Trends in the Commercial Aerospace Industry

Abstract

McKinsey’s prior work on the future of manufacturing discusses five broad trends that together are shaping the industries that make up the global manufacturing sector, ranging from automotive to textiles. These five trends are (i) demand growth, (ii) supply costs, (iii) business risk, (iv) technology and innovation, and (v) policy and regulation. Commercial aerospace, a roughly $300 billion global industry, is also affected by these five trends. Taken together, the trends presage a gradual shift of the global aerospace manufacturing footprint toward the Asia-Pacific region. The shift will serve rapidly growing local demand and respond to local government action that seeks to exploit a cyclical upturn in demand to attract investment in local manufacturing. Supply chains are already expanding in the region as Western incumbents build up capacity; as one or two new OEMs emerge from this region, particularly from China, local supply chains are likely to become deeper in capability as well. Given the long time investment (5–7 years) to build up capacity, the ‘nationally important’ status of the industry, and the risks that incumbents face in intellectual property, quality certification, and collaboration in both product development and manufacturing, these shifts in the aerospace footprint may continue to lag the footprint shifts of automotive and other manufacturing industries. But the shift to Asia-Pacific, already accelerating in the past decade, could speed up even more under two or three scenarios related to increased competition, pressure on profit margins, and expansion of digital capabilities in the aerospace value chain.