On a wing and a prayer? - Roland Berger...After flying high with strong growth in the past decade,...

On a wing and a prayer?Challenges and opportunities in the aerostructure supplier industry

January 2019

Management summary

After flying high with strong growth in the past decade, the commercial aircraft industry is altering its trajecto-ry. Production volumes will remain strong, but a lack of new programs mean that growth rates will decline. In addition, OEMs are starting to rethink their industrial systems and make-or-buy strategies.

As OEMs continue to squeeze shipset prices from sup-pliers, insource work packages or transfer them to emerging markets and limit suppliers' bargaining pow-er, suppliers could be left with overcapacity and serious pressure on margins. To avoid a hard landing and im-prove their competitiveness they must invest in automa-tion, new technologies and their global footprint. That in turn will open up new, business-defining opportuni-ties. A survey of top executives conducted for the 2018 edition of our Aerospace & Defence Issues Radar indeed identified aerostructures as an area with a high poten-tial for insourcing by OEMs and for consolidation be-tween supplier firms.

The resultant upheavals are bound to reconfigure the aerostructures industrial landscape. Suppliers therefore must proactively shape their future to secure a "sweet spot" in the changed market constellation.

2 Roland Berger Focus – Challenges and opportunities in the aerostructure supplier industry

Contents

1. Leaving cruising altitude ...........................................................................................................4 As growth slows in the commercial aircraft industry, OEMs

and aerostructure suppliers must rethink their strategies

2. Turbulence ahead ............................................................................................................................6 OEMs are looking to cut costs and control the market –

putting serious pressure on suppliers

3. Riding the storm ........................................................................................................................... 10 Suppliers must embrace change and reinvent themselves

to become indispensable

4. Into the future with a flying start ......................................................................................13 A proactive role in shaping consolidation will keep aerostructure

suppliers on the winning side

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Challenges and opportunities in the aerostructure supplier industry – Roland Berger Focus 3

The commercial aircraft industry has been flying high for some time, and order intakes are likely to stay at or around all-time highs for another couple of years. But change is com-ing and growth is slowing. OEMs and aerostructure suppliers alike must use the time to engineer a soft landing.

New orders in the commercial aircraft industry doubled between 2010 and 2014. Since then, order books have remained stable at or near to record highs, with roughly 13,000 aircraft still in the pipeline. Large commercial aircraft (LCA) programs – including the A320 neo and the Boeing 737 MAX, the A350 and the Boeing 787 – have driven much of this growth. As of around 2020, however, current planning figures indicate that the growth curve will flatten (see Figure A). This assumes a production rate of 60 aircraft per month for single-aisle programs as well as major aircraft programs, which will either slow down production (the A380 is a case in point) or stop altogether (like the Boeing 747). Only Airbus' smaller, single-aisle A220 (former C-Series) is forecast to see pro-duction increase continually in the years ahead. Other than that, no major new aircraft programs are sched-uled to get off the blocks before the middle of the next decade. However, existing programs could see a sub-stantial increase if the production rate 70 or 80 scenari-os materialize for the Airbus A320 neo and Boeing B737 MAX families. A

With large commercial aircraft constituting by far the largest segment of the civil aerostructure market (about 85 to 90% in value terms [in USD]), many tier-1 suppliers in particular have taken good advantage of the favorable conditions in recent years. As OEMs outsourced the bulk of aerostructure production, aerostructure tier-1 suppli-ers specifically built up capacity to accompany the ramp-up of the above LCA programs. They are still enjoying market growth rates of around 5%.

Substantial expansion of single-aisle programs, boosting production to 70 or even 80 aircraft per month,

will keep growth from grinding to a complete halt. Like their customers and other industry players, however, aerostructure suppliers must prepare for growth that could be as much as two thirds lower after 2020. This study examines how aircraft OEMs themselves are re-sponding to this changing scenario, the challenges that will confront aerostructure suppliers as a result, and what the latter can and must do to engineer a soft land-ing – or, better still, position themselves to make a flying start under changed market circumstances.

