Karen E. Thuermer profiles the aerospace industry, where intense competition and engineering research are the key influences.

For now prospects seem dim. The aerospace industry is facing its most severe downturn ever due to deep-rooted financial woes in the airline industry heightened by diminished passenger traffic caused by fears of terrorism, war and now SARS. The future of the space and satellite industry is economically and politically challenged. Recent world events have given the defence side of the business a slight boost but competition for government funding is keen. Also the industry is highly competitive and complicated.

Economic development within the industry remains the hope. Where aerospace companies locate their operations, source from suppliers, find their personnel, and position themselves for research and development (R&D) depend largely on who their customers are, their corporate goals and business priorities.

Global philosophy

The Boeing Co has made a dramatic transformation in the past two years by introducing a new philosophy to become a truly global company.

“What this means is Boeing is now drawing on the world and its resources as a contributor,” says Ambassador Thomas R. Pickering, Boeing’s senior vice-president for international relations. “The key is to become better locally while improving value. Essentially this improves supplier and marketing capacity in markets worldwide, not only as an international company, but by being a local partner in employment and value creation to that economy.”

Boeing is selective in choosing the countries in which it invests. “We consider the economic health of the market, its aviation and defence industry, manufacturing capabilities, and cluster of engineers,” he says.

Politics and economics also play an important role in considering sites. “But we must have the vision to put everything in the right context so as to not become confused that all politics is driven by economics,” he stresses. “We try to set tough standards so that whatever activity we come up with has a strong business case. The days of buying market share have proven to be not successful.”

This thinking led Boeing to open a Research and Technology Center in Madrid in 2002 that serves as a centre of excellence for environmental, safety and reliability, and air traffic control technologies. The centre is the first to be located outside of the US, although Boeing develops technologies in a number of countries, including Russia and Australia.

“Boeing’s goal is to work with the best intellectual talent around the world to develop leading-edge technologies that can be applied to our products and services,” says George Muellner, vice-president/general manager of Phantom Works, Boeing’s advanced R&D unit. “Spain’s technological and academic capabilities, and its increasingly important role in the European Union (EU) make this country an ideal choice for a long-term technology partnership.”

Currently, the centre is addressing noise alleviation in co-operation with the National Aerospace Laboratory of The Netherlands, the Madrid Polytechnic University and Barcelona Polytechnic University. A phased array noise study is being conducted at Amsterdam’s Schiphol Airport.

Russian design

Boeing also operates a Design Center in Moscow, the largest Boeing engineering centre outside the US. The centre is devoted to designing key parts and structures of commercial aeroplanes. Employees there work with Russia’s top aerospace research institutes on aerodynamics, computational fluid dynamics, vibrostrengthening and prototyping research projects.

Boeing is also expanding its university relationships by entering into collaborative agreements with universities around the world. In the UK, for example, Boeing has established an advanced manufacturing research centre at the University of Sheffield to develop new materials-cutting technologies; Cranfield University to research blended wing/body aircraft; and Cambridge University to develop new information technologies.

Boeing supports China’s airline industry infrastructure by offering assistance programmes in safety, increasing capacity, and management skills training. The Chinese market is regarded as huge. Airlines there are growing rapidly and, consequently, in need of aircraft.

Trade disputes

Mr Pickering does not underestimate the importance and effects of trade disputes. Currently, the European Commission is giving the US an autumn deadline to change tax break laws for major corporations, such as those in aerospace, or face the threat of up to $4bn in sanctions. The EU says the US tax system for foreign sales corporations is illegal and gives companies like Boeing unfair trade advantages.

“The Boeing Co. stays in close touch with all parts of the US government and members of the US Congress because solving trade issues and addressing regulations requires legislation,” says Mr Pickering. “Our view is we would like to see more open international trade policies. This builds jobs, supports prosperity, and brings more efficiency into international markets by creating a level playing field for trade where competition is treated equally.”

An example of this concern recently played out when Airbus Military chose European Prop International over Pratt & Whitney Canada to develop the A400M military transport aircraft. Its reason: to win European government support for its problem-plagued aeroplane development programme.

In that situation, Pratt & Whitney’s initial offer was $400m less than EuroProp’s consortium of companies, which consists of Britain’s Rolls-Royce, France’s state-owned Snecma Moteurs, Germany’s MTU Aero Engines and Spain’s Industria de Turbopropulsores. Pratt & Whitney had even offered to set up a production line in Germany and pledged that 75% of the engines would consist of European parts.

