The global aerospace industry is worth $170 billion, according to the Society of Manufacturing Engineers. The industry involves the manufacture of defense goods, including information systems, watercraft, aircraft and weaponry. It is a highly concentrated market that sells mainly to governments who require products for military purposes or spacecraft for federal space programs.

Aerospace manufacturing demand is driven by military budgets, the possibility of international warfare and airline traffic. The main success factors for companies in the industry are strong technical expertise and wise pricing of long-term contracts. Companies remain competitive by collaborating with partners and keeping costs down. Aerospace and defense manufacturing companies must collaborate with governments to remain compliant regarding regulations

In most industrial countries, the aerospace industry is a cooperation of public and private industries. For example, several countries have a civilian space program funded by the government through tax collection, such as NASA in the United States, ESA in Europe, the Canadian Space Agency in Canada, Indian Space Research Organisation in India, JAXA in Japan, RKA in Russia, China National Space Administration in China, SUPARCO in Pakistan, Iranian Space Agency in Iran, and Korea Aerospace Research Institute (KARI) in South Korea.

Along with these public space programs, many companies produce technical tools and components such as spaceships and satellites. Some known companies involved in space programs include Boeing, EADS, Lockheed Martin, MacDonald Dettwiler and Northrop Grumman. These companies are also involved in other areas of aerospace such as the construction of aircraft.

Aerospace manufacturing is a high technology industry that produces "aircraft, guided missiles, space vehicles, aircraft engines, propulsion units, and related parts". Most of the industry is geared toward governmental work. For each Original Equipment Manufacturer (OEM), the US government has assigned a CAGE code. These codes help to identify each manufacturer, repair facilities, and other critical aftermarket vendors in the aerospace industry.

Airlines are delivering weak profits in difficult times. In 2012, the industry made an aggregate profit of $7.6 billion. On revenues of $638 billion, that's a 1.2% net profit margin. That airlines made any money at all with GDP growth at 2.1% and oil averaging a record high of $111.8 a barrel (Brent) was a major achievement. To put that into perspective, in 2003 the industry was in the red, with oil at less than $30 a barrel and economic growth at 2.8%. Profitability is being delivered as a result of efficiency gains and improvements to the industry's structure. One illustration of this is that the average passenger load factor has increased by some eight percentage points over the last decade.

Of the three largest markets that together constitute 83% of global traffic, Asia-Pacific airlines continued to deliver the highest margins and largest profits, albeit profits that were lower than in 2011 because of the weakness of air freight. North American airlines generated the second-largest profits and improved their performance as a result of the efficiencies resulting from consolidation. European airlines only just broke even, largely as a result of the continued recession in the Eurozone.

During 2012, 65% of the growth in passenger numbers in international markets took place in markets linked to emerging economies. Travel within Asia accounted for just over half of this growth. Other important growth markets were between Europe and Asia and on segments connecting Europe and Asia via the Middle East. Markets from Africa to the Middle East and to Asia were also strong, reflecting the development of new South-South trade lanes. Another 23% of 2012's international air travel growth was generated within Europe, which looks odd given the severe recessions in many Eurozone economies. It should be noted that the European growth statistics include passengers originating in Russia, in central and Eastern Europe, and in Turkey, where growth remained considerably stronger than in the Eurozone.

Due to the high cost of specialized materials and intensive technological innovation necessary in the aerospace and defense industry, manufacturers need to bring down costs, boost productivity and cut the time it takes to get products to the market. The industry is becoming increasingly competitive on an international scale and is being hit by economic factors, which see governments trying to cut budgets, including defense spending. Mergers and acquisitions are an attractive option for companies seeking to become more competitive. Collaboration can help partnering companies speed up delivery of innovative products, while keeping the total cost of ownership down.

Read this article:

Global Aerospace Market