The aerospace industry is one of the most significant sources of innovation and technological progress in the American economy. Since the Wright Brothers’ legendary first flight in 1903, the aerospace industry has been known for its many technological achievements.
Along with those achievements, however, there have been many significant challenges, with the global COVID-19 pandemic being the most disruptive among recent events. The aerospace and defense industry has confronted the pandemic head-on, and is well on its way to recovering from the events of 2020.
As the aerospace market looks beyond the pandemic, what are the growth opportunities and challenges facing the industry? This article will look at the main market drivers and highlight the key growth strategies for aerospace businesses looking into the future.
How Big is the Aerospace Market?
The aerospace market is huge and diverse, including products and services spread across commercial, industrial, and military sectors.
Engineering is at the core of the aerospace industry. Aerospace engineering is focused on aeronautics and astronautics, and includes all aspects of aerospace and aircraft technology, from research and design to the production, operation, and maintenance stages. Much of the aerospace market consists of the sale and maintenance of that technology, including commercial aircraft and related services. In addition, the aerospace market covers supporting services and equipment, everything from radar technology to airport facilities to satellites.
According to the Aerospace Industries Association (AIA), total industry revenues for the aerospace market stood at $874 billion in 2020. That number came despite a drop due to the impacts of the pandemic. The workforce stood at just above 2 million, accounting for 1.4% of all employment in the United States.
The value of the global aerospace market reached $298 billion in 2020, with North America accounting for almost half of the total. It is expected to grow at a rate of 7.7% to $430.7 billion in 2025, and a further 5.9% annually until 2030 to a total of $573.6 billion.
Of course, the pandemic created a ton of uncertainty in the aerospace industry including lost revenues, upset customers, and loss of staff. If that has taught us anything, it’s that we need to prepare and get ahead of these risks before they happen.
The aerospace market is clearly a significant and growing part of the national and global economy, and promises to provide many growth opportunities for aerospace businesses in the near future.
Important Segments of the Aerospace Market
The aerospace industry’s customer base includes both the private and public sectors. Defence and military contracts are among the most significant aspects of the government’s role as both a producer and customer of aerospace technology, with many private companies, including Boeing, reliant on government defense contracts for a large source of their revenue.
The private sector accounts for a far larger share of the aerospace market than the government.
Commercial aircraft account for a very significant segment of the overall aerospace industry, and include the following:
- Commercial aircraft
- Commercial helicopters
- Commercial drones & gliders
- Engines & turbines (including aircraft engines, turbines, and rocket engines)
In addition, aircraft maintenance, repair, and overhauling services (MRO) contribute to the maintenance of the aircraft and aerospace infrastructure.
The aerospace market also includes the operation and maintenance of airport infrastructure, including aviation security. Security measures for airlines and airports are intended to protect workers and passengers not only from threats of terrorism, but from cybersecurity threats as well.
The commercial space sector is one of the most promising segments of the aerospace market, and has received much attention in recent years due to companies such as SpaceX and Virgin Galactic. Those companies are part of a growing commercial investment in space tourism and exploration that also extends to satellite communications and space laboratories.
One further distinction within the aerospace market is between manual and autonomous aircraft. While manual aircraft account for the vast majority of aircraft, the use of autonomous aircraft is rapidly increasing, especially through the use of drones, UAS, and UAV aircraft.
Drones, UAS, and UAV Aircraft
Autonomous aircraft are among the most exciting aspects of the current aerospace market. While most people identify all autonomous aircraft as drones, there are several different types of aircraft and systems.
Drones are commonly considered as aircraft vehicles that can be remotely or autonomously guided. The most basic definition of a drone is an aircraft that does not contain a pilot. Although the broadest definition of a drone includes sea or land-based vehicles (such as submarines) that are also autonomous, drones generally refer to unmanned aircraft that can fly autonomously.
UAV is short for Unmanned Aerial Vehicle. A UAV is an aircraft that can fly remotely or autonomously. The term is often used interchangeably with a drone, since the definitions are similar. The key difference is that some aerospace professionals require a UAV to be capable of autonomous flight, which does not apply to all drones.
In other words, while all UAVs are drones, not all drones are UAVs.
