On the tarmac of Le Bourget two years ago, Airbus pipped Boeing to the post in the race for orders, and at last year's Farnborough Air Show we saw $123.9 billion of deals recorded. As we see OEMs (Original Equipment Manufacturers) gradually take more control of the aftermarket, and major shifts in the global geopolitical order begin to transform the balance of the industry, this year's show could set the tone of the market for the next five years.
Here are the key topics that I predict will take center stage at the 52nd installment of the International Paris Air Show:
Boeing and Airbus have been moving away from the pure OEM play to become systems integrators and service providers. This is no more apparent than in the aftermarket.
Paris will see a rise in deals conducted on service models like Power-by-Hour contracts - likely to make up 60-70% of the deals. While such engine leasing models are not a new concept, they have proliferated widely throughout the industry in recent years. OEMs can realize profit much earlier in the lifecycle, while airlines receive a cheaper deal over the lifecycle of the engine. Keep an eye out for Rolls Royce who up to this point has been leading the charge here.
Continued political instability in the Middle East and Asia and the announcement by President Trump of a further $54 billion to the U.S. defense budget has been a huge boost for the defense industry, while shifting alliances have led to a more open global market. Previously seen as too closely affiliated with Russia, Indian manufacturers are now benefiting from renewed traction with U.S.-aligned markets. Israel now sends more than 50% of its defense export to India highlighted by the recent record $2bn deal between the two governments. Elsewhere, Rolls Royce recently completed a deal for the MTU Series 4000 engines to be assembled by a part of the Indian Ministry of Defence.
With India's power as buyer and manufacturer now highly regarded by western and developing markets alike, we could well see new and substantial contracts on the table.
Possibly the most prominent disruptive technology for the A&D (Aerospace & Defense) market is additive manufacturing and the possibilities it presents to streamline production lifecycles; printing, prototyping and testing highly complex components in-house at great speed.
Boeing has used the technology to consolidate its design of the F/A-18 E/F forward fuselage into 41% fewer parts, realizing a ripple effect of savings throughout the supply chain. Companies are also realizing big operational benefits, exemplified by next generation aircraft like the 787 and the F-35, which garner huge weight savings that incorporate new, lighter materials. While the industry's strict accreditation standards are a barrier to its application on more critical systems, Paris will certainly be abuzz with the latest advancements of this transformative technology from new and innovative market entrants.
With soaring demand for aircraft and production volumes, OEMs have a renewed focus on driving efficiency gains through automation across the supply chain. They are already realizing benefits in each of the three lifecycle areas - design, manufacturing and the aftermarket.
The challenge is for OEMs to move away from these three islands of automation to integrating digital transformation efforts across all them. For example, harnessing predictive analytics and the Internet of Things in the aftermarket to detect defects in products and have these automatically fed back through the supply chain to the ongoing design and manufacture of that component. We could see OEMs looking into new developments and suppliers, as they look to operate their whole supply chain on a single augmented platform.
One of the most intriguing areas of observation at Paris will be movement from the Chinese aerospace industry players as they look to gain a greater foothold in the sector. With new platforms like the C919 set to launch, it will be fascinating to see how they enter the market. For China, the demand lies in newer Asian and African markets such as Indonesia and Nigeria. But the true threat they pose to the U.S. and European establishment lies not in the platforms themselves, but rather in the commercial models by which they are sold. With aggressive pricing and by leveraging their large cash surplus to upend current leasing models, new models could transform how companies buy and sell aircraft.
It will also be interesting to watch their acquisition strategy. We saw Chinese acquisitions of European manufacturers last year and Le Bourget could see more activity from them. That said, you'll need to keep you ears to the ground as they may not be widely publicized.
This year's International Paris Air Show promises to be yet another dynamic spectacle. It will be fascinating to see how these developments play out at Le Bourget and if new markets and technologies continue to upset the status quo.