit from Free Trade
Agreements with the EU
Source: ICF International Analysis

RIGHTSHORING AND THE US RENAISSANCE
Reengining programs continued in the 2011 – 2014
timeframe as aircraft production approached $180B
2012 - 2014
Major
Program
Launches
• A330neo
• Boeing 777X
• E-Jet E2
• Global 7000/8000
• Longitude
Global
Aircraft
Production
$B
2000 2002 2004 2006 2008 2010 2012 2014
 Huge backlogs led to ongoing production
growth; aggregate production reached $180B
in 2014
 Boeing and Airbus elected to re-engine the
A330 and B777; Embraer also announced the
E2 program
 Aircraft OEMs became more cautious about
ambitious white sheet programs – “No
Moonshots” is the prevailing attitude of
aerospace leadership
0
50
100
150
200
2012 2013 2014

Automation continued to erode labor content for many
aerospace parts…
0
20
40
60
80
100
120
Before
Automation
Automated
Overhead
Outside
Services
Material
Labor
Generic Machined Part
Breakdown by Cost Type
 Automation is reducing the direct
labor content for a wide array of
aerospace parts
 Future advances in cutting tools could
improve machining productivity by 50-
100%

There is a balanced interest in locating activities in low and
high labor cost countries, or “Rightshoring”
Source: The Economist January 19, 2013
Manufacturing Outsourcing Cost Index
% of US Cost
0%
10%
20%
30%
40%
50%
60%
70%
80%
2009-11 2012-14
Move Between
High Cost
Countries
Reshore
Move Between
Low Cost
Countries
Offshore
Companies’ Intentions To Change
Manufacturing Source
Worldwide, % of Capacity
Rightshoring: locating aerospace value chain
activities in the best location based on long-
term competitive advantage and market access

“Rightshoring” means that the US is the new hot spot for
aerospace manufacturing investment
0
5
10
15
20
25
30
USA China Mexico Brazil Canada Germany India Japan Morocco Thailand

Some OEMs are trending towards greater vertical
integration; Boeing is a notable example
Selected Examples of Boeing Vertical Integration
Nacelle design
& production
787-9
Horizontal
Stabilizer
777X Wing
Production
Acquires Alenia’s
fuselage
assembly facility
Source: ICF International analysis
New composite
design &
manufacturing
center

…and the Southeastern US is now arguably the most
popular aerospace manufacturing destination
Source: ICF International Analysis

Agenda
 Tectonic Shifts
 Relative Size of LA market

The $530B global aerospace industry is dominated by six
countries which comprise ~70% of activity..
Source: National Industry Associations / Secondary Research / ICF International analysis
2011 Global Aerospace Market Size*
Total = $530B
$220B
624,000 employees
$23B
87,000 employees
$38B
100,000 employees
$39B
625,000 employees
$60B
143,000 employees
$36B
97,000 employees
* Size of country proportional to aerospace market size and land area
CONCLUDING REMARKS

Commercial Aircraft: fleet growth at a healthy 3.4%
annually
CONCLUDING REMARKS
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
2015 2025
Africa
Middle East
Latin America
Europe
Asia Pacific
North America
27,100
31% 26%
37,900
27%
25%
8%
32%
23%
8%
# Aircraft
3.8%
2.5%
1.6%
5.2%
5.3%
5.1%
CAGR
3.4% Avg.
5%
6%
10 Year Global Air Transport Fleet Growth

Militare Aircraft: North America and Asia Pacific have the
largest active fleets
CONCLUDING REMARKS
 Source: ICF, FlightGlobal World AirForces directory 2016
 Note: Other includes Special Mission, Tanker, and Heavy Transports
Fighter /
Attack
Rotary
Wing -
Transport
/ Utility
Trainer /
Light
Attack
Transport
- Lt/Med
GA /
Utility
Rotary
Wing -
Attack
Other
51,104
Aircraft
By Aircraft Type By Global Region
North
America
Asia
Pacific
Europe
Middle
East
Latin
America
Africa
51,104
Aircraft
2015 Global Military Aircraft Fleet*
34%
29%
12%
8%
7%
6%
4%
29%
26%
22%
10%
7%
6%