UAS refers to Unmanned Aircraft Systems. A UAS includes a UAV or drone as well as the person(s) controlling it and the system through which it is controlled. A UAC refers to the whole system, not just the aircraft (the UAV or drone).
In general, the term “drone” has come to refer to drones, UAVs, and UAS aircraft broadly, because of its popular usage in the media. Drones are mostly used for military, research, and recreational uses, but their commercial use is on the rise. That’s especially true in the case of delivery systems being implemented by commercial giants such as Amazon and Walmart.
The commercial use of drones provides one of the most exciting opportunities for growth in the aerospace market. That is in large part due to the increasing legal usage of drones for commercial purposes. Specifically, the Federal Aviation Administration (FAA) issued the Operation of Unmanned Aircraft Systems Over People final rule effective April 21st, 2021. The rule allows for the relaxation of some regulations regarding the use of drones at night and over people and moving vehicles.
Since drones can be relatively affordable and accessible, an increasing number of users and entrepreneurs have become interested in starting their own drone business. While there are exciting benefits to starting a drone business, there are also potentially significant risks that business owners should protect themselves against.
Aerospace Market Opportunities
In addition to the exciting potential of drones discussed above, there are several other aspects of the aerospace market that offer promising growth opportunities for the future.
Increasing Digital Innovation
The increasing use of digital tools in the aerospace market is supported by the development of new technologies and business models as well as a drive for greater efficiencies and productivity.
Digital innovation will be crucial in supporting every aspect of the aerospace industry, from the design stage to the operation, support, and maintenance of products and services. The insights gained from tracking the progress of the technology through all the stages will be crucial in improving the products and services offered by aerospace businesses. Digital innovation can help reduce production and service costs and help companies meet customer demands more effectively.
Following the pandemic, many aerospace companies have been motivated to reduce costs and manage risks more effectively. Investing in digital platforms can help businesses achieve those goals, while helping their employees and customers gain the most from their services and products.
Digital services can also help companies strengthen their supply chains, streamline their workflows, and track their progress through data analytics, thereby giving them an advantage over their competitors.
Use of Advanced, Innovative, Smart Materials
Many aircraft manufacturing businesses are committed to using smart and advanced materials. Such materials, including graphene and carbon nanotubes, enable airplane wings to be lighter and more efficient, thereby reducing their weight and fuel consumption.
The use of innovative, smart materials applies to many segments of the aerospace market, from producing lighter aircraft and innovating in the hypersonic field to creating better personal protection equipment. Such materials will have environmental as well as health benefits, and have the potential to lead to better growth prospects as well.
Advanced Air Mobility (AAM)
Advanced Air Mobility (AAM) is an air transport system dedicated to helping emerging aviation markets move people and cargo between places previously underserved or not served at all by aviation. AAM will be achieved through the use of innovative aircraft designs and flight technologies that will benefit the aviation industry and the public in the future.
Many organizations have already moved beyond the R&D stage when it comes to AAM, and are conducting testing at the present time. While the AAM field is evolving, it holds enormous commercial potential, with revenues expected to be well above $100 billion over the next two decades.
Space Market Growth
Growth in the space market has been among the most attention-grabbing aspects of the aerospace industry, especially thanks to SpaceX and Blue Origin.
The key areas of continued growth in the space market include the launch industry and next-generation satellite technology. That includes the increase in small satellite constellations that are predicted to change the distribution and accessibility of broadband internet worldwide.
Use of Virtual Reality (VR)
VR technologies hold great potential for improving manufacturing efficiencies. Aerospace companies are increasingly using VR technology in manufacturing aircraft technology as well as for training, maintenance, and design.
One of the benefits of VR technology is that it allows engineers to create virtual environments wherein technology can be tested according to different scenarios. Virtual reality technology can therefore help companies test prototypes of new technologies, improving problem-solving and eliminating inefficiencies during the pre-production stage.
Use of Internet of Things (IoT)
The use of Internet of Things (IoT) is particularly promising when it comes to the maintenance and repair of aircraft equipment and parts. Specifically, IoT allows for predictive maintenance, which involves anticipating possible damage to aircraft parts before the damage occurs by using various sensors attached to the machines.