Today, Boeing’s global reach includes customers in 145 countries, employees in more than 60 countries and operations in 26 states. The company is organised into six major units: Air Traffic Management, Boeing Capital Corporation, Commercial Airplanes, Connexion by Boeing, Military Aircraft and Missile Systems, and Space Communications.

Boeing’s Air Traffic Management (ATM) unit is located in Seattle, Washington, and Reston, Virginia, just miles from the decision-makers and government agencies in Washington DC. Formed in 2000, the unit is charged with developing solutions for air traffic management to increase effective airport capacity without redesigning or developing more runways.

Boosting the unit’s work is the US government’s Homeland Security agency. Consequently, the Federal Aviation Administration (FAA) is contracting $23m towards such programmes, with a significant share going to Boeing.

“There is a heavy security aspect to this programme,” says Tim Neale, ATM spokesman. “You can never underestimate the lobbying that goes on for such systems. There is a bigger political challenge to this programme than a user challenge. Being near the US Congress, the FAA as well as subcontractors such as Raytheon and Lockheed Martin was a huge draw for us to locate here. Northern Virginia has great promise for the industry.”

While Boeing still leads the world in manufacturing commercial jetliners as well as satellites and military aircraft, Airbus Industrie – based in Toulouse, France – is gaining market share. Owned 80% by EADS and 20% by BAE Systems, Airbus is now capturing about half of all orders for airliners with more than 100 seats. Big on its assembly line is its next-generation jumbo jet, the 555-seat A380, a double-decker flying behemoth. Ground has just been broken on the A380 assembly plant in Hamburg, Germany.

With engineering and manufacturing being the backbone of all Airbus technical and industrial activities, the company operates more than 150 sites throughout the world, including 16 development and manufacturing facilities in France, Germany, the UK and Spain where Airbus aircraft are designed, built, assembled and tested. Both engineering and manufacturing are transnational processes that draw on the skills and expertise of each particular site.

Training centres

The newest Airbus facility in the US – and largest in terms of people-power – is in Wichita, Kansas. The first design and engineering venture for Airbus in North America, the facility hosts some 100 engineers working on the A380.

A $50m, 100,000-sq-ft Airbus training centre is located in Miami, Florida, here more than 3000 air crew, mostly from North and Latin America, are trained every year. Florida is a logical place for flight training. It boasts a $1bn flight training industry (one of the world’s largest), the National Center for Simulation (the world’s epicentre for modelling and simulation activities) and Embry-Riddle Aeronautical University.

Commercial suppliers

The aviation industry survives on its large network of suppliers, some of which have sprung up in close proximity to their customers. Yet the changing landscape is also fostering new opportunities. When Boeing decided to shed its parts business and closed related Washington area plants, new companies rose to fill the void. New materials manufacturer Triumph Composites is one of them. Now, it is seeking business not only with Boeing but in other industrial markets, such as automotive.

Proximity is by no means a requirement, however. Airbus spends about 40% of its procurement budget with American suppliers on items ranging from engines to window glass. Airbus also utilises suppliers from all over Europe, Asia, Africa and Australia that provide aerostructure commodities, materials, equipment systems and propulsion systems, as well as company consumables and services or product-related services. COMTAS Aerospace in Rastatt and Hamburg, for example, provides high performance fibre composites and produces interior components.

Although Belgium is not one of the main partners in Airbus Industrie, it has participated significantly through the Belairbus Interface. In addition, the Belgian aeronautics industry collaborates on production of the regional aircraft Embraer. Spacebel, headquartered in Liege, designs, develops and implements “tailor-made” software solutions for the aerospace industry.

“We are part of the so-called Spatiopole, or cluster of aerospace companies situated together in the Parc Scientifique du Sart-Tilman in the neighbourhood of the University of Liege,” says Ingrid Leonard, Spacebel spokesperson. “Most of the engineers working at our headquarters graduated at the University of Liege.” The firm also has offices in Hoeilaart and Brussels, Belgium, and Toulouse, France.

“In Hoeilaart, we can easily find highly-qualified workers, most of whom come from Brussels,” she says. “The presence of an important aeronautical pool in Toulouse explains our location in the south of France.”