BGA fleet: 60% is based in North America
GLOBAL MRO MARKET
North
America
South
America
W. Europe
Asia
Pacific
Middle
East
Africa
62%
14%
11%
5%
2%
3%
32,740
aircraft
2013 Fleet by Region
E. Europe
1%
1%
China
CIS
1%
Source: JETNET, ICF International; BGA fleet comprises turbine-powered aircraft only, including turboprops. Piston-engine aircraft are excluded
Note: Countries defined in Asia Pacific is provided in the appendix at the end of this report
North America fleet breakdown:
 United States: 88%
 Canada: 6%
 Others: 6%

9.011
11.954
6.109
6.332
4.199
5.909
2.148
3.630
2.136
1.910
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
2013 2023
Others; 1.8%
EMBRAER; 13.9%
ROCKWELL; -5.5%
PILATUS; 6.0%
PIPER; 1.4%
DASSAULT; 2.2%
HAWKER BEECHCRAFT; -1.1%
GULFSTREAM; 5.4%
BOMBARDIER; 3.5%
BEECHCRAFT; 0.4%
CESSNA; 2.9%
The installed business aviation fleet is forecasted to
reach over 42,600 aircraft – a 2.7% CAGR
GLOBAL MRO MARKET
20.197
24.786
4.733
6.544
3.449
4.086
1.640
2.550
1.140
1.558
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
2013 2023
CIS; 7.8%
China; 12.3%
E.Europe; 3.9%
Middle East; 4.8%
Africa; 3.2%
Asia Pacific; 4.5%
W.Europe; 1.7%
South America; 3.3%
North America; 2.1%
32,740
42,681
2013-2023 Fleet Growth by Region
2013 – 2023 CAGR: 2.7%
32,740
42,681
2013-2023 Fleet Growth by OEM
Region; CAGR
International
2013 – 2023 CAGR: 2.7%
Region; CAGR

Agenda
 Tectonic Shifts
 Relative Size of LA market

Southern California

2
1927 – Wings joins
Hollywood and aerospace
1950s - 1980s – Cold War; center of
“black” programs
WW2 – 2 million aerospace
employees build 300K aircraft
Late 1920s – SoCal boasts 25+
aircraft & engine OEMs
2Sources: ICF research; Peter Westwick, Blue Sky Metropolis(2012)
Southern California was the epicenter for aerospace
through the 1980s

2
Southern California was the epicenter for aerospace
through the 1980s
3
3
Source: ICFInternational
 Growing competition from other
regions changed the balance of
competition – particularly in the air
transport sector
 The end of the Cold War was a
body-blow to SoCal’s huge
military aerospace presence
 The demise of political competition
following Proposition 187 led to
“business unfriendly” public policy
 The popularity of California itself
led to tremendous population
growth….and to rising labor and
land costs
Year Event
1954 Lockheed selects Marietta,GA
for C130 production
1967 McDonnell buys Douglas
1970
Airbus founded
1980s So. Cal still home to 1/3 of
US’s aerospace engineers
1991
End of Cold War
1994 Proposition 187
1997
Boeing buys Douglas
1990s Entertainment passes
aerospace as largest
employer
2010 Northrup Grumman moves
HQ to Washington

3
Aerospace employment decreased by 65%
from 1990 through 2011
4
Aerospace manufacturing in Southern California
4
Sources: California EDD, QCEW Data(2011)

4
Southern California is a case study in declining
comparative advantage
 Southern California leveraged several strengths
become the world’s largest ever aerospace cluster
Gradual erosion of competitiveness underpinned its demise
 Ease of doing business declined
 Public policy not business friendly
 Land & labor costs skyrocketed
 The End of the Cold War played a huge role in
declining activity
 Rising competition from other regions/countries
was inevitable
Key Takeaways: The Southern California Story

