2023 presents a promising aviation industry outlook, with International Air Transport Association (IATA) predicting a return to 2019 passenger levels, and analysts forecasting an uptick in new aircraft orders, with a corresponding increase in demand for MRO services.
With this will come a return to slight profitability for the first time in three years, but margins will be razor thin.
There are five areas of change that will significantly boost commercial aerospace industry growth through the next 12 months:
Prediction 1 – One-third of aerospace companies will localize supply chains – and additive manufacturing has a central role to play
In its latest Aerospace & Defense Industry Outlook, Deloitte sees an acceleration in the shift from global to regional sourcing in 2023, including the exchange of raw materials, parts, and finished A&D goods globally. Supply chain diversification, near-shoring, and ally-based sourcing are all methods airlines are using to stabilize disrupted supply chains
Additive manufacturing (AM) is another method to shore up supply chains and reduce risk—and it’s already showing its potential. AM or 3D printed parts can reduce cost and lead time by 60-90%, and there are already examples of airline operators and MRO providers embracing 3D printing for different uses.
Looking to protect grounded or stored aircraft, Scandinavian Airlines (SAS) could not source off-the-shelf engine covers, exhaust plugs and more due to ongoing supply issues. It took the decision to partner with a local aviation engineering organization that had the means to 3D print the extremely large exhaust covers. There are still many regulatory issues to overcome before additive manufacturing can reach its full potential, but recent examples are promising. In June 2022 a metal component for the IAE-V2500 engine’s anti-icing system, developed at Lufthansa Technik’s Additive Manufacturing (AM) Center received its official aviation certification from the European Union Aviation Safety Agency (EASA).
Prediction 2 – The commercialization of space will bring a market growth of over one-third
In 2023 we’re looking at a new kind of space race, this time commercially, not militarily driven. NASA and SpaceX both have lunar visits in their sights. Other “space tourism” market entrants include Blue Origin and Virgin Galactic, all contributing to the industry exhibiting a huge Compound Annual Growth Rate (CAGR) of 36.4% from 2022-2028.
In other commercial areas of space there are more revenue opportunities as the number of satellites providing critical on-earth infrastructure support increases. Space Infrastructure Servicing (SIS) or in-orbit servicing is becoming a growing and highly addressable market. This includes the life extension, orbital phasing, repair, and maintenance of critical assets as they orbit the earth. The market is huge. Some research organizations forecast as much $14.3 Billion In-orbit Servicing & Manufacturing revenue through 2030 and enabling technologies will play a key role in the sustainment and support of space assets.
Prediction 3 – Around a quarter of Advanced Air Mobility companies will enter Advanced Air Vehicles into service over the next three years
The commercial aviation Advanced Air Mobility (AAM) industry is still in its early growth stages, with some stand-out OEMs progressing from prototype to Entry into Service. While there are still areas of progress to be made with certification and creating the supporting infrastructure to manage these new methods of travel, advanced air travel is closer than ever before. Figures from the Advanced Air Mobility Index show nearly 25% of leading AAM start-ups are anticipated to go from prototype and testing to Entry into Service (EIS) over the next three years. From the regulatory side, in November 2022, the FAA proposed its criteria for the Joby Aviation Model JAS4-1 eVTOL air taxi aircraft to be certified—providing one of the first in practice examples of eVTOL certification.
To get there though, the Advanced Air Vehicle (AAV) manufacturers will need to shift from prototyping mode to production mode while remaining cognizant of maintenance and ongoing support. It is critically important to have scalable, end-to-end systems in place that can adapt as an organization finds itself at different points on the path of production, operation, and support of AAVs.
Prediction 4 – One-third of leading airline operators must modernize legacy MRO software and become more evergreen
Maintenance of traditional airframes is also reaching a point of change. Many maintenance software providers are now forcing painful upgrades on customers who must overhaul their systems earlier than they would have anticipated. Upgrades to older best of breed systems or legacy software comes with lengthy and costly updates and changes, or major disruptions with brand-new implementations. These upgrades are required just to keep maintenance software operational, let alone support new business models, growth plans or new aircraft introductions.
As a result, top airline carriers will explore a move to evergreen maintenance solutions in 2023 to guarantee ongoing system performance characteristics, scale MRO to meet passenger & business demand, take advantage of new embedded technologies, and uphold security requirements. ARC Advisory Group report: “There is a growing trend among carriers with large fleets to seek enterprise level core MRO solutions that are more comprehensive in scope (fleet/line, engine, component, heavy maintenance), and are at enterprise scale. Legacy ERP systems are being replaced or seek replacement by core MRO solution sets at enterprise scale.”
Prediction 5 – Sustainable Aviation Fuel (SAF) production will triple in 2023 – as industry-wide sustainability progress continues
Sustainability has been top-of-mind for the aviation sector in recent years, and now Sustainable Aviation Fuel (SAF) use is reaching significant levels to power traditional airframes in terms of production and usage; over 50 airlines now power flights with some form of SAF. IATA figures estimate that Sustainable Aviation Fuel (SAF) production will reach 1bn liters in 2023, more than three times 2022 levels. This milestone sets the tone for more sustainably powered flight, SAF will account for 65% of the mitigation needed for industry net zero CO2 emissions, requiring a production capacity of 450 billion liters annually by 2050.
New methods of air travel also have a key role to help the aviation sector meet sustainability targets, particularly in light of the AAM industry progress highlighted earlier. Airline operators agree, Cirium reports investments and orders from leading global airlines including Air Canada, United Airlines, and Japan Airlines.
AAM can address emissions from related ground transportation for regional or urban movement—a recent Deloitte study estimated AAM can reduce travel time by 75% with zero operating emissions for a 25-mile intra-city trip. AAM, electrification and hybrid propulsion work best across these short-haul and regional distances, especially significant when McKinsey estimates flights below 600 miles in length account for 17% of total airline CO2 emissions.
Climbing towards profitability
Profit margins will be extremely thin despite the positive market outlook for the aviation industry over the next 12 months. Those organizations that embrace new manufacturing principles, markets, methods of air travel, maintenance systems, and more sustainable operations can set themselves on a flight path to success and growing profitability in 2023 and beyond.
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