Resiliency, innovation will dictate the future growth of the aerospace and defense industry

September 15, 2020

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By Scott Thompson

PwC’s recently published seventh annual edition of aerospace manufacturing attractiveness rankings comes during a period of considerable upheaval for the industry. Indeed, the global aerospace and defense (A&D) industry will likely look back on 2020 not only as a year of great disruption, but also as one that triggered profound reinvention. Ultimately, demand for commercial air travel (as well as cargo freight) will recover, but it’s still uncertain what that recovery may look like, and how long it may take. But it appears it will be an arduous climb back. Just consider that, before the crisis hit aviation disproportionately, the industry had enjoyed a growth rate roughly doubling that of global GDP for the past two decades.

No matter how and when future demand unfolds, one thing is certain: the pandemic has exerted the need for greater resilience and innovation – not only by companies, but also by public policy makers and local and federal governments – themes that resound in our report.

Our index – which ranks all states in the US as well as global economies in categories including cost, economy, geopolitical risk, infrastructure, labor, industry and tax policy — unveils myriad signs that global efforts to expand and deepen A&D ecosystems persisted in 2019 (and even into this year). Such efforts will likely do much to contribute to the recovery of the industry over the next three to five years. Certainly, a recovery will require the strengthening of traditional A&D highly ranked hubs such as Georgia, Ohio and Washington.  But it’ll also hinge on rising stars such as South Carolina, this year’s biggest gainer, soaring from a ranking of 29 last year to 14 this year on the wings of improved rankings in the index’s tax policy, labor and economy categories. It’ll also be bolstered by the arrival of new kids on the block elsewhere in the world, Just consider Japan, ranked five this year, buoyed by its redoubled efforts to become an emerging player in the small and medium passenger jet market.  Or India, which is making foreign direct investment more attractive in a bid to nurture its “Made in India” A&D program.

While this year has been a painful one for OEMs and the supplier network — especially for those furloughed or laid-off — 2020 may actually be the year that the industry can make real improvements. For instance, the current urgency is helping drive some companies to fast-track initiatives, such as greater adoption of automation and smart factory technologies, innovations in workforce and training, and rebalancing supply chains to make them more resilient.

Especially now, as the industry copes with stressors on numerous fronts, expanding ecosystems widen the options for all players in the industry: from benefitting via enhanced technologies (e.g.,  IoT-driven capabilities, automation, 3D printing technology and materials science) to seizing new opportunities to realign global footprints to introduce greater resiliency when the world requires it — as was made abundantly clear during the COVID-19 crisis. And, finally, commercial aviation players may need to approach the customer differently and accommodate new preferences, needs and expectations post-COVID-19.

Looking to our US findings, our ranking demonstrates that the US has strengthened its position as the world’s most important hub for production of both commercial aircraft and military systems. Going forward, the states that continue to support the growth of A&D clusters will likely continue to attract the domestic and foreign investment they need to sustain themselves through the COVID-19 recession and to continue at the forefront of innovation — not only in what they produce, but, just as important, how they produce. At the same time, the industry should attend to the perennial challenges of attracting talent and nurturing the next generation of engineers and shop-floor specialists.

As we see nascent signs of containment of the pandemic, all A&D players will do well to take actions on numerous fronts now to come out of this crisis – as well as to weather other future disruptions including economic, natural or even another healthcare emergency — with greater capabilities geared toward resiliency, efficiency and worker and customer safety.

Top 10 country/region rankings for aerospace attractiveness

  1. United States
  2. Singapore
  3. Canada
  4. South Korea
  5. Japan
  6. Australia
  7. United Kingdom
  8. Germany
  9. Switzerland
  10. Hong Kong

Top 10 state rankings for aerospace attractiveness

  1. Georgia
  2. Ohio
  3. Washington
  4. Texas
  5. North Carolina
  6. Indiana
  7. Arizona
  8. Michigan
  9. Florida
  10. California

For the complete rankings, please view the full report, 2020 Aerospace manufacturing attractiveness rankings.

©2020 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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