Netherlands

In the mid-1990s, the Netherlands was one of a
few countries with final assembly capability....
1912 – Antony Fokker
founds Fokker
1920’S – Fokker becomes
the world’s largest aircraft
OEM in the late ‘20s
1980’s – Fokker
develops F50 and F70
at the same time
WWI: Fokker builds aircraft
for the German army
1968 – KLM founding member
of KSSU maintenance alliance
with SAS, Swissair, UTA
1949 – Schiphol
becomes primary
airport of Netherlands
7Source: ICFResearch

…the country repositioned itself following the
bankruptcy of Fokker in 1996
Key Events in Dutch Aerospace: 1996 - 2015
Year Event
1996 Fokker bankruptcy
1996 Key assets acquired by Stork;aircraft
OE activities shut down
2007 First commercial application ofGLARE
onA380
2007 Maastricht “Maintenance Boulevard”
initiative
2008 Aviolanda Woensdracht established
(Dutch MRO hub)
2010 TAPAS consortium founded to develop
next generation composites
2014 Dutch aerospace companies sign€24B
TAPAS 2 agreement withAirbus
2015
GKN acquires FokkerTechnologies
2015
Dutch Aerospace Cluster signs
agreement at Paris Air Show towork
on compositerepair
1996 – Fokker declares
bankruptcy
2007 – first major
application of GLARE
2010 – TAPAS consortium
8Source: ICFresearch

Fokker restructured into several focused
businesses
9
The restructuring of Fokker
Markets
• Military
• Rotary wing
• Turboprop
• BGA
• Commercial air
transport
• Military
• BGA
• Rotary Wing
• Commercial air
transport
• Military
Products
• NH-90 landinggear
• F-35C arresting gear
• Q400 nosegear
• AH-64 landinggear
• F16 landinggear
Main
Customers
• Flaps & fuselage
parts for large
commercial aircraft,
business jets and
military aircraft
• Electrical wiring
harnesses
• Electrical
distribution
systemsSource: ICF
International
Business
Unit

9
Many leading names are based in the
Netherlands
12
 The Netherlands identified two key areas of
focus following the demise of Fokker
 Advanced materials / aerostructures
 Maintenance, repair & overhaul +
distribution
 The success is underpinned by close
collaboration between industry, academia
(TUDelft) and government technical research
centers like the NLR and TNO
 Amsterdam’s world-class logistics
infrastructure, strategic location, competitive
tax structure and English- speaking workforce
provide a good environment for (MRO) and
spare parts logistics
 In important lesson: There is life after final
assembly!
Academia
Government
Industry
12ICF International

Singapore

Just 30 years after its founding, Singapore
established itself as the premier Asian MRO hub…
1965 – Singapore Founded 1975 – Establishment of
ST Aerospace
1990s and 2000s -- Western
suppliers make Singapore
their Asian MRO Hub
1981 – Changi Airport
opens
1992 – SIA Engineering
Company opens; numerous
JVsfollow
1990s MRO demand
explodes and global
support networks created
14Source: ICFResearch

…however escalating labor costs and the rise of
China challenged Singapore’s MRO dominance
15
Singapore’s GDP Per Capita (US$):
1985 - 2014
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
90
80
70
60
50
40
30
20
10
0
Asian Aircraft Maintenance Bays
2014
Source: ICF International, World Bank national accounts data, and OECD National Accounts data file 15

Singapore repositioned itself to focus on higher
value-added MRO, manufacturing and R&D
16
Year Event
2006 SeletarAerospace Park
announced
2006
EADS Innovation Works opens
– the first outside of Europe
2007 A*STARAerospace
Program started
2011 Bell & Cessna BGA MRO
center
2012 Rolls-Royce opens Seletar
facility
2013 Pratt & Whitney moves into
Seletar
2013 Thales innovation hub
2015 3D printing cluster
launched
2011 – Cessna & Bell
open first Asian MRO
center at Seletar,
signaling the ongoing
growth of business &
GA in Singapore
2012 – Seletar
becomes Asia’s first
major aeroengine
final assembly
facility
2013 – Pratt &
Whitney breaks
ground on GTF
manufacturing
facility
At Seletar
16
Source: ICF research

