No industry on earth circles the globe like the civilian arm of aerospace. Airbus might have its identity with the EU and its fierce competitor Boeing with the US, but when it comes to the development and manufacturing of aircraft, the effort is truly global. After all, aircraft are comprised of thousands of parts and pieces. And the trend toward further internationalisation and global sourcing is increasing.

The reasons for the internationalisation of the industry are varied, but they are imbedded in the soaring cost to develop, design and construct aircraft and their parts. Not one single company – or even country – can take on the risk and cost of developing and creating everything involved in a new commercial aircraft. Consequently, Airbus and Boeing are trying to hold close to their national interests, but also seek out the best and the brightest employees, cheapest labour, and most cost effective parts and manufacturing practices possible.

“Boeing is far ahead of Airbus in introducing new manufacturing practices,” comments Stephen R Westby, vice president of manufacturing, Boeing Commercial Airplanes.

Nevertheless, the business has become truly global and has trickled down to even those firms involved directly and indirectly in composite materials and technologies.

Economic boosters

Without a doubt, aircraft manufacturing is big business. In the US, the industry generates nearly 15% of GDP. In 2003, the industry supported approximately 689,000 American jobs, although that figure had declined to 570,000 by March 2004.

“Our industry leads the nation in net exports,” says John W Douglass, Aerospace Industries Association of America (AIA) president and CEO.

Exports in the civilian aerospace sector totalled $44.058bn in 2003, according to US Department of Commerce data.

Across the Atlantic Ocean, the European Association of Aerospace Industries (AECMA) reports at least 435,000 direct jobs in Europe’s aerospace sector in 2001 with over 1.2 million total jobs supported directly or indirectly by the industry. In 2001, the latest data available, the industry saw a turnover of E81bn, 12.5% of which was spent on research and development (R&D). Exports that year totalled E47.6bn, or 59% of turnover.

Today only two companies in the world make large passenger airplanes: the Boeing Company headquartered in Renton, Washington and Airbus, headquartered in Toulouse, France. Airbus, which was created by European governments in 1967, is a division of the European Aeronautics Defense and Space Company, also known as EADS. The aerospace industry is seen as one of the main driving forces of European unification. Since the EU subsidises the industry, it is able to devote nearly one-fifth of its sales revenues to R&D. Boeing, on the hand, is a stock-owned company that must answer to earnings reports.

Design philosophy

While Boeing used to be a market leader for large passenger aircraft, today Airbus has well over half of worldwide backlog orders. In a battle for market share, both Boeing and Airbus are gearing up to manufacture new and innovative aircraft ready for delivery over the next four years: Boeing, its 7E7 Dreamliner; Airbus, its A380. The new aircraft are the result of years of collaborative efforts with scores of suppliers. Both aircraft are indicative of two opposing philosophies on where air traffic is headed.

The Airbus A380 will provide seats for as many as 800 passengers in a fully double deck aircraft, a design, Airbus officials believe that will relieve congestion of so many airplanes operating in and out of airports by economically ferrying more passengers between major hubs. The strategy may work in Asia where populations are concentrated in certain cities. But the jury is still out if such an aircraft will be attractive for European or North American use.

“We are convinced that this aircraft will have a bright and extremely successful future,” comments Manfred Bischoff, Airbus chairman.

Boeing’s Dreamliner 7E7 family of airplanes, on the other hand, will accommodate 200-300 passengers on routes of 6500-16,000km on non-stop, point-to-point travel. The Dreamliner is expected to provide better fuel mileage and 40%-60% added cargo revenue capability due to a larger hold. Airlines see the 7E7 as possibly replacing Boeing’s 757 and 767 aircraft and Airbus’s A300-600 in the next decade. Production of the Dreamliner is expected to begin in 2006.

Both Airbus and Boeing anticipate their planes will be in service by 2008 – if not earlier – and thus are creating a surge of opportunities worldwide for companies to bid to supply parts to the assemblers.

