Airlines are now transporting more passengers at better yields and s they climb out of the doldrums caused by the global economic slump, changes – with relevance for the FDI market – are underway. As an insider of the airspace sector, I want to share with you my finding on the FDI trends within the sector – specifically in the areas of aircraft manufacturing and maintenance and repair organizations.

The Aircraft Manufacture and its risk-sharing partnerships

It may seem that commercial airplane manufacturing is dominated by two global organizations (Airbus and Boeing) surrounded by a handful  of, for the most part, regional aircraft in Brazil, Canada, China and Russia. However, aircraft development and production has evolved. All major players have put risk-sharing partnerships in place – partnerships that develop and build significant components and subsystems. This approach, which means that any component might be built anywhere, generates logical challenges while simultaneously offering significant business advantage. The approach provides opportunity for companies using innovative production techniques to become part of the supply chain of much larger manufacturers. The use of global supply chains makes it easier to rapidly utilize and and industrialize research anywhere in the world. An example is the cooperation between EADS (parent of Airbus) and GKN Aerospace to develop production of complex 3D shapes from powder material.  This was made possible by university research centers that created the ability to create lighter structures with less parts. Another good example is Stork Fokker in the Netherlands.

Maintenance and Repair Organizations (MRO’s)

Airlines are backing off from earlier approaches that pushed manpower-intensive maintenance to low-cost countries. The current preference is to keep maintenance close to the airline bases, in order to increase the availability of the airplanes. Higher wages for staff are one consequence of this change. The higher wages are offset using smart maintenance programs that are defined between airlines, aviation authorities and MRO’s. A smart maintenance program can provide significantly improved efficiency – especially for aging aircraft,. An example: Gol, Brazil’s largest airline, and Delta Airlines TechOps have a defined a cooperative effort wherein Gol will benefit from Delta’s quality standards and efficiency, while Delta benefits from high quality, but low-cost, maintenance performed on the Boeing 737 fleet in Brazil.

Component repair is another booming business as companies focus on very specialized work packages. This relentless focus allows these companies to optimize their specific area of expertise resulting in high quality, rapid delivery. The result are compelling enough to outweigh the logistics of having components sent to and from a remote facility.

The world is getting smaller. As long as an organization can deliver quality products that meet industry demand, they no longer have to be geographically close to their customers. Consistent quality and guaranteed throughput much more important. The aerospace industry is among the leaders in taking advantage of this change.