Today, the Singapore Aerospace Cluster is worth
$7B with most major aerospace firms present
17
 20 years of 10% growth
 20K+ employees; 90% are
skilled jobs
 ~$7B US cluster output
(2012)
 A well-developed aerospace
SME supply chain
 A global aerospace R&D
center
 Growing high technology
manufacturing hubs
 The Asian hub for capital-
intensive MRO and distribution
Singapore Changi
International Airport
Seletar AerospacePark
17Sources: ICF International,Singapore EDB

Singapore exemplifies the power of visionary
leadership and industry- government collaboration
 Visionary leaders and talented
government agencies
 World class infrastructure and
airport; global logistics hub
 Phenomenal business
environment
 Investment in basic research
and applied technology
 Strong indigenous aerospace firms
 Strong collaboration between
industry, government (e.g., EDB
and Workforce Development
Agency) and
research/educational institutions
Industry
Research &
Educational
Institutions
Government
18
Source; ICF

In the late 1990s, some Mexican States began to
target aerospace as growth opportunity following
the passage of NAFTA…..
1970s – early investment
in Mexico by Honeywell,
Collins, Hughes Aircraft
The rise Of China impinges
on Mexico’s competitiveness;
some Mexican states focus on
aerospace as target sector
1970s/80s – Recession
“La Década Perdida”
1994 – North American
Free Trade Agreement
1988 – Gulfstream opens
parts manufacturing facility
Source: ICFresearch

…and the progress continued over the last
decade aided by the US-Mexico Bilateral Aviation
Safety Agreement
Year Event
2006 Bombardier final
assembly in Querétaro
2006 Eaton opens manufacturing in
Tijuana
2007 FEMIAformed
2007
U.S.-Mexico Bilateral
Aviation Safety Agreement
(BASA)
2007 Tariffs abolished on
aerospace parts;
2008 Goodrich to Baja
California
2010 Safran builds fourth
facility in Querétaro
2013 Eurocopter final assembly in
Querétaro
2014 Delta andAeroMexico
major JV MRO facility
2010 – Safran
continues
expansion
2013 –
Eurocopter
assemblyfacility
2006 – Bombardier
final assembly in
Querétaro
Source: ICFresearch

Today Mexico has more than 250 aerospace
firms which employ more than 34,000
Mexican Aerospace Industry - 2014
Sources Dirrecion General de Industrias Pesadas y de Alta Technologia; ProMexico;Femia

The Mexican aerospace industry is now
worth $6B and is set to double by 2020
0
2
4
6
8
10
12
14
2007 2011 2015* 2020*
Mexican Aerospace Exports ($B)
• $12B Exports
• 110K workers
• 50% local content
24Source: The OffshoreGroup
2020 Goals
* estimated
 Many investments in
2000s are bearing fruit
 Mexico’s
competitiveness aided
by escalating Chinese
labor rates
 Exports expanding to
include a broader mix
of engineering and
MRO activities

Mexico’s aerospace development was mostly
bottoms- up; it wisely avoided developing its
own indigenous aircraft
 Mexico was well-positioned to take
advantage of trend low cost
sourcing in the 2000s
 Mexico leveraged several key
strengths
 Labor costs
 Ease of doing business
 Proximity to US
 NAFTA and BASA
 Protection of IP
 Mexico wisely avoided pursuing its
own indigenous aircraft offered
strong IP protection…in contrast to
China
 Unlike Singapore and The
Netherlands, Mexican aerospace
developed without strong federal
government involvement
Investment not driven by market access
Key Takeaways:
Mexico

Southeastern US

The Southeastern US was not on the radar screen
for aerospace investments until late last decade
Background: Southeastern US
2012 - Airbus announces
Mobile, AL as site of A320
production facility
Growing interest in reshoring
manufacturing to US
2010s -- Fracking
revolution leads to falling
US energy costs
2009 - Boeing selects
Charleston for 787
production facility
2008 - EADS-Northrop win
tanker competition; program
cancelled after protest
2010s – Governments play
active role in recruiting
aerospace investments