Spin-off innovative aircraft designers and manufacturers find advantages in locating themselves in the same areas as major companies. Analytical Mechanics Association Inc (AMA) chose a base in Hampton Roads, Virginia, solely because it wanted to be close to the National Aeronautics and Space Administration’s (NASA) Langley Research Center. NASA is an important institution, which contributes to technological advances in aerospace systems concepts and analysis.

AMA has teamed up with Moller International (based in Davis, California) to develop the production version of the Skycar, Moller’s revolutionary new vertical take-off and landing aircraft. The companies are located on opposites coasts of the US, yet AMA is assisting Moller in optimising Skycar’s structural and aerodynamic characteristics and helping to define large-scale production techniques for the aircraft.

AMA more typically supports NASA missions with technical expertise in systems analysis, conceptual and preliminary design and ground testing definition for a wide range of flight vehicles.

General Electric (GE), which manufactures aircraft engines, has been concentrating on developing more efficient engines for regional jets, the only growth segment in the commercial aviation industry. Last year, GE invested more than $100m in a multi-year project to modernise its R&D headquarters in Niskayuna, New York, to become a state-of-the-art research lab and hub for new technology innovations. As a result, GE’s Global Research Center continues to be a focal point of New York’s technology cluster.

UK business

Wales has attracted 100 companies employing approximately 20,000 people to its aerospace industry cluster. Nearly 35% of the UK’s maintenance, repair and overhaul business by value and 25% by employment is within 30 miles of Cardiff International Airport. Companies located there include GE Aircraft Engine Services, Raytheon, British Airways, Curtiss-Wright Corp., and Brown & Root Services, a business unit of Halliburton Co and partner with Marshall Aerospace Ltd.

Recently, Lufthansa Technical Training and partner Blakebrook International chose to locate a Lufthansa Resource Technical Training centre in Cwmbran, near Cardiff.

“The Cardiff area is an ideal location for the Welsh aerospace industry,” says Klaus Schmidt-Klyk, Lufthansa Technical Training spokesman. “The proximity to rail and motorway links provides excellent accessibility for customers from across the whole of the UK.”

Rotherham, a 150-sq-mile borough in the county of South Yorkshire at the heart of the UK, is home to a variety of aerospace companies, many of which supply or work in partnership with companies such as Boeing, Lockheed Martin and Rolls-Royce.

The cluster is so significant, that the borough is home to an advanced manufacturing park that will provide R&D and hi-tech engineering in the aerospace, metals and materials and other sectors.

Space developments

Projects spearheaded by NASA and the European Space Agency (ESA) have given rise to aeronautical and space-related companies around the world, although today budgets are strapped. The greatest concentration are located in the US and Europe.

Huntsville in Alabama is a hotbed of activity thanks largely to NASA’s Marshall Space Flight Center. A new Propulsion Research Laboratory is scheduled for completion and operation there by June 2004. At the laboratory, scientists from NASA, the US Department of Defense (DOD), the US Department of Energy, universities and industry will pool their skills and expertise for proving scientific principles and testing a host of advanced propulsion concepts.

Also hugely significant in Huntsville is Redstone Arsenal, where scores of missile and space and aviation technologies have been born.

In Germany, Bavaria leads that nation’s E4.4bn ($4.1bn) aeronautical and aerospace industry. Since 1990, the Bavarian government has spent about E153m on the promotion of aeronautical and space technology, including the Technologies for Future Space Transportation Systems project, in which new materials for reusable space transport systems are being developed.

Under the direction of the Cologne-based German Aerospace Center (DLR Space Agency), German space companies, universities and DLR institutions have been researching, developing and testing new technologies for hot structures, thermal protection systems, avionics, health monitoring, aerothermodynamics and mission and systems analysis.

In April 2003, the ESA signed a contract with the French space agency (CNES) for the development and operations of the Automated Transfer Vehicle Control Centre in Toulouse. Main functions there will be to command and control the unmanned automated transfer vehicle (ATV) that will be put into orbit from Kourou, French Guiana, by Europe’s Ariane 5 launcher. The first ATV is expected to be launched in September 2004.

The ESA is seeking co-operative agreements with other European states wishing to establish closer relations with the space agency. Recently, Hungary signed an agreement to take part in the ESA space science and radio navigation programmes.

Defence systems

The September 11 events, followed by the intervention in Afghanistan and war in Iraq have placed emphasis on new defence systems, such as integrated large scale networks whereby weapons can communicate with each other and unmanned vehicles. Competition is fierce given that the industry is government controlled and budgets remain tight. A limited amount of money is available for new systems. Those who succeed must be innovative and lean.

