Market and Strategic Intelligence for the Advanced Composites Industry

Aircraft Interiors Conundrum

I recently returned from Seattle, Washington where the Aircraft Interiors EXPO Americas was held in conjunction with CompositesWorld’s High Performance Composites for Aircraft Interiors exhibition. The overall tenor of the events was relatively upbeat, with industry wide sales showing substantial improvements over last year and the year prior. The general upward trend in the industry should not be too much of a surprise for those who have read this blog, but coming out of the event left me with some sobering realizations for the composites industry.     I was pleased to be asked to be the opening speaker for the High-Performance Composites for Aircraft Interiors event. The opportunity not only provide me an opportunity to put some fresh thought into the factors that are shaping the application of composite materials in this sector as well as to meet a number of colleagues that I haven’t seen in a while – plus, I do truly enjoy public speaking and sharing some of my thoughts and insights. Relative to last year’s presentation that I gave (you can read my take on last year’s conference a couple of entries down “The Under Appreciated Aircraft Cabin”) organic growth appears to be closely correlating to the forecast that I provided.

I did not want to repeat myself, so I set off on trying to develop some “gee whiz” figures that could be useful ammunition for all of the companies represented at the event, as well as set the stage for all of the presentations about materials and applications innovations that followed. I updating myself on recent “interiors market” news and events I noticed that the cost of fuel continues dominate airline operating costs. One of the established benefits of advanced composite materials is their ability to reduce system weight, whether that be in the airframe, engine, or cabin. With jet fuel prices expected to grow at CAGR 5.4% over the next ten years, the cost per gallon could become 60% more expensive than prices today. With the emphasis on fuel burn reductions, the value of weight savings would seem to be at an all time high.

Today's commercial aircraft burn half as much fuel as their early predecessors

Since the 1960s, aircraft OEMs have been able to cut by half or more the amount of fuel burned in their transport aircraft products.

To underscore that point I performed an analysis of the fuel burn rates for the current fleet of commercial and regional transports. I started by identifying actual pilot reported values for specific models and variants of aircraft and correlated that information to the year in which the aircraft were introduced into service. The results were quite interesting. Based on data for 75 aircraft models and variants, expressed as fuel burn per aircraft seat-mile, since 1980 average aircraft fuel burn per seat-mile has improved:

  • Regional turboprops: 22%
  • Regional Jets: 35%
  • Single Aisle: 35% (NEO/MAX.C-Series 48%)
  • Twin-Aisle: 27%
  • Jumbo: 9%

The associated graphic here certainly substantiates the efforts of the aircraft industry to improve the cost economics of its products to the airline industry.

I went even further to try and develop a value for weight savings for all of these aircraft. I had done a more informal analysis of this kind for the Boeing B787 and the Mitsubishi MRJ about five years ago and was quite surprised at that time to find that 1 pound of weight savings could reduce an airlines fuel consumption by about $150 per year. At this rate the weight savings and resulting efficiency of the B787 compared to its predecessor more than justified the price difference.

While I was aware that this value for weight saved would be greater now than before, what I found was eye opening. Depending on aircraft size, age, propulsion systems and assuming that Jet A fuel cost airlines $3 per US gallon the annual savings for just one pound of weight saved could reduce airline operating expenses by as much as $715 per year! For single-aisle aircraft reducing weight by 1% could net an airline cost savings of $240-$1.6M per year. In-service twin-aisle aircraft could save as much as $2.4M per year, and jumbo jets could potentially save more than $5M each year.

At these rates, aircraft operators should easily be able to justify buying innovative product solutions at a cost premium to reap immediate benefits in operating costs. As long as fuel prices remained steady at today’s prices almost all of the composite solutions I have seen would provide a return on investment in a year or less – providing significant benefits for at least three or four years of service before being replaced. Armed with this sort of data, composite interiors suppliers should be scrambling to fill orders and growing at a rate much faster than what I have suggested in the past.

Mark Twain is credited with saying that the difficult part about writing fiction, unlike reality, is that it has to make sense. This appears to be  the case with my carefully made analysis of what should be motivating the market. While that data and conclusions that I presented were well accepted by the audience at the aircraft interiors event, when representative of the Boeing Commercial Airplanes introduced some much needed reality with a well placed questions. Attributing a remark to a top Boeing executive to the effect that aircraft OEMs needed to concentrate on reducing the price of their products to stay competitive, “How willing are airlines are to spend a little more on their interiors in order to achieve the costs savings shown in your data?” I have a couple of good examples to show that at least some airlines are willing to pay for those savings – after all its make great economic sense. Right? Perhaps my theory made too much sense to be true.

Many people subsequently expressed to me that, despite the credibility of my numbers, that they have a very hard time selling their products which offer such tangible results. It appears that most airlines expect innovation (that could easily mean the difference between profit and loss) to be given to them for freePerhaps it’s no wonder then that airlines only generated 1.5% profit on sales in 2012. There appears to be a considerable disconnect within airline management, purchasing, and operations. Maybe it has something to do business unit budgets or the innate political nature of humans and beaurocratic hierarchy, but spending a little in interiors updates and refurbishment to save a lot in operating costs appears to be a hard sell – especially considering that an airline doesn’t have to stay married to one solution or set of products for very long. One might tend to think that an industry that operates on such paper thin margins but has tons of cash flow would jump at the chance to double or triple their profitability – but then again, I might be wrong.

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