IoT technology is also useful in collecting data from engines and various other aircraft components that can aid engineers and technicians in the maintenance and improvement of aircraft technology.
Artificial intelligence (AI)
Artificial intelligence is having a transformative effect on a host of industries, and the aerospace industry is no exception. One particular aspect of AI that is proving to be useful in aerospace tech is the use of machine learning. Machine learning is helping to improve aerospace research and education by providing new ways of analyzing the data.
Through the exponential increase in problem-solving made possible by AI, innovative technologies can be developed and tested at a far faster pace than was previously possible.
Aerospace Market Challenges
While there are many future trends and technologies that are guaranteed to lead to greater opportunities in the aerospace market, there are also significant challenges that the aerospace industry faces. Some of the key challenges include:
- Supply chain problems: as many industries have recently experienced, disruptions at any stage of the supply chain can disrupt the entire industry.
- Geopolitical tensions: as the current war in Europe shows, political conflicts can have a profound impact on travel and supply routes.
- Market volatility: the impact of inflation, especially when it comes to the price of raw materials and fuel, can have a significant impact on the aerospace industry.
- Airline bankruptcies: as was evident during the pandemic, economic downturns have a detrimental effect on the airline industry, leading to bankruptcies that negatively impact not just customers but aircraft manufacturers as well, leading to order cancellations.
- Increased cyber-attacks: a higher reliance on digital tools means an increase in the risk of cyber attacks, which can impact airport infrastructure as well.
- Pandemic & global health concerns: despite the rollout of vaccines, the pandemic is still not over, as continued shutdowns in China have shown.
- Climate change: the threats posed by climate change will impact the aerospace industry in many complex ways, including debates over whether to limit air travel and how to develop new technologies to minimize the industry’s carbon footprint.
How to Take Advantage of Growth Opportunities
Companies looking to take advantage of growth opportunities in the aerospace market have to focus on adopting new technologies, including those discussed above. The aerospace industry is a highly mature industry with a long history, but it must always adapt and grow to meet future challenges.
Here are some tips for aerospace companies looking to grow:
- Embrace digital innovation: businesses should take advantage of digital technologies at every step of the way, not just during research and manufacturing, but also in supporting their sales and marketing teams.
- Promote your aerospace business: this may seem obvious, but many aerospace businesses do not put enough effort into creating an effective marketing plan that can enable them to promote their products and services.
- Maintain good relationships with customers and suppliers: staying on good terms with your customers and suppliers requires a lot of trust, which comes from doing your job in the best way possible, by delivering your services and products on time, at a competitive price, and to the highest quality possible.
- Put the focus on your people: an effective people strategy is essential for an aerospace business. The workforce is the strongest asset the aerospace industry has, from engineers to technicians. Learning how to retain talent and keep them motivated is key to any aerospace company’s success.
- Make future plans: the aerospace industry is always looking to the future, especially since many business deals come in the form of long-term contracts. There are many rewards to that, but there will always be risks as well.
How to Protect Your Aerospace Business from Growth Risks
As the aerospace industry adjusts to a post-pandemic world, there are many reasons to be optimistic about its long-term prospects. From its very beginning, the aerospace industry has been known for its ability to adapt and grow, and the potential for growth in the near future is very promising.
Those opportunities for growth, however, will come hand in hand with many risks. Companies that wish to take advantage of the growth opportunities in the aerospace market must also prepare to deal with the risks involved.
Having the right insurance coverage is the most effective way of ensuring that your business will benefit from the many opportunities for growth while staying protected. That includes creating an effective risk management plan for your aerospace business, and having a trusted insurer.
With its team of experts, Embroker is committed to being a trusted and reliable insurer for the aviation and aerospace industry. By providing industry-specific solutions, Embroker’s team is dedicated to utilizing its extensive experience working with commercial enterprises, owner-operators, airports, and many other segments of the aerospace industry in order to provide aerospace businesses with the right coverage at the best price.
With the right insurance coverage, businesses can benefit from the many growth opportunities in the aerospace market while secure in the knowledge that they will be protected from the challenges and risks involved.