Big money & politics

It is easy to see how the money and politics at stake is enormous through all channels of the aerospace industry, given the fact that orders for new aircraft are worth billions of dollars. Take, for instance, Japan’s All Nippon Airways (ANA), which recently ordered 50 of Boeing’s new 7E7 Dreamliners. Valued at $6bn at list prices, the deal marks the single largest launch order in Boeing history. Consequently, Boeing has announced ANA will be an integral partner in developing the 7E7 family of airplanes.

“By being the launch customer for the 7E7 Dreamliner, ANA will have a direct influence on what passengers throughout the world will experience when they fly in this new airplane,” says ANA president and CEO Yoji Ohashi. Japan is already playing a large part in manufacturing the Boeing 7E7 Dreamliner. As much as 35% of the structural work is being done by Japanese manufacturing powerhouses Fuji Heavy Industries (FHI), Kawasaki Heavy Industries, and Mitsubishi Heavy Industries.

At last year’s Paris Air Show, Dubai-based Emirates Airlines confirmed that it had ordered 45 of the A380-800s. Worth $19bn, the announcement is the biggest order for new aircraft in the history of any airline. Emirates also announced orders for A340s, purchasing two more ultra-long-ranges A340-500s and 18 of the larger A340-600 Higher Gross Weight (HGW) aircraft, as well as leasing two A340-600s from ILFC, the International Lease Finance Corporation, thereby making Emirates the launch customer for the A340-600 HGW. All totalled, Emirates’ current total order book is $26bn.

Airbus: site locations 

In preparation for assembling the A380, construction is already complete on the Airbus equipment hall in Hamburg, Germany that will outfit A380 passenger cabins. When operational, the plant will serve as the third largest airline assembly line in the world after Seattle and Toulouse. Located at the Muhlenberger Loch site, the massive hall is capable of handling four A380s simultaneously.

While Airbus had to battle environmentalists who wanted to protect the site and its wetlands, the city-state is pushing for a new law that would make it easier to expropriate private property for future expansion. Hamburg already awarded Airbus a $600m subsidy to help nail the deal.

But Hamburg is only one location involved in major A380 production. “This project could secure or create 22,000 jobs in the UK alone,” says Mike Turner, chief operating officer of BAE Systems. The firm will work on the A380 integrated wing design and manufacture at its UK sites in Filton, England and Broughton, North Wales. The business in Broughton has already spurred the Welsh Development Agency to invest £4m in a 42-acre site on a former World War I airbase to further attract related activity.

Knock-on effect

The wings will be delivered to the final assembly line at the Airbus’ A380 assembly facility in Toulouse, which was inaugurated in May. Heightened activity by Airbus at its central Toulouse plant already has spawned considerable economic development activity in France. Honeywell, for example, opened a 13,000m2 site to consolidate its avionics services and European sales and support operations several years ago.

“The facility reflects our continued commitment to Airbus and the changing needs of our OEM [original equipment manufacturers] and airline customers based in Europe,” comments Adrian Paull, vice-president Customer Service, Honeywell Aerospace Electronic Systems. “We designed this facility with Honeywell Six Sigma tools to ensure leaner processes that improve our repair turnaround time and services for our airline customers. By consolidating all our regional support functions into one single site, we also became more efficient in the development of the new solutions that our customers expect.”

Global presence

Today Airbus has more than 150 sites throughout the world, and maintains 16 development and manufacturing facilities in France, Germany, the UK and Spain where Airbus aircraft are designed, built, assembled and tested. Worldwide, Airbus operates several subsidiaries, six regional offices, three training centres, five spare parts centres and 120 resident customer service offices. The company utilises a network of some 1500 suppliers in more than 30 countries, including 800 suppliers in the US.

Airbus has also established four hubs in North America with its headquarters for Airbus North America and North America Customer Services in Herndon, Virginia, outside of Washington, DC. Its North American spare parts centre is located in Ashburn, Virginia. Working with the spares facilities in Hamburg and Beijing, the Ashburn centre serves customers in the US, Canada and much of Latin America. A $50m, 100,000ft2 Airbus training centre is located in Miami, Florida.