Recent activity has been fast and furious in the
Southeastern US, much of it high technology
28
Source: ICF International Research
Year Event
2012 Embraer opens Phenom
final assembly in Florida
2013 Boeing Propulsion COE in
Charleston
2015 GE prepares for 3D printed
nozzles
2014
Carpenter Technology
begins powder metal
production inAlabama
2015
GE announces two facilities in
Alabama for advanced
materials
2015 Airbus A320 production
facility opens in Mobile
2015 Boeing Charleston
unionization drive fails
2015
Boeing announces plans to
invest another $1B in
Charleston
2015 – Airbus
A320 final
assembly
facilityopens
GE additive
manufacturing
facility in
Auburn, AL
2014 –
Carpenter
Technology
powder metal
facility in AL

A wide array of suppliers recently invested in the
Southeastern US
29
Selected Aerospace Investments In Southeastern US
MISS
ALABAMA
GEORGIA
FLORIDA
SOUTH
CAROLINA
NORTH
CAROLINA
Mobile: A320final
assemblyline
TENNESSEE
Morristown: Expansion of
Howmetfacility
Memphis:
Spare parts
distribution
center
Ft Lauderdale: JV –
interior refurbishment
services
Greensboro:
Service Center
Palm Beach: NewHQ,
R&DcenterTampa Bay: new investment
casting foundry and ceramic
core facility
Greenville: Carbon
fibermanufacturing
Deerfield Beach: JV
for landing gearMRO
Ft Lauderdale: Full
servicefacility
Space Coast: Phenom
Final AssemblyFacility
Nashville: Full
service facility
North Charleston: JV to produce
sub-assemblies forB787
Savannah: Gulfstream aircraft
maintenance trainingfacility
Auburn: New
manufacturingfacility
for super alloys
Orangeburg: Hondajet
fuselage assembly
Charleston: 787 Final
Assembly and Delivery
Savannah and Brunswick:
Expansion of completions
and servicefacilities
Greensboro: Honda’s HQ
and manufacturing
facility
Tampa:
Component
repairJV
Monroe:
Engine parts
manufacturing
Mobile:MRO
facility
Wallburg:New
manufacturing
facility
Columbus : UH-72A
final assemblyline
Powder Metal
Facility
Source: ICFInternational

Developing a Successful
Aerospace Cluster Strategy

Aerospace Industry is a Growth Business with
Very Attractive Attributes
SAO JOSE DOS CAMPOS AEROSPACE CLUSTER STRATEGY
Source: ICF Analysis
Aerospace Industry Attributes
Growth
Industry
High Paying
Jobs
Stable
Long Term
production
Highly Skilled
Manufacturing
Photo

“Right Shoring”
Need to Understand the Important Aerospace Trends
That are Reshaping the Aerospace Supply Chain
Growing capital
market interest
Key
Aerospace
Supply
Chain
Trends
AEROSPACE CLUSTER STRATEGY
Source: ICF
Advanced
Aeroengines
Additive
Manufacturing
Supply Chain
Transparency
& Control
OEM Vertical
Integration
OEMs Push
For Cost
Reduction

Example of How Aerospace Trends can Be
Used as Development Opportunities
Source: ICF
Shifting Heavy Airframe MRO Migration
Patterns
 Average labor hours per heavy
maintenance check is declining
 High fuel prices increase
maintenance ferry flight costs
 Skilled labor shortages in Asia
driving up labor rates
 US and Latin American labor
rates now comparable to Asian
market MRO rates
 Excess facility supply
increasing local
competitiveness
ICF Insight
Less Trans-
Pacific
Heavy Check
Migration
More Heavy
Maintenance
Stays in
Americas
“Right-shoring is the
new Outsourcing”

Tier 3 & 4 consolidation continues to put
pressure on smaller players
Source: ICF analysis, market interviews
 Tier 4 consolidation of raw material,
forging, casting suppliers is
accelerating
 The motivation is to increase added
value as customers demand “near
net shape parts”
 Another motivation is to capture,
revert and create “closed loop”
material systems
 Recent examples
 PCC: Wyman-Gordon, Carleton Forge,
Special Metals, Primus, Heroux Devtek
 ATI – Ladish
 Carpenter Technologies - Latrobe
 Alcoa – Howmet, fastener OEMs
 Doncasters – moved from turbine blades
downstream into gas turbine modules
 The upshot: new Mega Tier 4s will
increase customer bargaining power
and could threaten some Tier 2/3
suppliers
Trends Shaping Aerospace Supply Chain
Consolidation

