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Publication date: 23 February 2011
Aerospace sector forecasts bright future, boosting UK economic growth
A|D|S today publishes a summary and forecast for the UK-based aerospace sector from its Chairman, Ian Godden. Speaking in advance of the UK Government’s Budget statement on 23 March 2011 Mr Godden seeks to demonstrate the growth and wealth-creation potential of UK aerospace.
In looking at the future global civil aerospace market and the UK’s part in it during a presentation to industry executives at A|D|S this morning, Mr Godden said:
“The UK Government can count on one sector for excellent growth this year and for the next few years. Aerospace.
“Not many people in this country realise that throughout the last severe recession there was one advanced manufacturing and engineering sector in the UK that continued to grow: Aerospace. In 2009, the UK Aerospace sector grew by 5 per cent. Why was this? Two simple facts: the rest of the world – China, India, and the Middle East – continued to buy aircraft throughout the last three years and more importantly, unlike many other UK sectors, we are a global leader – having invested heavily in the past two decades – and our market is not dependent on UK demand. We are a world leading exporter; still number two in the world in this sector with 17 per cent global market share, employing over 100,000 people and generating over £22 billion in 2009.
“The outlook for this year and the next five years is even rosier. As air travel continues to become more accessible throughout the world – the ‘democratisation of air travel’ – the forecast for the next 16 years is for a staggering 10 per cent growth per annum in India, 8 per cent per annum for China, 6 per cent for Brazil and 5 per cent for the rest of Asia. Even the mature regions of North America and Europe are expected to trundle along at 3 per cent and 2 per cent respectively.
“Furthermore, aircraft manufacturers have already announced that they will increase their rate of production as a way to address demand for retirements and growth. Airbus announced its intention to increase production of the A330 from 8 to 10 per month by early 2013, while the A320 will be hiked from 34 to 40 per month for the same time period. Boeing has also revised its production numbers, the 737 will increase from 31.5 to 38 on a monthly basis by the second quarter in 2013. Regarding the Boeing 777, production will already increase by mid 2011 from 5 to 7. With its major operations in Belfast, Bombardier’s investment in new aircraft programmes such as CSeries and Learjet 85 are also significant for the UK sector. The increases in production rates for Airbus and Boeing are just the tip of the iceberg, as more revision is expected to the production rates in the near term. In 2010, Airbus and Boeing received combined new gross orders of 1,269 aircraft (net 1,104) in 2010. Both firms more than doubled their order intake compared to 2009.
“Looking at the longer term aerospace industry, passenger demand is expected to shift to some extent to emerging markets (new links, routes, infrastructure and strong commercials driving market growth) with global passenger traffic averaging 5.3 per cent growth per annum in the next 20 years. Nevertheless, North America will continue to be a strong market given the need to replace older aircraft such as the Boeing 757 within time, while Europe’s significance is expected to match the US due to infrastructure development. The backlog in the aerospace industry remains high with 30,000 aircraft to be delivered over the next 20 years. The current backlog for large aircraft is worth around $735bn (£452bn, 17 per cent of which – the UK market share – is £77 billion) alone. In terms of engines, it is predicted that 141,000 will be delivered over the next 20 years, at a total value of $820 billion.
However, we cannot live off the past. The need for sustained research and development investment and the importance of government support as a part of this is crucial to ensure the strong future that is within our grasp, capable of being delivered and sustained amidst fierce international competition.
Furthermore, this new breed of aircraft will be significantly more fuel-efficient. Today, the average aircraft in use in the UK is as fuel-efficient as a hybrid car travelling 100 passenger kilometres on 4 litres of fuel. Aircraft such as the Airbus A380 perform considerably better, using just 3 litres of fuel. As an illustration of the expected progress in this area the UK aviation industry has produced a CO2 Roadmap (http://tinyurl.com/saco2) demonstrating how, through the use of new technology, the UK aviation sector will meet the predicted threefold rise in demand to 2050 while reducing CO2 emissions back to 2000 levels over the same period. This exceeds the UK Government’s targets for all sectors of reducing CO2 emissions to 2005 levels by 2050.
“Moreover, as many developing nations rely on air freight to developed world, combined with a growing demand drive for western goods (wealth growth), total freight traffic growth is expected to grow at a 6 per cent per annum in the next 20 years. Other factors impacting the growth figure is the shift toward larger freighters and new, more efficient airplanes.
“A|D|S’s latest review of the market, based on multiple up-to-date sources, shows the following:
- An expectation of over 4 per cent world growth in aircraft deliveries over the next decade;
- A higher growth in the first three years, possibly reaching 6-7 per cent per annum;
- A large-scale recovery growth in business jets by over 10 per cent per annum; and
- All sectors of aerospace growing at least by 3 per cent in the next two years, irrespective of the UK and US economic outlook- double dip or not.
“How will the UK capture its share of this growth? The local heroes are numerous, with a UK supply chain of over 3000 companies scattered throughout the UK. Some well-known global names have a major presence here, with notable examples being:
- Rolls-Royce: Number two in the world in large commercial jet engines;
- Airbus: number one in the world. The UK designs and produces the wings for these aircraft;
- Bombardier: world leader in regional and business aircraft: the advanced composite wings and wing components for the new CSeries and Learjet 85 aircraft respectively are being produced in Belfast;
- AgustaWestland: world leader in helicopters;
- GKN: world leader in aerostructures;
- Spirit: an expanding aerostructures company with major operations in the UK; and
- Numerous system and niche suppliers for landing gear, wheels and brakes, cabin seats and equipment, avionics.”