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Aircraft Manufacturing Industry Essay

4681 words - 19 pages

Industry DefinitionThe Aircraft Manufacturing Industry is defined by the manufacturing of commercial and defense aircraft. Our focus will be on the commercial aircraft manufacturing segment. This segment can be broken into two markets, one for planes carrying more than 110 passengers and the other more regionally focused, carrying less than 110 passengers. For the purpose of this paper all manufacturers of defense and executive aircrafts are exclude as well as suppliers and manufacturers of aircraft components.The commercial aircraft manufacturing industry is global and is not limited by geographic boundaries. The approximate size of this industry is $76 billion1, 2, 3, 4. There are 2 important markets to consider within this industry segment as mentioned above, 110+ passenger aircrafts and under 110 passenger aircrafts. There are 2 key firms in each of these markets. Boeing and Airbus are the only players in the 110+ market, which is approximately $57 billion in size1, 2. Both of these companies' aircrafts are capable of international and domestic travel. Boeing is headquartered in the US while its direct competitor, Airbus is a European firm. Embraer and Bombardier are two key firms in the less than 110 passenger market significantly smaller at $19 billion3, 4. These companies focus on manufacturing smaller jets capable of regional travel. Embraer is located in Brazil and Bombardier's regional aircraft manufacturing is part of a much larger Canadian firm specializing in transportation.Porter's 5 ForcesOver the last year the commercial aircraft manufacturing industry has seen relatively strong growth overcoming weak to moderate performance in the last decade. This can be understood by examining Porter's 5 forces model.CustomersThe main customers for commercial aircrafts are leasing companies. GE Capital Aviation Services and British Aerospace Asset Management make up the majority of customer demand. The limited number of buyers places control in the hands of the leasing companies. They are able to control the components that are used in the manufacturing process such as demanding a Rolls-Royce engine versus a General Electric engine. This control leads to a strong industry force.SuppliersCommercial aircraft component suppliers are located throughout the world.While there are few suppliers for critical, high-tech components there are many suppliers for basic parts. In addition, Boeing has stepped up the amount of outsourcing used in production and engineering of the airframe, becoming more reliant on suppliers. Also, suppliers have begun to develop stronger relationships with the four commercial aircraft manufacturing companies by investing capital and taking increased responsibility for the overall design process6. These actions result in suppliers being a moderate to strong force for firms within the industry.SubstitutesThere are few direct substitutes for commercial aircrafts. This would require a significant technological advancement changing...

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