| Why Aerospace and Defense?
What is the Business Model?
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Aerospace and Defense
The aerospace industry "has become a catalyst for world trade, economic growth, international investment, tourism, and the unprecedented pace of globalization that we're seeing today."
We saw the surging civil aircraft market boost the aerospace industry in 2006, with total sales increasing to $184 billion and a record level for the third year in a row. Business travel has grown as companies become international in terms of customers, investments and supply chains.
Newspapers and aerospace trade journals are awash with headlines foretelling the continued growth of our industry and predictions for air traffic to double — or triple — by 2020. We're seeing the airline industry reinvent itself through new business models and restructuring, making everything from airline operations to maintenance and repair more efficient. …
In the Government market, I believe we’ll continue to see a strong military budget although perhaps not growing at the same rate. The DoD long-range budget forecast projects an increase from $432 billion in fiscal 2007 to $536 billion in fiscal 2012… While there seems to be increasing pressure in Congress and from the American people to bring our troops home from Iraq, I don't believe we'll see a situation that would call for any significant reduction in the defense budget as long as the security of the American people remains a crucial concern."
So almost everywhere within the aerospace and defense industry — from commercial markets to the military — things look relatively good.”
-Luncheon Speech to the AIA Supplier Management Council, July 25, 2007-
By Clayton M. Jones, Chairman, President & CEO Rockwell Collins
Business Model
Today the aerospace industry has the largest positive US trade balance of any industry in doing business in the global marketplace, thus transitioning from a domestic to an international industry over the last 10 years.
Primes and major subcontractors
- Have defined their core competencies in becoming system integrators
and outsourced everything else.
- Have drastically reduced the number of suppliers in their supply base.
- Suppliers now provide over seventy percent of the value of the product
and this trend is increasing.
- Are managing their suppliers with greater intensity and doing business
with the best suppliers providing the lowest cost.
- Are looking toward third world country suppliers because of their cheap
labor costs.
- Are depending on its suppliers for innovation to contribute to a
technologically superior competitively priced product for national and
economic security and sales in the global market place
- Have the responsibility to help develop domestic small businesses to
become world class through mentoring, cultivating preferred suppliers
and supporting small business R&D programs.
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