Additive manufacturing represents a potential
step-change in cost and part design capability
Sources: University of Exeter
• Additive manufacturing (AM) “builds up” parts with material
deposition, rather than removing material through machining
• There are many types of additive manufacturing processes and little
industry standardization
Traditional Subtractive Manufacturing Additive Manufacturing
Additive
Manufacturing

As a Result, Competition between Aerospace Clusters to
Attract these Businesses is Very Fierce
Source: ICF
* Note – Russia is emerging for Western certificated equipment
Southern
California
Eastern
Canada
Southeast
US
Central US
Mexico
Washington
Brazil
North
Africa
France
United
Kingdom Germany
Eastern
Europe
UAE
Malaysia
Singapore
China
Established Clusters
Emerging Clusters
Connecticut
Russia*
Spain
India
Japan
Aerospace Industry concentrated
In North America and Europe…
…but has been shifting to other
merging markets as well.
Global Aerospace Clusters

Implementation of a Aerospace Cluster Strategy Requires
Deep Specialist Knowledge of the Aerospace Industry
Source: ICF analysis
Key Industry
Trends &
Implications
Aero Cluster
Capabilities &
Strengths
Target
Companies &
Challenges
SUCCESS

Targeted Companies Need to Understand the Unique Value
Proposition Offered in Locating in Your Aerospace Cluster
Improved ability to serve
customers
Reduced operating costs
Strengthened segment
profile or presence
Low start-up and training
costs
Increased sales
Tangible Benefits
Benefits Must = $$$$$$
Sample Cluster Traits
Cost Effective Labour
Proximity to
Transportation Hubs
Nimble and Flexible
Government Interface
Strong Training
Programs
Strong Incentive
Packages

To Succeed in Attracting Aerospace Companies One Must
Understand the Value Proposition
 Need to Understand Your Strengths and
Value
 Need to Understand Aerospace Industry
Trends
 Need to Understand the Challenges of the
Various Segments of the Industries
 Need to Understand How Companies Can
Use What You Offer to Meet Their
Challenges
 Need to Develop a Customized Marketing
and Communication Strategy the defined
target audience

 What is the proper balance of in-house versus outsourced activities?
 Where to locate key activities to underpin strategy and desired
competitive positioning? How to leverage low cost poles?
 To what extent should investments follow those made by key
customers?
 How to manage global supply chains and human resource pools?
 How to fend off threats from new competitors in low cost regions?
 Which aerospace market segments and/or value chain activities to
target?
 How to develop elements of a “cluster ecosystem?”
 Desired mix of indigenous suppliers versus foreign direct investment?
 Appropriate regulatory and taxation policies?
 What is the required infrastructure? Human resources and education?
 For existing clusters: how to maintain competitiveness in light of
emerging
clusters in low cost regions?
IMPLICATIONS
Globalization Has Important Implications for
Suppliers… and Governments

For questions regarding this document, please contact:
Paulo Franklin
+55 12 991821800
paulo.franklin@icfi.com

Paulo Franklin - AEROSPACE DAY SEMINAR - Spotlight: Transformações na cadeia global de valor e oportunidades no Brasil

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Paulo Franklin - AEROSPACE DAY SEMINAR - Spotlight: Transformações na cadeia global de valor e oportunidades no Brasil

Ähnlich wie Paulo Franklin - AEROSPACE DAY SEMINAR - Spotlight: Transformações na cadeia global de valor e oportunidades no Brasil (20)

Mehr von IBAS International Brazil Air Show

Mehr von IBAS International Brazil Air Show (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Paulo Franklin - AEROSPACE DAY SEMINAR - Spotlight: Transformações na cadeia global de valor e oportunidades no Brasil