STUDY METHODOLOGYThe analysis and recommendations reproduced in this paper are based on a comprehensive market and competition model developed by Roland Berger. Figures for growth in the aerostructure market (in US dollars) are based on estimates of the number of aircraft produced and aerostructure value per aircraft. Aircraft production data was derived from pro-jected fleet growth and current order backlogs. The aero-structure value per aircraft was calculated by breaking over-all aerostructure value down into individual components (such as flaps and side shells).

Based on a thorough understanding of the demand and supply situation for each of the work packages, we then as-sembled the overall market model. This includes not only the status quo but also the changes in the demand and supply situation based on the sourcing strategies of OEMs, strate-gies of suppliers as well as as process, technology and ma-terial trends.

This model was backed up and enhanced by the findings from more than 20 in-depth interviews conducted with key aircraft OEMs and aerostructure suppliers in Europe as well as the Americas.

1. Leaving cruising altitude As growth slows in the commercial aircraft industry, OEMs and aerostructure suppliers must rethink their strategies


* Compound annual growth rate

* * Components may not sum to total due to rounding

CAGR* 2016-2026

[%]

1.9%

2.5%

20262025202420232022202120202019

67

2018

Forecast

60

2017

59

2016

60

A: The end of rapid growthDevelopment in segments of the aerostructure market, global market volume 2016-2026 [USD bn]**

2.0%

Rate 60

0.2%

3.7%

3.0%Rate 80

Rate 70

545252525150

52

482

4

1021

432

4

921

422

4

921

4423

820

Space

UAV

Business Jet

Military

Large Commercial Aircraft

Regional Aircraft

Scenario single-aisle rate 70

Scenario single-aisle rate 80

2

5

1021

2

5

1021

2

5

822

2

5

921

2

5

921

2

5

921

4

732

73 4

4

81

42

76

4

479

4

4

79

4

4

79

6971

7370 71 71 71

2

5

821

0.5%

4.8%

4.1%

1.7%

Source: CLIENT, Research, Market reports, TEAL, Roland Berger


To cut costs, shore up the global supply chain and gain great-er control of the market, aircraft OEMs are quite happy to clip the wings of their suppliers, if need be. Aerostructure suppli-ers must thus deal with lower growth, pressure on margins – and possibly a loss of business.

As major LCA programs tail off and growth is project-ed to flatten as of 2020, aircraft OEMs must naturally protect their interests and align with a changed set of market circumstances. Some of them are less profit-able than their suppliers right now, and are under in-

tense pressure from airlines to lower prices. To sharp-en their competitive edge and raise profitability, OEMs are thus moving to cut both internal costs and the cost of purchasing products from the supply chain. Airbus, for example, is committed to the Scope+ campaign, while Boeing's "Partnering for Success 2.0" (PFS 2.0) drive likewise targets cost (and hence) price reduc-tions in the company's major LCA programs.

In recent decades, the aerospace industry followed the lead given by the automotive industry: OEMs scaled back their own vertical integration, allowing suppliers to advance from build-to-print (BTP) to design-and-build (D&B) work packages. Of late, however, OEMs have expe-rienced delivery issues with some suppliers (affecting the A350, Boeing 787, A320 neo and B737 MAX programs, for instance), which has also been driven by the risk-shar-ing partnership model that transferred considerable re-sponsibility from the OEMs to their supplier firms – however, the RSP model did not always deliver the benefits to the OEMs or supplier firms as intended. Ac-cordingly, and driven by the need to cut costs and have a more balanced share of industry profit pools, they are now keen to regain more control of work packages they see as critical to aircraft performance (pylons and na-celles, for example) or that command significant after-market business (such as nacelles again). At the same time, they are looking to strengthen their bargaining po-sition and reduce dependency on outside suppliers.

