Editor's note: Fluid Conditioning Products (FCP) of Lititz, Pa., shared with us its recent blog post about growth trends in the mil-aero sector, including the need to fill aircraft orders, the increase of mergers and acquisitions, and the ramifications of growing geopolitical tensions. The original post can be read on FCP's website here.
By Fluid Conditioning Products
The technically demanding aerospace and defense industries that we serve here at Fluid Conditioning Products (FCP) are often faced with complex challenges that can limit their overall strength and growth. In fact, reviewing any reliable industry research reporting in 2019 will show that manufacturing in these sectors—particularly in commercial aerospace—is in the process of rebounding from some difficult years.
Luckily, these recent growth trends are likely to continue for some time based on experts’ predictions. This is excellent news for the global economy, of course, but also exciting to dependable and high-quality suppliers like us who have the capabilities to support our customers no matter their precision filtration needs.
Here are some of the significant trends we’re keeping an eye on in aerospace and defense today so we can continue to drive quality in manufacturing for these critical industries as they expand and evolve.
There is no doubt about it, commercial airlines are seeing increased revenues in the last year or so as both more cargo and more people are being transported around the world. And, aerospace manufacturers are beginning to step up production to meet the demand for more flights every day.
Production Increasing to Fulfill Backlog of Aircraft Orders
Connected to challenges caused by rising oil prices, commercial aircraft manufacturers such as Boeing and Airbus have developed order backlogs as they face the need to create more fuel-efficient, next-generation fleets.
When anything is backlogged, it sounds like a negative thing, but the good news here is that manufacturers are now beginning production ramp-ups that had previously been delayed. In fact, recent reporting from industry consulting giant Deloitte suggests that the backlog reached its peak in 2018, and now manufacturers are poised to deliver about 38,000 new commercial aircraft in the next 20 years.
This growth will not be without engineering and design obstacles, but fulfilling all these backorders inevitably means more jobs, as well as more opportunities for outsourcing to reputable third-party suppliers who work with original equipment manufacturers (OEMs) and the aircraft makers themselves.
Mergers & Acquisitions are On the Rise
In order to meet the increased production goals required to break up the aircraft production backlogs, manufacturers in both the commercial and defense sectors are taking seriously the old adage “if you can’t beat ‘em, join ‘em.” Both company mergers and collaboration between different producers is on the upswing right now—and this extends down through the supply chain to makers of individual parts and components.
Indeed, cost-effectiveness and negotiating power often grow as a business gets larger, and consolidating with a competitor can sometimes be the best way to scale up quickly. As of late 2018, several key deals had been made for partnerships within the industry, and this kind of activity is expected to continue. Additionally, some of the most powerful defense contractors are expected to begin acquiring smaller companies in new markets and technology sectors.
Geopolitical Tensions Driving Defense Industry Growth are also Creating Challenges
If you pay attention to the news, it’s no secret that our world is in the throes of much tension between and within a large number of world governments. These troubles are compelling many nations to dramatically increase defense spending, as well as push ahead into the new frontier of space command and control.
As we talked about in a previous blog post, the United States is seriously considering adding a new military branch dedicated to space defense—often called Space Force in the media—and this idea is driving a sort of new global “space race” that has impressive economic potential. However, this situation will likely further pit individual countries against one another, which is bad for already-strained trade relations.
Looking again at those predictions from industry consultants, we see that trade-hindering factors like import tariffs on aluminum and steel may cause manufacturers to have trouble meeting their order goals for defense assets like missiles, rockets, and military aircraft and vehicles. Supply chain disruptions are considered likely at this point, and manufacturers will have to deal with potential profitability issues as raw materials become more expensive.
For more information about Fluid Conditioning Products, please visit their website: https://www.fcp-filters.com/.