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Backlogs and balancing acts in the aerospace and defense industry

Portrait of Manfred Hader
Senior Partner, co-Head of Global Aerospace & Defence Practice
Hamburg Office, Central Europe
+49 40 37631-4327
24 febbraio 2020

Disruptive technologies and climate awareness are gaining altitude in the Aerospace and Defense industry

"Companies must decide which technology to focus on and develop a clear strategy to overcome specific challenges."
Portrait of Manfred Hader
Senior Partner, co-Head of Global Aerospace & Defence Practice
Hamburg Office, Central Europe

Technological disruptions in the Aerospace and Defense industry could transform the landscape beyond recognition in the near future. This combined with ongoing consolidation and pressure to reduce carbon emissions is pulling market players in many different directions. Roland Berger’s new study, “Backlogs and balancing acts – Aerospace and Defense Top Management Issues Radar 2019,” is based on surveys from 200 senior industry executives and reveals the greatest disruptions coming to the industry and the best ways to stay ahead.

The A&D industry is currently in a “supercycle,” largely on account of huge order backlogs, which are expected to continue for at least five years. As such, survey respondents from both OEMs and Tier-1 and Tier-2 suppliers consider manufacturing to the be the number one priority for the fifth year in a row. The second key focus is believed to be digital transformation, focused on facilitating greater efficiency and automation of production. Product strategy came in as third priority and supply chain as number four.

Market optimism has rebounded sharply over the past two years, with 61% of participants not expecting a downturn in the aerospace industry in the next five years. This is up significantly from the last two years (41% in 2017 and 52% in 2018), largely due to the ever-lengthening backlog of orders for single-aisle aircraft.

Disruptive technologies, vertical integration and increasing pressure on sustainability will drastically transform the A&D landscape.
Disruptive technologies, vertical integration and increasing pressure on sustainability will drastically transform the A&D landscape.

Climate awareness expected to take off

Growing climate awareness could be one of the major factors to threaten this positive outlook by increasing taxes and reducing demand for air travel. 91 percent of respondents believe that the need to reduce carbon emissions will certainly affect the industry, with 27 percent predicting a strong impact. This goes hand in hand with the belief that electrification, according to 29 percent of respondents, will be the greatest technological disruption in the near future.

“Electrification of aircrafts is a logical solution to reduce maintenance costs and alleviate the pressure of reducing carbon emissions, pressure which comes from both the public and governments,” explains Manfred Hader, Senior Partner, Co-Head of Global Aerospace and Defence Practice at Roland Berger. “But ever-increasing power loads and immaturity of some segments of technology are just some of the challenges that need to be overcome before electric systems can take wing.”

Widespread technological developments

Artificial Intelligence and autonomous flight are also expected to become major technical disruptors in the next decade. AI has potential to make supply chain management more efficient and optimize flight operation performance. But as with autonomous flight, regulation, public acceptance and immaturity of technology present key barriers to its widespread adoption. Other developments expected to push the A&D industry into new territory include electrically propelled aircraft, Alternative Jet Fuels (AJF) and urban air mobility.

Greater consolidation calls for focused strategies

Further consolidation and vertical integration are anticipated in the next decade, with 95 percent of participants expecting more M&A between Tier-1 suppliers and 94 percent expecting to see a rise in vertical integration. This could result in a handful of super-tier 1 suppliers delivering aircraft systems to OEMs, resulting in another significant industry disruption.

With the likelihood that disruptive technologies, vertical integration and increasing pressure on sustainability will drastically transform the landscape, executives must be ready and become more agile in order to stay ahead of the game; ideas which are explored in further detail in the Roland Berger study, “Backlogs and balancing acts – Aerospace and Defense Top Management Issues Radar 2019.”

“Companies must decide which technology to focus on and develop a clear strategy to overcome specific challenges,” says Manfred Hader. “Having the right operating model to then deliver on this strategy is the key to surviving the economy of the future.”

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Backlogs and balancing acts in the aerospace and defense industry

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Disruptive technologies and climate awareness are gaining altitude in the Aerospace and Defense industry

Published February 2020. Available in
Further reading
Portrait of Robert Thomson
Partner, Managing Partner United Kingdom
London Office, Western Europe
+44 20 3075-1100