TO MAKE OR TO BUY?All these considerations are prompting aircraft OEMs to rethink their make-or-buy strategies and insource activ-ities that they hitherto farmed out to aerostructure sup-pliers. Wings for the Boeing 777-X, for example, are now being produced back in-house at a brand-new, heavily automated facility. This trend means that future market growth will largely end up in-house with the OEMs, not in the hands of tier-1 suppliers.

2. Turbulence ahead OEMs are looking to cut costs and control the market – putting serious pressure on suppliers

Source: Roland Berger Contracted shipset price

P3

P2

P1

P0

PRICE PER SHIPSET

[USD]

DELIVERED SHIPSETS [#]

n 0 n 1 n 2 n 3

B: Downward pressure Evolution of shipset prices based on the number of units delivered


* Earnings before interest and taxes Source: Roland Berger

C: Fighting to remain profitableAerostructure (tier-1) EBIT* margins, 2014-2017

Average EBIT margin [%]

Highest EBIT margin [%]

Lowest EBIT margin [%]

2014 2015 2016 2017

8.1

4.2 4.15.8

16.6

-0.8

13.4

-26.2

15.9

-28.1

16.1

-9.8

For those work packages that will continue to be out-sourced, OEMs are adopting a more granular approach and also exploring the option of dual sourcing strate-gies. If the same work package is split 70-30 between two different suppliers, say, that again gives the OEM greater negotiating muscle. More than that, it helps them safe-guard a reliable supply chain and remain more flexible in the event of a production ramp-up. It also forces sup-pliers to compete with each other. Moreover, developing work packages in-house and then outsourcing them on a build-to-print basis adds greater transparency, limit-ing suppliers' potential to realize attractive margins.

MORE THAN A SPOT OF TURBULENCE FOR SUPPLIERS: PRESSURE FROM THE OEMSHaving upscaled to accommodate the LCA production boom in recent years, aerostructure suppliers now face the very real threat of being left sitting on overcapacity in the years ahead. As programs such as the A380 and the Boeing 747-8 are phased out, suppliers' dedicated production equipment will be left standing idle. Growth in the order of 5% is projected to decline to around 2% as of 2020 (in our base scenario with single-aisle produc-tion rates at 60 aircraft per month), partly due to a slow-er increase in production rates compared to previous


– India and Saudi Arabia in particular – have launched ambitious programs to build up their own aerospace and defense industries. They are doing this on the basis of local content and offset obligations, as well as by en-gaging with established OEMs and supplier firms in the form of joint ventures that operate local production in these countries. This development puts additional pres-sure on the supplier firms due to the rise of new suppli-ers in these emerging markets. In particular, the latter are often assisted by government funds provided on fa-vorable terms to cover their investment and non-recur-ring costs. These newcomers thus also reap the benefits of cutting-edge equipment. Although many of these supplier firms are initially established within the frame-work of defense programs, they very quickly also prog-ress to targeting the civil aviation market.

At least in the years from 2014-2017, tier-1 suppliers of aerostructures defended their margins fairly success-fully despite the pressure exerted on them by OEMs. They did so by streamlining their internal cost base, ex-ploiting economies of scale as they ramped up produc-tion to keep pace with aircraft programs, but also by re-ducing the cost of materials purchased from tier-2 suppliers and benefiting from favorable exchange rate effects. C

The problem now is that, having already successfully reduced costs within the supply chain in the recent years of plenty, it will become increasingly difficult to make further cutbacks in the comparatively lean years ahead. That said, OEMs' now-stronger bargaining position has undermined suppliers' ability to resist outside pressure to realize further savings. As a consequence, tier-1 sup-pliers have been ramping up production in low-cost countries and increasing automation. They have also reorganized their supply chain and are working with new tier-2 companies, e.g. in Morocco or India. D

years, and partly due to existing price reduction agree-ments for the work packages. As suppliers strive to be-come more efficient, this too will exacerbate the prob-lem of overcapacity as they can effectively realize the same output with less equipment. The capacity situa-tion is made even more complex by the fact that, before growth begins to flatten, demand for capacity will spike in the short term – for perhaps the next two to four years – on the back of a sharp increase in single-aisle aircraft production (A320 neo and B737 MAX).