The newest Airbus facility in the US, and largest in terms of people-power, is Airbus North America Engineering in Wichita, Kansas which opened in Spring 2002. The facility is the first design and engineering venture for Airbus in North America and hosts some 100 engineers working on the A380. The wealth of talent and the tradition of aviation activity in the region were key factors for selecting Wichita. The mid-west city is home to nearly 45,000 aviation workers and more than 130 aviation-related companies, including Boeing, Cessna, the Raytheon Company, and Bombardier Aerospace.

Boeing: site locations

When Boeing decided to locate its assembly plant for its new Dreamliner 7E7 series in the US city of Everett, Washington, company executives said the decision was made because Boeing was already anchored in the Puget Sound – also in Washington.

“We looked at three locations where Boeing already had a presence: Long Beach, California; Renton, Washington; and Everett, Washington,” says Boeing’s Mary Hanson, who is involved in the Everett site selection process for the 7E7. “Boeing already carries out final assembly and testing in these three locations. But the fact the company manufacturers 747, 767 and 777 aircraft in Everett helped Boeing decide also to build the 7E7 there. After looking at other sites, including Portland, Oregon and Auburn, Washington, we decided to keep the operations in Everett.”

During the site selection process, Boeing kept US communities on edge stating it would also consider other cities around the world. Consequently, Washington lawmakers worked hastily to write new legislation to change unemployment insurance and worker-compensation rules that Boeing and other businesses had considered unfair. But logistics became another critical component since Boeing reported it would source products from all over the world. The company needed suitable runway provisions, proximity to a port capable of around-the-clock operations, continuous availability of heavy traffic ways between the plant site and port, and proximity to railways and interstate highways.

Martha Choe, director of the Washington Department of Community, Trade and Economic Development State (CTED) who worked with Washington Governor Gary Locke on the Boeing deal, comments that Washington’s distinct geographic advantage was a major plus for convincing Boeing to site the 7E7 plant in Everett. But as an incentive, the state offered the aerospace company nearly $4bn in tax and other incentives over 20 years – a package legislatures are now touting as a “jobs package” although only 800 to 1200 jobs will be created to perform the three-day final assembly. In addition, $15.5m was slated for a rail-barge dock at the Port of Everett, not specifically for Boeing but capable of handling oversize cargo, along with eased shoreline regulations for construction.

“The legislation that was passed offers significant benefits to suppliers as well,” Ms Choe emphasises. “It offers suppliers a distinct advantage to work in close proximity and to consider potential sites near the Everett plant.” Ms Choe admits that the goal is to turn the area into a hub for Tier 1 and Tier 2 suppliers so that they can work together to integrate systems. To date, however, there are no announcements.

International team

While aircraft manufacturers are big stake enterprises attractive to aerospace-centred communities such as Everett, the Boeing 7E7 will be sourcing parts from subcontractors worldwide.

From the beginning an international team of aerospace companies has been developing the airplane, led by Boeing at its Everett facility. Boeing has joined with more than 20 international systems suppliers to develop technologies and design concepts for the 7E7. As the development work concludes, the same companies are now competing to become ongoing suppliers to the program. They include: ECE Zodiac, Messier-Bugatti and Thales from France; Diehl and Liebherr-Aerospace Lindenberg from Germany; Teijin Seiki from Japan; FR-HiTemp and Smiths Aerospace and BAE SYSTEMS from the UK; Connexion created by Boeing, and Crane Aerospace, Fairchild Controls, Goodrich Corporation, General Dynamics, Hamilton Sundstrand, Honeywell, Matsushita Avionics Systems, Moog, Parker Hannifin Corporation, Rockwell Collins, and Triumph Group from the US.

Stephen R Westby, vice-president – manufacturing, Boeing Commercial Airplanes, points to the importance these fostered supplier relationships have to the future of the Boeing 7E7 project. “We considered how we would design our aircraft and looked closely at the engineering needed for production,” he says. “Now we are taking a close look at our value stream. The design of the body, wings, galleys and avionics of the aircraft hardly ever change. Then there are customer variables such as the choice of interior colours and in-flight entertainment systems.”

By engaging the strengths offered by its engineers and suppliers, Mr Westby says that Boeing will be able to reduce its supplier base and save costs.

