Paris Air Show: Trade Tensions and the Environment Will Transform the Aerospace Industry
18 juin 2019
The Paris Air Show started this week, putting emphasis on the civil aerospace market. In times of heightened trade competition, what can companies expect from this global show? Are the market leaders declining? Interview with Rémi Bourgeot, associate research fellow at IRIS.
The 53rd Paris Air Show is taking place against a backdrop of trade tensions between the United States, Europe, and China. What are the stakes of this event for the civil aviation industry?
The industry has benefited from very large orders in recent years and from the spectacular expansion of air traffic, particularly in emerging economies. But while aircraft manufacturers can indeed be pleased with the state of their order books for the coming years, the ills of the global economy are directly affecting them at the same time. In addition to the usual and reciprocal criticism on the issue of public subsidies, and the ongoing corruption probe into Airbus in the U.S., global trade tensions promise to further complicate trade in the sector, between the United States and Europe, but also with China of course. And as we saw at the time of the global financial crisis, any slowdown in overall trade affects air traffic, particularly in the business travel segment, which is essential to airlines’ profitability and therefore to their aircraft orders. Thus, behind the optimism associated with the emergence of new markets around the world, with their business travellers and middle classes keen on tourism, there is palpable concern about the ups and downs of the global economy, trade tensions and the ongoing fragmentation of globalization.
In addition, environmental issues are leading to renewed efforts not only to increase efficiency in terms of fuel consumption, but also to move towards an alternative to the turbojet in the (much) longer-term. The electric aircraft is in its infancy, since we are currently talking about taxi aircraft prototypes, presented by start-ups, for very limited journeys. The development of electric airliners is currently based on a futuristic perspective, despite a fascinating and promising research effort in that area. The various electric aircraft technologies, particularly those based on hydrogen, face considerable (and exciting) challenges in terms of energy density and efficiency, size, weight, pressure, and overall aircraft design to address distribution issues that are significantly different from those in force today.
Nevertheless, the civil aviation sector is gradually being forced to emerge from a period of about three decades of very incremental innovation, relatively weak competition in the context of a global duopoly, very strong demand and a favourable legal and fiscal framework. The coming years and decades will require a more determined approach from industry giants such as Boeing and Airbus in particular in terms of innovation, to meet environmental requirements, the instability of the global economy, and deglobalization, of which the desired appropriation of major technologies by various world powers is now a key driver, whether in terms of information technologies or in a sector such as aeronautics.
Airbus and Boeing are in technological competition with their respective A320 and 737MAX aircraft. Faced with Boeing’s disappointments following accidents involving its model, can Airbus take the lead and gain market share at Le Bourget?
The crisis that Boeing has been going through since the two successive crashes of the 737 MAX has benefited Airbus in the short and medium-haul segment, where the European aircraft manufacturer is already dominant, indeed, and should consolidate its lead. Airbus is also seeking to fill a gap between medium and long haul (where Boeing still dominates, as evidenced by the discontinuation of the A380), by launching a transcontinental version of the A321, with a significantly increased range compared to the A320 family’s medium haul positioning. But Airbus does not escape certain limitations faced by the sector as a whole.
Aircraft manufacturers remain reluctant to launch truly new models in the most profitable segments. Over the past decade, there has been a tendency to favour models that have simply been improved or updated, often with new engines. This option was generally considered more reasonable from both a profitability and safety point of view. Boeing’s problems with the 737 MAX point to the limits of this trend, since the flaws in this version of the aircraft seem to be linked to the new engines, which have changed the balance of the aircraft. The software supposed to compensate for this situation seems to have failed to offer a reliable solution under adverse circumstances, particularly in the event of sensors failure. Airbus’s updated A320 family does not suffer from the very same flaws, but a common industrial logic appears to be at work, in the context of this global duopoly, which is not necessarily conducive to breakthrough innovations.
In addition, the fragmentation of design units and production lines poses problems of industrial integration. Boeing has suffered particularly from this issue in recent years, whether in updating an aircraft like the 737 or developing a new one like the 787. But this was also the case in Europe, with the series of issues that surrounded the very complex development of the A400M across the continent, in the military transport segment. The political will that now leads to the development of the Franco-German fighter jet is also likely to be confronted with these technological difficulties and issues of consistency in particular, the effects of which are often felt after a number of years and therefore tend to be underestimated by policy circles in the first place.
European and American aeronautical leaders see their duopoly competing with the arrival of Sino-Russian collaboration. How will this impact the aerospace market, where China is a key customer?
Over the past ten years or so, a number of projects have been developed in major emerging countries. These projects have focused on regional aviation up to the short-medium range segment in the case of Comac in China, inspired by the A320. While Embraer in Brazil (which is now in the process of launching a joint venture with Boeing) offers serious guarantees of reliability, in the regional segment, and is based on long-standing and established expertise, the Chinese challenge is quite different in nature. This is not so much about conquering the global market in a particular segment, but gradually offering a reliable alternative on its domestic market to Airbus and Boeing aircrafts. The announcement of joint projects with the Russian aerospace sector is of interest to both countries. The fragmentation of globalisation encourages this type of initiative. China remains highly dependent on European and American technologies, however, not only in the aviation sector, but in many sectors where the country is making rapid progress, while still depending on technological components and production systems imported from more advanced economies, in sectors as varied as the automotive and IT sectors. The question of developing a certain degree of autonomy in aeronautics, once a certain level of reliability has been reached, is a concrete one, but still appears to be a long-term project at this stage.