On top of flatter growth, OEMs too are putting the squeeze on suppliers' margins. For aerostructure suppli-ers, OEMs' insourcing trend effectively reduces the size of the accessible market. Dual sourcing policies will likely further reduce even those work packages that they keep. Both of these developments will add to the burden of overcapacity for suppliers who potentially have less work to do. At the same time, pressure to cut costs will natural-ly also be passed on down the line. To take just one exam-ple: OEMs typically trade down the price per shipset (from tier-1 suppliers) after a certain number of shipsets have been delivered. These price reductions are either al-ready agreed in the initial contract or imposed during the lifetime of the contract (again via Scope+ at Airbus and PFS at Boeing). At the same time, OEMs are applying dual sourcing policies, which implicitly means that suppliers who didn't do a specific work package for an OEM up to now will be asked to do so in the future. B

Again with a view to cutting costs, OEMs are also moving toward giving supplier firms "build-to-print" products with similar technologies across different pro-grams. That is precisely what Boeing has in mind with its concept of the "focus factory", for example. The aim in adopting this platform-style approach is to leverage synergies of scale while also ensuring consistent opera-tional excellence.

Yet another OEM-driven effect on supplier firms is coming from emerging markets. Some of these markets


Source: Roland Berger

P6new

P5new

P4new

P3new

P3

n 0 n 1 n 2 n 3 n 4 n 5 n 6 n 7

P2

P1

P0

D: Continuous cost-cuttingImpact of pressure from OEMs on suppliers – example of shipset cost evolution

PRICE PER SHIPSET

[USD]

Yearly price reductions of 5 to 10%

Price reduction of 20 to 30%

Step change in production costs needed by supplier firm (e.g. new production

processes/automation, new materials, new

design)

DELIVERED SHIPSETS [#]

Step change in price reduction (e.g. stronger competition)

Contracted shipset price (existing work packages) Price of produced shipset

Required shipset price to contract new work packages New price of produced shipset


Stagnating markets, overcapacity, pressure on margins and customers keen to insource confront aerostructure suppliers with a daunting array of challenges. Before today's market growth begins its descent, they must embrace change and reinvent themselves to become indispensable tomorrow.

With the question of striking a balance between initial development activities and subsequent production largely taken out of their hands by OEMs, aerostructure suppli-ers must alter their business model. Above all, they must commit to industrial excellence, efficiency and innova-tion – three levers that affect and depend on each other, and that are key to generating sustainable profits in the future.

EXCELLENCEOEMs attach great importance to lower costs and reliable delivery, even when demand is at an all-time high. "On time, on cost, on quality", or OTOCOQ, sums up what OEMs expect of their suppliers, both for existing work packages and in the development and implementation of new technologies. Living out this doctrine – consistently delivering operational excellence, in other words – will help aerostructure suppliers stay one step ahead of OEMs' incessant demands for better service at lower cost.

EFFICIENCY To deliver such excellence at the right price and still make a profit, aerostructure suppliers must obviously also improve their internal performance. This will criti-cally involve investing in automation and innovative production processes as they seek to shed the overca-pacity described above and significantly reduce their own cost base.

INNOVATIONWith the market forecast to stagnate, makers of large commercial aircraft are increasingly looking for suppli-

ers whose superior inputs will enable them to sell better products than their competitors – and thereby win new orders. In the decades ahead, having innovative materi-als (e.g. thermoplastics), products (e.g. thanks to addi-tive manufacturing) and processes (e.g. resin transfer molding (RTM)) that others cannot compete with will be a good way for suppliers to maintain existing contracts and acquire new ones. Suppliers who do so will be well positioned to defend their work packages as a single source, become a preferred second source, pick up re-sourcing opportunities as they arise, and also be inte-grated in new programs going forward, for existing and new customers alike.

