APEX Insight: Building, fitting and servicing aircraft is a global effort. So much so that aerospace companies the world over have formed strategic alliances, finding strength in numbers.
The first US A321 rolled out of its hangar in Mobile, Alabama, to the tune of a marching band, flanked by pom-pom waving cheerleaders, Airbus crew in football jerseys, and red, white and blue balloons. The only thing missing as Airbus handed the aptly named BluesMobile over to JetBlue in the spring of 2016 might have been Bruce Springsteen chanting “Born in the USA.” But the anthemic chorus wouldn’t have been entirely accurate. The A321 wasn’t exactly born in the USA. Sites in France, Germany, China, the UK and Spain all contributed to its development; but the aircraft itself was built in the USA.
“We are seeing a ‘build-it-and-they-will-come’ syndrome. Suppliers are grouping themselves around us.” – Barry Eccleston, Airbus Americas
“Already we are seeing a ‘build-it-and-they-will-come’ syndrome,” said Barry Eccleston, president and CEO, Airbus Americas, in an interview with the Seattle Times. “Suppliers are grouping themselves around us.” In the year of the opening of Airbus’ $600-million assembly plant at the Mobile Aeroplex at Brookley, at least 19 companies followed suit, including France-based Zodiac Aerospace and Safran. In December, Airbus supplier Hexcel announced it would be investing $200 million in an expansion in nearby Decatur, creating 90 jobs.
Manufacturing at a rate of four narrow-body aircraft per month – on par with Airbus’ assembly line target in Tianjin, China – and with plans to bring a C Series assembly line to Mobile through the company’s recent agreement with Bombardier, the centripetal forces of a budding aerospace cluster are at work. And with a healthy research and development landscape, a government keen on offering major incentive packages for new companies and a widening network of industry stakeholders with mutual interests in close proximity, the textbook conditions for an aerospace cluster to form and thrive are in place.
Production in Mobile may be ramping up, but the scope of the city’s operations is far outpaced by Boeing’s output in Renton, Washington, where forty-seven 737 aircraft come off the assembly line each month, or Toulouse, France, where up to four jumbo A380s can be manufactured in a month. The rise of Toulouse and Seattle as leading global aerospace capitals dates back to World War I. In France, government officials requisitioned Toulouse as a site for ammunition and military aircraft production, since the battle in northeastern France froze industrial activity in that area. In Boeing’s case, Seattle was less a strategic wartime post and more a harbor whose shipyards facilitated expansion fast enough to allow the burgeoning airframer to accept contracts for military aircraft and solidify its base in the Pacific Northwest.
“Through our network, we group different consortia and project teams to apply for larger funds from the federal or EU level.” – Lukas Kirchner, Hamburg Aviation
These sites, along with Hamburg, Montreal, northwestern England and parts of Mexico, remain important aerospace centers, thanks in part to the geographical inertia that comes from heavy sunk costs and a largely immobile infrastructure. Unlike other industry clusters such as Silicon Valley, Wall Street or Hollywood, which tend to rely more on human capital, the aerospace hubs for the most part stay put.
But it’s not the case that the aerospace world has made a few very large and expensive beds and now has to sleep in them: They also happen to be very nice beds – hotbeds, even, of innovation. “A typical advantage of a cluster is funding,” says Lukas Kirchner, head of Marketing for Hamburg Aviation. “Through our network, we are able to group together different consortia and project teams with different backgrounds – setups that are mandatory to apply for many larger funds from the federal or European Union level.”
As an example, Kirchner points to a 2017 research partnership between Hamburg Aviation and Aero Montreal that will receive a total of $15 million in funding from the German and Canadian governments.
“The opportunity to have support from municipal, state and federal governments is a huge advantage.” – Javier Urquizo, Cobham Microelectronic Solutions
Small to medium-sized enterprises especially stand to gain from the lobbying power of a cluster. According to Javier Urquizo, Mexico plant manager for Cobham Microelectronic Solutions, the “opportunity to have interaction and support from municipal, state and federal governments” is a huge advantage. Cobham, and other members of the Baja Aerospace cluster, recently requested a meeting with Carlo Humberto Bonfante Olache, Baja California’s secretary of Economic Development. “He shared his interest to support our companies with incentive programs and funding,” Urquizo says.
As the center of the European aerospace industry, Aerospace Valley, the French cluster comprising companies in the Toulouse and Bordeaux region, boasts more than 850 companies, 80 research centers and an accumulated 123,000 employees. And the cluster has an export value 15 times larger than the second-largest cluster in the country: Bordeaux wine. So, socializing has its perks.
“We have more and more activities now related to helping our smaller companies do business.” – Thilo Schoenfeld, Aerospace Valley
“I keep saying that the most important added value of our cluster is actually the network,” explains Thilo Schoenfeld, deputy director of International Affairs for Aerospace Valley. “We organize hundreds of events each year for our members, and they are an excuse to get our members to come together, exchange business cards and to converse.” These kinds of events can also stimulate internal competition. “We have more and more activities now related to helping our smaller companies do business,” Schoenfeld says.
For larger companies, access to the network can help find suppliers and ancillary support without looking too hard.
“Hamburg Aviation is an important network platform for its members,” says Wolfgang Reinert, head of External Communications for Lufthansa Technik, an MRO and anchor company within the German cluster. “It bundles the interests of a variety of players coming from completely different areas in the aviation business and gives them the possibility for a regular exchange of information or for initiating common activities or campaigns.”