Not surprisingly, these companies gain strength by locating themselves in pockets of talent and in states that host military bases and aerospace activities, such as the US states of Florida, Texas, California, Maryland and Virginia.

BAE Systems North America is headquartered in Rockville, Maryland, and operates its Integrated Systems unit in Reston, Virginia. The company designs, develops, integrates, manufactures and supports a wide range of advanced aerospace products and intelligent electronic systems for government and commercial customers.

Since the establishment of Integrated Systems in Reston, BAE Systems has increased its presence in northern Virginia by 1000 and has a total workforce in Reston of nearly 400. The unit is the largest technical support provider to the US Navy and the number one supplier of US Air Force ground test equipment.

“We have a strategic advantage in Reston,” says William Schuster, president of Integrated Systems. “We are within a 10-mile radius of the majority of our customers and have direct DOD access. By being in their backyard, we add value to their needs. For one, they do not have to get on an airplane to see what we are doing. We can be interactive.”

Bell Helicopter recently selected Amarillo, Texas, out of more than 1200 cities nationwide for its Tiltrotor Aircraft Assembly plant. It has since built a “factory of the future” there with more than 400 employees.

“When searching for a location, we sent out notices to communities to tap their interest,” recalls P D Shabay, executive vice-president of administration and human resources. “We received hundreds of replies, mostly from Texas. We then considered Fort Worth, Dallas, Austin, College Station (home to Texas A&M University), Amarillo and San Antonio. We ultimately chose Amarillo because they made us a great financial offer.”

While Amarillo did not have the trained workforce that Dallas or Houston had, the community put together a training programme to help Bell Helicopter hire employees who were qualified. “The city also provided us with land at the airport, access to bond money and tax incentives,” he says.

Kaman Aerospace Corp, a major supplier of structures and components for commercial and military aircraft, recently decided to expand its aerospace operations and employment substantially in Jacksonville, Florida. “The quality of the local workforce and the support of state and local officials were key elements in that decision,” says Joseph H Lubenstein, Kaman Aerospace president.

“We intend for Jacksonville to become our primary location for aerostructure sub-assemblies, detail part fabrication and subcontract fuselage assembly,” he says.

An advantage of Jacksonville is its high retention ratio of military personnel and concentration of naval personnel. Jacksonville is a major location for military aircraft repair and overhaul for the US Navy.

Suitable locations

Further down the coast, Symetrics Industries LLC, a designer, manufacturer, tester and integrator of electronic and mechanical assemblies and systems for the DOD, NASA, and international military and commercial customers finds Melbourne, Florida, to be a well-suited location because of its capable and available workforce.

“We are 40 miles from Kennedy Space Center, eight miles from Patrick Air Force Base, and three miles from the Florida Institute of Technology,” says Jim Peterson, Symetrics director of business development.

Besides being home to top community colleges, Mr Peterson points out that the area offers reasonable business costs. “Our expenses are much less, compared with other high-tech areas like Austin, Texas, and Raleigh-Durham, North Carolina,” he says. “Florida is business friendly with policies that allow tax credits and abatements.”

European efforts

Across the Atlantic, Europe’s defence industry is fragmented, although major efforts are being taken to unify defence efforts. Coming to a consensus on a defence and security policy has been slow. For many years, defence investment in Europe has been significantly smaller than in the US: €40bn in Europe compared with $100bn (E86bn) in the US. Add to that the fact that the European investment is made through different authorities, therefore scattering European efforts. Initiatives have been taken to develop multi-country co-operative programmes but more co-ordinated initiatives are needed for long-term research and technology.

Nevertheless, clusters are found in the UK, Germany, France, and Belgium. EADS Defence Systems & Electronics (UK) Ltd in Milton Keynes, England, for example, has been awarded an order to replace a part of the UK’s national radar surveillance system.

In July 2002, Boeing and EADS announced an historic partnership to develop solutions in ballistic missile defence. The transatlantic team effort will focus on creating end-to-end products for global ballistic missile defense. Currently, joint Boeing-EADS teams are looking at aircraft security standardisation and exploring potential areas of co-operation in homeland security and other defense areas.

Aerospace in all its forms is truly a global industry. Given the environment for healthy competition, innovation will always prevail and the strong survive.