THE ROAD LESS TRAVELEDThese three levers can and must be flanked by suppli-ers altering their approach and, to some extent, open-ing themselves to a different growth trajectory. A good track record in working with a specific client, coupled with impressive technological capabilities, can be in-strumental in helping suppliers access major work-share packages when new programs (such as Boeing's NMA) come up. In particular, they should be looking to land packages (such as fuselages) where the outsourc-ing ratio is projected to increase in the future. In paral-lel, proactively approaching Airbus and/or Boeing with attractive proposals can be an excellent way to trigger and win major re-sourcing opportunities. The same strategy can also be used to acquire dual sourcing op-portunities (by being involved in the ramp-up of the A320 neo, the B737 MAX and the A350, for example). Be-yond these activities, supplier firms should also consid-er exploring work packages that are non-core business for the OEMs, or that the suppliers can provide more efficiently either as BtP or D&B* packages (e.g. supply-ing ready-equipped and/or integrated structures). This too can be a way of proactively creating and benefiting from outsourcing opportunities. E

3. Riding the storm Suppliers must embrace change and reinvent themselves to become indispensable

*BtP: Build-to-Print; D&B: Design & Build


The following areas of innovation (selected examples) can all help aerostructure suppliers position them-selves to profitably service the changing demands of their industry:

New automation solutions/Industry 4.0 Automated riveting is just one example of many solu-tions that will increase flexibility, reduce costs and ac-celerate production, resulting in higher quality, greater reliability and traceability. However, suppliers need to understand the technical aspects of automation en-

hancements: While greater automation is favored for many reasons (including safety, quality and cost), it sometimes necessitates the redesign of aircraft parts (which must be "designed for automation"). This, though, very quickly becomes a matter of economics, i.e. a financial decision. Given this situation, a solid busi-ness case and convincing arguments must be presented to the OEMs. Players who successfully rise to this dual challenge will give themselves an edge over their rivals

– and will stand to realize the full benefits of the new hope that is dawning for the industry.

E: Innovation to shape the futureImpact of new technologies on capabilities and efficiency

High

Low

HighLow RATIONALIZATION/INCREASED EFFICIENCY

NEW CAPABILITIES/INNOVATIONS

OFFERED TO OEM


Additive manufacturing

New bonding concepts

Automation/ Industry 4.0

Thermoplastics

RTM


aerostructures segment, major applications in the short to medium term will be for spare parts (to ease obsoles-cence management) and rapid prototyping.

SPECIALIZATION? OR GENERALIZATION?Embracing innovative production processes and materials in this way is already helping some tier-1 suppliers develop ca-pabilities and technologies that will strengthen their position at early (upstream) links in the value chain. Caution is ad-vised, however. Each supplier must think carefully about its strategy for the future: Do you want to specialize in certain narrowly defined technologies in which you foster a unique depth of expertise (like Boeing's "focus factory" concept)? Or would you prefer to cultivate a broad spectrum of capabili-ties across various materials and manufacturing techniques? The new technologies that are now becoming available can help suppliers improve their internal efficiency, deliver new capabilities and innovative products to OEMs, or perhaps even do both. For lack of a clear strategy, however, the dan-ger is that many existing suppliers may end up stuck in the middle, with neither the depth nor the breadth of expertise they need to stay competitive in the long term.

Resin transfer molding (RTM) Resin transfer molding lets suppliers avoid the heavy outlay of acquiring both automated fiber placement (AFP) machines and autoclaves – one of the major draw-backs in the current carbon fiber reinforced polymer (CFRP) production process. Dry fiber layups are placed into molds that are then infused with liquid resin. Out-of-autoclave (OOA) curing, as the name suggests, then eliminates the need to invest in autoclaves.

Thermoplastics Thermoplastics can be heated and returned to their initial form after an impact, for example – a property that can yield significant savings on maintenance and repair costs. Right now, these polymers are used most-ly for secondary parts (such as brackets on the A350 and the wing-leading edge on the A380). In the future, however, new welding and co-molding techniques will increase their importance for complex structural as-semblies too.

