The Airbus senior management team’s announcement in July 2012 that it would be locating its A320 Family jetliner final assembly line operation in Mobile, Alabama, was not only the result of seven years of state interaction with the European original equipment manufacturer (OEM), it represented the first time Airbus had chosen a site in the Western Hemisphere to assemble aircraft.

“We have already been present in the US through our partnerships and our employees since our very beginning 40 years ago,” says Airbus president and CEO Fabrice Brégier. “But now, when operations begin at the Mobile assembly line, we will be manufacturing aircraft in Asia, America and Europe.” Airbus assembles aircraft in Toulouse, France, and Hamburg, Germany. It also opened a facility in Tianjin, China, in 2008.

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Construction of the $600m Mobile facility commenced in April 2013, with aircraft assembly scheduled to begin in 2015. The first delivery is targeted for 2016. Airbus anticipates the facility will produce between 40 and 50 aircraft a year by 2018. The project also includes a delivery centre.

Keen to make the most of this announcement, Alabama governor Robert Bentley signed legislation aimed at attracting aerospace industry suppliers to the state. Mr Bentley maintains that the legislation levels the playing field between Alabama and nearby states in the recruitment of suppliers and the additional jobs they will bring.

A group of economic development organisations across Alabama have also launched a website – a one-stop resource – for aerospace suppliers interested in locating near the Airbus facility. Here they can get information on Alabama’s workforce training, taxes, logistics and infrastructure on the website.

“We have already seen interest from potential suppliers,” says Bob Smith, assistant director of business development for the Alabama Department of Commerce. “This site aims to simplify the process for those companies.”

Competitive incentives

Hungry to create jobs, states and cities across the US have stepped up incentive programmes to attract aerospace investment. Alabama offered Airbus $158m that included $82m for capital investments in the plant and other expenses, $51.9m for a 3700-square-metre on-site training centre for workers, tax breaks on manufacturing equipment and a state corporate income tax credit.

In April, South Carolina governor Nikki Haley signed legislation to provide $120m in incentives to Boeing for its expansion plans in the state. Boeing opened its 787 Dreamliner assembly plant and delivery centre in North Charleston in 2011, a project for which South Carolina offered $450m in incentives. The company recently announced plans to invest another $1bn and create 2000 jobs over eight years in North Charleston. According to South Carolina officials, Boeing’s plans will put the state in a position to become an aerospace hub, with suppliers locating across the state to serve not only Boeing but also possibly Airbus in Alabama.

Elsewhere, the state of Virginia offered Rolls-Royce Holdings $57m to open in Prince George County. The company is investing $136m to develop an advanced airfoil machining facility, which will create 140 highly skilled jobs. The 8400-square-metre facility will be located alongside the company's Rotatives manufacturing site. Construction of the facility is expected to be completed by the end of 2013, with the first components produced in late 2014.

"Rolls-Royce is making significant investments in the US and around the world to ensure we have the capacity to deliver on our promises to customers." says James M Guyette, chairman, president and CEO at Rolls-Royce North America.       

Other locations are throwing their hat into the ring, such as Dover, Delaware and Greensboro, North Carolina, by offering increased incentives such as tax breaks, worker training and infrastructure assistance.

People and places

Incentive programmes, however, are only one element in the site-selection process. Delays at both Boeing and Airbus have demonstrated that assembling airplanes is complex. David Fitzpatrick, managing director of aerospace for North America at consultancy AlixPartners, stresses that access to a cluster of engineers, proximity to suppliers and a ready availability of talented workers are critical. “Finding all of these elements is tough to do, and beware if you chase low-cost labour,” he says.

Another key aspect, according to Eric Bernardini, managing director and global leader of the aerospace and defence group at AlixPartners, adds that close proximity to customers is also key. “If you want to be taken seriously by the US airline industry, you need a footprint in the US,” he says.

Currently, Airbus’s market share in the US, where Boeing dominates, is below 30%.

One thing driving manufacturer interest is that many US carriers have been flying old aircraft, and are now beginning to renew their fleets. New York-based JetBlue Airways, for example, is scheduled to receive the very first A320 from the Mobile final assembly line. “Airbus’s $600m investment in the new Alabama site demonstrates the level of its commitment of being close to its important American operator base for A320 aircraft,” says JetBlue CEO and president David Barger.

Worldwide expansion

Boeing and Airbus have been increasing their presence in China in recent years for the same reason: to access the Chinese market, the Chinese customers demand a presence in the country. Since opening its A320 final assembly operations at Tianjin in 2008, Airbus has more than doubled its share in the fast-growing Chinese air transport market.

But Mr Bernardini points out that China presents a different ball game between OEMs and the tier-one suppliers. “The Chinese are simultaneously developing aircraft,” he says. “Consequently, tier-one equipment suppliers are transferring technology to China.”

The same thing is occurring in Russia, which is aiming to rebuild its aerospace industry after facing a deep crisis after the dissolution of the Soviet Union. Today its United Aircraft Corporation is regarded as a national champion comparable to EADS in Europe. “Tier-one suppliers want to be on board with its programme,” says Mr Bernardini.

He is uncertain, however, about how quickly the Chinese and Russians will learn to integrate new technology and make aircraft of a similar quality to Boeing or Airbus. “It depends on who you ask. It’s going to take time, but they will able be to do,” he says.

Meanwhile, other locations offer a viable argument for aerospace OEMs. Brazil is a rising star, given heightened potential for aerospace in South America. Mexico is also attractive for entering the North American market because of its close proximity to the US, low costs, and North American Free Trade Agreement advantages.

Talent scouts

As much as location and incentives are important, the availability of skilled talent remains the most important factor when it comes to site selection for aerospace companies. With demand for new aircraft set to hit the 20,000 mark over the next 20 years, recruitment for engineers has become cut-throat.

Seattle in Washington state exemplifies the problem. Once the primary employer in the north-western US city, Boeing now competes with Microsoft, Amazon, Google and other large companies that also pay well for skilled engineers. Consequently, Boeing now operates a research and technology centre in Bangalore, India, and actively pursues technical and business partnerships with local Indian companies and institutions. Airbus opened an innovation centre in Bangalore last year.

“[These companies] are taking advantage of engineer competencies, mostly around software development, where those guys are good and much cheaper than you would get in the US or Europe,” says Mr Bernardini.