To streamline the thousands of suppliers Boeing has utilised, the company is now holding its major suppliers such as Rockwell Collins and Hamilton Sundstand responsible for engaging third and fourth-tier parts providers. Consequently, many suppliers, who thought they had an advantage by being located near Boeing’s assembly line, are now scrambling to get work from big subcontractors.

Still, the word on the street is Boeing is considering a plan to have at least one major supplier open a new satellite factory near the Everett plant to help assemble large structures and install systems and interiors.

Smaller players 

While Airbus and Boeing are market leaders, scattered around the world are scores of other small passenger aircraft manufacturers such as ATR in Toulouse, France; Fokker Aircraft BV of Amsterdam in the Netherlands; Eclipse Aviation in New Mexico, US; Gulfstream in Georgia, US; and Gulfstream’s major competitor Bombardier Aerospace in Montreal, Canada. Like the high flyers, small aircraft manufacturers are involved in a global business.

While small jet manufacturer Bombardier hails from Canada, for example, its interiors are finished in Tucson, Arizona in the US. Metro Tucson is home to about half the state’s aerospace workers, many of them working for major industry players such as Raytheon, Bombardier, Honeywell, Sargent Controls & Aerospace and Universal Avionics.

Bombardier is a particularly important player in Northern Ireland, UK, where the aerospace sector in general accounts for 20% of GDP. There, some 30-40 companies operate in the sector, although the industry is dominated by Bombardier. In April the aircraft manufacturer announced its £33.5m investment in two aircraft programs at its Northern Ireland plants: the Bombardier Learjet 40, a six to seven seat light business jet, and the 12-19 seat long range Bombardier Global 5000 business jet.

Academic lift

A plus for the industry is Queens University in Belfast, which operates as one of the top notch universities for the industry and operates a centre for aircraft technology research, a joint venture with Bombardier.

“We emphasise to companies like Bombardier the value manufacturing in Northern Ireland offers,” says William McGuinness with the Belfast office of Invest in Northern Ireland. “Northern Ireland is still at the high end of manufacturing when compared with Eastern Europe or the Far East, but we provide a totality of service, including a quality trained workforce. Companies located in Northern Ireland can compete on our strengths.”

Competitor Gulfstream, on the other hand, finds its location in Savannah, Georgia best for meeting its needs.

“Savannah is a superb location for Gulfstream,” says Robert N Baugniet, Gulfstream spokesman. “We have excellent education facilities from which we can draw our personnel. Savannah is a major transportation hub, both rail and seaport, which is convenient for receiving components. Finally, we are located less than 10 miles from a major aircraft test area and range, operated by the US Navy, where we can fly our aircraft 24 hours a day if need be. Also the proximity of the test area to our facility has other obvious advantages.”

Still, the company outsources major components from around the world. Tails and floors for the G500 and G550 are made by Fokker in Holland and shipped to Savannah by sea.

“The engines for our G350, G450, G500 and G550 aircraft are manufactured by Rolls-Royce in Germany, and also transported by sea,” Mr. Baugniet reveals.

The company also owns a facility in Mexico, which produces wire harnesses and some metal component parts.

“In 1986, when Gulfstream acquired the completions and service facility in Long Beach, California, the package included a modest manufacturing facility in Mexico, which has subsequently been modernised by the landlord,” he explains. “Six buildings have been consolidated into one new building.”

Gulfstream has recently collaborated with Varig Engineering & Maintenance (VEM), the largest aircraft maintenance provider in Brazil, and is now expanding the Gulfstream aircraft maintenance capabilities of VEM’s facility at Congonhas Airport in Sao Paulo. Gulfstream model-specific technician maintenance training, coupled with a new spares parts inventory valued at $2.4m, will enable VEM’s Sao Paulo Gulfstream Authorized Warranty facility to perform heavy maintenance, warranty work and inspections on Gulfstream business jet aircraft.

“We are committed to supporting our Latin American aircraft operators where they live,” says Larry Flynn, president, product support, Gulfstream. “These recent changes are just the beginning. As more people and companies in the Latin American region choose Gulfstream business jets, we will continue to enhance our product support capabilities and our commitment to passenger safety and aircraft performance and reliability.”