New bonding concepts These concepts can slash costs by reducing the volume of manual work, the number of assembly steps and the need for riveting, for instance. They can also facilitate less weight-intensive parts and even allow large mono-lithic structures (such as composite/CRFP doors) to be made "in one shot". In many areas, current composite parts and modules are still rooted in traditional design concepts (with composite panels riveted together, for example), so this field opens up vast streamlining po-tential.

Additive manufacturing/3D printing Long touted as the next big thing, market forces and greater technological maturity mean that 3D printing is now genuinely on the verge of a wholesale breakthrough, though certification issues remain to be resolved. In the


4. Into the future with a flying start A proactive role in shaping consolidation will keep aerostructure suppliers on the winning side

Lower growth/stagnation, dwindling market shares and the need to streamline operations and innovate will also prompt a wave of consolidation in the market for aerostructures. Suppliers must make sure they end up where the business is and the profits are.

Past waves of consolidation in the supply chain created a few dominant players but left the vast majority of the aerostructure market heavily fragmented. The top five players today account for about 50% of the market, the top ten players for 65% and the top 20 players for 75%. The aerostructure supply chain breaks down into four main segments: wings, fuselage, empennage and engine support. Wings and fuselage are the largest segments. But even here, the degree of fragmentation is clearly visible as individual players typically focus on specific segments. F

This time around, both horizontal and vertical con-solidation can take suppliers to the next level of value creation. The point became abundantly clear in the new-est version of our yearly Roland Berger Aerospace & De-fense Issues Radar, which drew on the expert opinions of more than 200 senior executives. Of these, 85% expect further consolidation among tier-1 suppliers. The pivot-al question for suppliers is: Which way to go?

BENEFITS OF HORIZONTAL CONSOLIDATIONHorizontal consolidation – essentially, acquiring or otherwise merging with direct competitors – can obvi-ously enable suppliers to broaden their customer port-folio. At the same time, it can streamline their asset base, facilitate economies of scale to improve profit margins, give them access to certain technologies by buying firms that master or are developing them, en-large their own footprint and, at the same time, trim down the competitive undergrowth. Suppliers keen on treading this path need to answer four key questions for themselves:

1. On what level of work package integration do we want to position ourselves? Do we want to deliver fully inte-grated assemblies or focus on specific sub-assemblies or components?

2. Do we also want to target additional OEMs?3. Who are those OEMs?4. Based on these criteria, who is the most

suitable partner?

BENEFITS OF VERTICAL CONSOLIDATIONOn the other hand, vertical consolidation can give sup-plier firms streamlined interfaces to important lower-ti-er suppliers. This in turn can give them access to (new) technologies that set them apart, increase their control over costs, quality and delivery, and also enlarge their footprint. In similar fashion, suppliers targeting vertical integration must ask themselves four questions:1. In light of current aerospace trends, what position do

we want to occupy in terms of work packages and the material mix?

2. What core competencies will we need in the future?3. Of those core competencies that are currently avail-

able, which ones can we develop organically and which ones will require a vertical partnership?

4. Again, based on these criteria, who is the most suit-able partner?

CHOOSING THE RIGHT BUSINESS MODELConsolidation in the aerostructure industry can lead suppliers down one of four roads: G

Centers of excellence possess in-depth expertise in pro-duction technology but do not have a strong focus on R&D integration. Suppliers in this category typically concentrate on technologies and products, operational excellence and striking a healthy balance between low-cost and high-cost production footprint in order to opti-mize their overall cost base.


F: Fragmented competitionSuppliers in the global aerostructure market, 2016 [USD bn; %]

Vertically integrated players are also strong on production technology but at the same time cultivate a sharp focus on R&D integration. These players interlock deeply with OEMs' R&D activities and are thus able to deliver inte-grated, end-to-end systems.

Engineering service providers have little knowledge of pro-duction technology but a keen focus on R&D integra-tion. Their R&D capabilities are impressive, and they can effectively support either OEMs or suppliers on other tiers across the entire development cycle.