“It bundles the interests of a variety of players in the aviation business and gives them the possibility for a regular exchange of information.” – Wolfgang Reinert, Lufthansa Technik
To succeed in the aerospace industry, it’s a little bit of what you know and a little bit of who you know. Put differently: “It’s not about knowing everything, but knowing who might have an answer to a particular question,” Kirchner says. And sometimes it’s about finding subcluster communities. “We also host women’s conferences in addition to promoting women’s working groups,” says Fiona McKay, business development director for the Pacific Northwest Aerospace Alliance. In other cases, as with Aerospace Valley’s inclusion of automotive and rail companies, there can be cross-sector cluster pollination.
There are also clusters of clusters. Established in 2009, the European Aerospace Cluster Partnership brings together 42 clusters from 15 countries. Not stopping there, the consortium organized the first Global Aerospace Cluster Manager Meeting at the Paris Air Show last year.
Come and They Will Build It
Reduced transportation costs may appear to be one of the more obvious benefits of a cluster, but with the global emergence of low-wage economies, where the cost of labor can be as much as three to five times lower, this is no longer the case.
International outsourcing from OEMs [original equipment manufacturers] and other large manufacturers has given rise to new poles of growth in China, India, Mexico and elsewhere, and as a result, the original build-it-and-they-will-come cluster model is being flipped on its head.
Prior to the opening of Bombardier’s facility in Querétaro in 2010, Mexico lacked the traditional makings of an airline cluster. Despite that, the export numbers for aerospace parts and supply to Canada and the US are strong, and fostered the industry’s growth from 150 aerospace factories in 2007 to more than 300 by the end of 2016. With a skilled workforce – more engineers per capita graduated in Mexico in 2012 than in Germany – growth in the market appears to be on a sky-high trajectory.
The factories are expanding, too. “Back in 2005, we reflected on our industrial strategy with the intention to develop content in cost-competitive countries,” says Baptiste Valois, general manager of Zodiac Aerospace’s branch in Mexico. “For logistical reasons, our approach has been focused on countries that are either close to the homeland and systems control or close to our customers.” Zodiac Aerospace’s Chihuahua campus is now the manufacturer’s largest site, with around 3,000 employees and five plants covering 600,000 square feet (with 77,000 square feet reserved for additional expansion).
Perhaps soon – as in China, where outsourcing from Boeing and Airbus led to the development of a Chinese-born and Chinese-made passenger aircraft, Comac C919 – Mexico will have its own airplane. “We are not shy of sharing our desire to build our own aircraft,” says Tomas Sibaja, executive president of the Baja Aerospace cluster. “This way, we will align our strengths and expertise in improving our ecosystem with national pride.”
Pacific Northwest Aerospace Alliance
As a nonprofit financed mostly through membership, PNAA receives less public funding than other clusters. While Washington State is North America’s largest commercial aviation cluster, 15 percent of companies in the state are PNAA members.
Number of employees: 131,500 approx.
Main Actor: Boeing
Core Industries: Aircraft assembly, components
Arriving this year, Airbus will join Aero Montreal as its fifth OEM. Montreal represents more than 50 percent of Canada’s employment in the aerospace industry and is one of the only cities in the world where an entire aircraft can be designed.
Number of employees: 39,130 approx.
Main Actors: Airbus, Bombardier, P&WC, Bell Helicopter
Core Industries: Aircraft assembly, supply chain
With the second anniversary of the ZAL TechCenter in view, Hamburg Aviation and its partners are strategically investigating the UAV market, additive manufacturing, fuel cell technology and digitalization.
Number of employees: 40,000 approx.
Main Actors: Airbus, Lufthansa Technik, Hamburg Airport
Core Industries: Aircraft and aircraft systems, cabin and cabin systems, MRO modification, air transport systems, aviation-related IT and comms tech
With new members such as Hyperloop Transportation Technologies arriving in Toulouse, Aerospace Valley leadership is also exploring bilateral expansion through agreements with, among others, Hamburg Aviation, Aero Montreal, Farnborough Aerospace Consortium and OSSA (Turkey).
Number of employees:
Main Actors: Airbus, Dassault-Aviation, Stelia Aerospace, Thales Alenia Space, Safran, Turbomeca
Core industries: Aircraft assembly, satellite production, embedded systems
Unlike more traditional clusters, many of the aerospace companies established in Baja California, Mexico, are from elsewhere – 70 percent of which have direct relations with California. But leaders are upfront about their plans to eventually produce a Mexican-made aircraft.
Number of employees: 45,000 approx.
Main Actors: Cobham SATCOM, Gulfstream, Zodiac Aerospace
Core industries: Component parts, including fuselage, ranging gear, engines; interior parts; avionics; cables; harnesses
North West Aerospace Alliance
Contributing more than $10 billion to the UK economy, the alliance is bracing for the shake-up that may ensue with Brexit on the horizon. “In the UK, we have cooperated and collaborated with Europe for over 30 years,” says David Bailey, chief executive of North West Aerospace Alliance. “We need to be a part of it.”
Number of employees: 50,000 approx.
Main Actors: Airbus, BAE Systems, Rolls-Royce
Core Industries: Military aircraft systems integration, airframe components, engine subsystems and components
“Build It and They Will Cluster,” was originally published in the 8.2 April/May issue of APEX Experience magazine.