R&D risks

Airbus and Boeing may be taking a risk by introducing their new aircraft, but aerospace R&D is recognised as a high flying risk for the sector’s biggest players and especially small companies that have only a fraction of the financial resources of the big spenders. Companies do not realise profits from research for years, if ever. With around 13% of the aerospace sector’s turnover spent annually on R&D, long lead times for research, high costs and the preference of big companies to deal with tried and tested suppliers work against small companies.

Big engine manufacturer GE exemplifies the issue. Bets on aircraft engine technology must be made up to 10 years before they result in a sale. Investments in regional jet engine technology that GE began making in the 1980s, for example, did not pay off until last year when that company won the bid to supply the engine for China’s new regional jet the ARJ-21. According to executives in GE’s Transportation division, the firm worked with Avic I Commercial Aircraft Co. (ACAC) to design an engine for ACAC’s ARJ-21 regional jet that needed to be capable of flying China’s diverse and demanding flight environments. GE is sourcing the CF34-10A from global suppliers, most of which are based in the US. ACAC and GE see a potential market for 500 ARJ-21s over the next 20 years, representing a potential value to GE of $3bn.

Consequently, GE invested $70m last year to open the China Technology Center in Shanghai to work with customers and offer training for Chinese executives in GE management processes. Located in the Zhangjiang Hi-Tech Park, the centre is located 11km from Shanghai’s city centre and 7km from Shanghai Hongqiao International Airport. The centre is composed of seven world class laboratories focusing on various aspects of GE business, including power electronics, real-time/power controls, advanced manufacturing technologies, materials science, and materials characterisation/analysis.

“GE Asia is a $20bn business, which is a little over 15% of GE’s total $130bn,” comments Yoshiaki Fujimore, president and CEO of GE Asia. Mr Fujimore sees huge potential for GE in China and projects that country alone will achieve $5bn for GE in 2005.

“We don’t know how big China will be in the next 10 years. It could be bigger than the US,” he says. “In terms of GE’s Asia role, we will enhance the relationship with customers and the government. We need to recruit and develop Asian talent, especially Chinese talent. And the next is to drive initiatives, like six sigma and customer centricity.”

Top priority

Jeffrey Immelt, GE CEO and chairman of the board, is targeting research as GE’s top priorities. Recently over $100m has been allocated for global research centres that include facilities in Niskayuna, New York; Shanghai, China; Munich, Germany, and Bangalore, India. The Bangalore facility was GE’s first R&D centre outside of the US. The Munich facility, which opened in 2002, entails a $52m investment to be spread over five years. The facility conducts advanced R&D for all GE businesses.

“Germany is a world-class source of intellectual capital, home to over 8000 GE employees and hundreds of our most valued customers,” says Mr Immelt, regarding the selection of Munich for the centre. “It is a logical choice to be the site of our first technology centre in Europe, bringing our advanced technology development closer to our many customers here and throughout Europe.”

The New York centre, however, remains command central for the company.“We recruit people worldwide to work here,” comments Jim Healy, GE Global Research Center spokesman. “Where we are physically located is not related to the recruitment of talent.”

With today’s internationalisation of the aerospace industry, the comment is ringing true throughout the entire sector. When it comes to workforce, R&D, and the sourcing of parts and piece, the aerospace industry knows no boundaries, only a pursuit for excellence.

Subcontrators get their wings

Sections of the Airbus A380 will be made in France, Germany the UK and Spain. Metal for the wings will be cut, for example, by BAE Systems in Filton, near Bristol in the UK. The completed rib sets will then be sent to the sister plant in Broughton, North Wales for assembly into the wings then delivered to the final assembly line at the Airbus’ facility in Toulouse.

Meanwhile the manufacturing of Boeing’s 7E7, unlike previous aircraft, will also source parts from subcontractors such as those in Asia. This includes the 7E7’s wings – the first time outside companies have been given the lead in wing production for Boeing commercial aircraft.

“The difference in manufacturing this aircraft will be Boeing’s use of large composite parts,” says Boeing’s Mary Hanson. “This practice is indicative of how manufacturing processes are changing.”