Source: Market reports, Interviews, Roland Berger Market share:

Market size [USD bn]Number of main players

Wing

22.8 22.2 7.2 8.112 13 13 10

Engine supportEmpennageFuselage

0-5% 5-10% 10-15% 15-20% >20%

Aerospace Industrial Development Corporation

AERnnova

GE Aviation

MAGELLAN

AIRBUS

Premium Aerotec

GKN Aerospace

Mitsubishi Heavy Industries

SPIRIT Aerosystems

BOEING

Kawasaki

Northrop Grumman

STELIA

BOMBARDIER

LEONARDO

AVIC SHENYANG Aircraft Corporation

Triumph Group

FUJI Heavy Industries

Lockheed Martin

SAFRAN

United Technologies

Others


CONCLUSIONThe future is not what it used to be, as Paul Valéry fa-mously wrote. Players in the aircraft industry are no strangers to change. Yet the changes and challenges de-scribed by this study require different approaches, dif-ferent strategies, different business models to those ad-opted in response to past changes. In particular, advances in automation and new technologies now cre-ate opportunities to disrupt the existing market order, create entirely new organizations – and reap the benefits of excellence, efficiency and innovation for yourself. Those aerostructure suppliers that put themselves in the pilot's seat for change will ultimately be the ones who are cleared for take-off to a sustainable, profitable business future.

Commoditized suppliers neither have much production technology that differentiates them, nor are they partic-ularly focused on R&D integration. This group typically devotes itself to high-volume products with low value added. They are able to leverage automation and econo-mies of scale in production. However, they also face the highest risks, as OEMs can quite easily either force sup-pliers to compete based on a dual sourcing strategy or transfer the entire work package to another supplier firm.

Once the fundamental strategy and target position have been mapped out, a proven five-step approach can help suppliers tackle consolidation head on and successfully establish their new or modified organization:> Analyze the current organization and capabilities of

both firms, as well as the way they work.> Define exactly what you want the integrated organiza-

tion/company to be.> Plot a clear transformation path that will lead two sep-

arate companies from independence to integration.> Prepare a detailed master plan for post-merger inte-

gration, specifying the actions needed and identifying critical paths.

> Monitor and follow up implementation strictly, paying especially close attention to change management and communication.

Aerostructure suppliers that plot a clear strategy and proactively shape the wave of consolidation ahead can turn the coming changes to their own advantage. They can steal a march on their rivals and occupy one of the "sweet spots" in the future market constellation, suc-cessfully positioning themselves as a center of excel-lence, a vertically integrated player or an engineering service provider, for example. Done properly, any of these strategic orientations will avoid the trap of com-moditization and should lead to sustainable and profit-able business.

G: Choosing a business modelDifferent types of aerostructure suppliers and business models

CENTER OF EXCELLENCETechnology focusOperational excellence Efficient cost base

COMMODITIZED SUPPLIERSLow added value products with high volumeNo R&D involvement

VERTICALLY INTEGRATED PLAYERComplete system delivery with high level of R&D integration with OEM

ENGINEERING SERVICE PROVIDERHigh level of R&D capabilities

R& D I N T E G R AT I O N

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AUTHORS

Dr. Stephan BaurPrincipalAerospace & Defense+49 89 9230-8041 [email protected]

Manfred HaderSenior PartnerGlobal Co-Head Aerospace & Defense+49 40 37631-4327 [email protected]

Dominique GautierSenior PartnerAerospace & Defense+1 514 875 2000-212 [email protected]

More information to be found here: www.rolandberger.com

PUBLISHER

Roland Berger GmbHSederanger 180538 MunichGermany +49 89 9230-0www.rolandberger.com

WE WELCOME YOUR QUESTIONS, COMMENTS AND SUGGESTIONS

DisclaimerThis publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.

© 2019 ROLAND BERGER GMBH. ALL RIGHTS RESERVED.

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