Kickstart Your Aerospace Career – The State of the Industry, continued

In the 15 years I’ve been in aerospace, everything has changed. And it’s still changing.

Airbus has FALs (Final Assembly Lines) and parts factories in China and the USA. It has significant design offices in Bangalore (India) and Wichita (USA). Boeing has a big design office in Russia.

Far more design work is outsourced to suppliers, often small firms, all over the work. Some is done for a fee, some on a risk-sharing basis (i.e. they are paid per aircraft sold).

Airbus (and Boeing, and the other major airframers) have moved towards the Integrator model.

High-value-added technical design and support work is outsourced to wherever, and the airframer manages it from a distance. (Boeing didn’t do this very well with the 787, hence have been talking about pulling more design work back in-house. However, economic and talent recruitment pressures will limit this.)

The driver for this is economic, not political.

The Baby Boomer factor

Western workforces, and western stock market investors, are ageing.

As early as 2000, industry trade magazine articles were warning that 25% of the aerospace workforce (in the US) would be eligible to retire by 2012.

It’s the same in Europe, and it’s the same across a lot of industries in the west.

These workers want to retire, draw their pensions every month, enjoy stable or steadily increasing returns from their investments. They also want to enjoy the healthy social welfare benefits for seniors that they voted for while they were of working age.

This requires:

  • aerospace companies to continue funding their pension funds, which have growing liabilities;
  • governments to continue taxing (and preferably taxing MORE) large aerospace firms;
  • aerospace firms to keep cutting costs everywhere possible, to meet pension, investor and tax obligations;
  • a steady, reliable supply of healthy young workers, to keep this Machine ticking over.

Well here we are in 2013 . . .

. . . . and I don’t have any figures to quote you as to how many have actually retired. I suspect it’s functionally less than 25%, since Boeing has a lot of new aircraft to design, deliver and support. With the US economy in poor shape, a lot of retirement-eligible workers have probably opted to continue working and earning while they still can.

Eventually, however, they will not be able to avoid retirement. (Unless someone comes up with a cure for mortality.)

The demographic and sociological trends are undeniable.

In the so-called Developed world:

1. Baby Boomers are starting to retire.
2. Birth rates are below levels needed to sustain the population. Many Generation X-ers and Y-ers have opted to postpone or altogether avoid having children.
3. The current crop of school- and university-age people are generally uninterested in the sciences and engineering.
4. The aerospace industry still has the skills and experience to design, certify and manufacture complex aircraft.
5. However, the vast majority of players in the aerospace industry are publicly-owned companies. They are owned by pension funds and ageing investors, who want to ensure that the dividends and share prices keeping rising. They are burdened by their own (sometimes underfunded) pension funds, which must now support a growing volume of retired and retiring employees. That places huge downward pressure on costs, including what they pay for the skills they need.

In the so-called Developing world, conversely:

1. The population distribution is skewed towards the younger end. (China being a notable exception.)
2. Birth rates are well able to sustain the population.
3. Post-secondary educational institutions are producing huge numbers of engineers and technical knowledge workers.
4. There is an urgent need to develop sufficient infrastructure to enable people to escape poverty and create wealth.
5. The aerospace industry is young, eager, growing rapidly, without the financial pressures of western aerospace firms
6. However, they are inexperienced. They need new projects and opportunities to develop their own skilled workforces.

It’s not hard to see the dynamic. If the major aerospace firms in the developed world are to meet their current commitments, they will HAVE to continue shifting high-value-added work to wherever they can find cheaper skilled labour. There just won’t be a sufficient supply of young, cheap, educated, and flexible knowledge workers in the west.

If you’re trying kickstart your aerospace career in the BRIC countries (Brazil, Russia, India, China), but also Malaysia, Indonesia, Vietnam, Mexico . . . . this is great news! (At the moment.)

It’s not terrific news if you’re trying to kickstart in Canada, the US, Japan or Europe. Though don’t lose heart, it’s not a showstopper. (More on that in a future post.)

The World is Flat

If you haven’t read it already, read Thomas Friedman’s The World is Flat. It paints the picture of what’s happened with most economic activity in the world. The book is not new anymore, but it’s still timely. The trends he illustrated are continuing to accelerate.

Aerospace typically runs behind this curve.

The conservative, highly-regulated nature of the aerospace business means that the industry generally lags new trends. Firms are slow to understanding the changes happening, slow to react to it, and slow to adopt new technology, etc.

There’s one good reason for that. Aircraft are safety-critical pieces of equipment. Himan beings have this irrational desire to want to arrive at their destination in one piece. They even want to arrive with all their baggage intact as well. (What nerve.)

As a result, any development that has the slightest potential to influence the safety of the aircraft’s occupants MUST be carefully assessed and tested before that influence can be allowed.

Applause, applause. We’re all in favour of that.

Unfortunately, that necessary conservative approach to safety tends to infect all other aspects of aerospace businesses as well. It can make them seem VERY old fashioned and antiquated to a young arrival fresh from university.

Aerospace will catch up. Don’t worry. The world is getting even flatter.

What does all this feel like for someone working inside an aerospace business?

I thought you’d never ask. We’ll go into that in the next post!

2 thoughts on “Kickstart Your Aerospace Career – The State of the Industry, continued”

  1. A great post and a really useful series for someone who is, slowly but surely, re-orientating their career towards aerospace.

    What impact, in your estimation, will the current investment in aerospace have? Much is being made of the UK aerodynamics catapult although the NCC in Bristol seems to get much less media attention. Are these going to achieve their aims?

    1. That depends on what the real aims are! I remember the announcement of the UK government’s investment in aerospace, but I confess I haven’t digested the detailed aims. So I’m not smart enough to make a confident prediction.

      My suspicion is that the motive for the announcement is overly political: Keep design and manufacturing of Airbus wings in the UK, in the face of competition from other nationalities within Airbus.

      Simply throwing money at a problem (no matter what the problem is) doesn’t solve it. You have to have the right people at the helm and at the coalface. You have to have a culture in place that is suitable to the accomplishment of your goals.

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