ADS Live 2021 brought together the UK’s aerospace, defence, security and space to discuss key themes for the sectors – resilience, innovation and opportunity.

Katherine Bennett CBE, Senior Vice President, Airbus, was ‘in conversation’ with Tony Wood, President, ADS & CEO, Meggitt to discuss the latest priorities for ADS and the industries. Kevin Michaels, Managing Director, AeroDynamic Advisory and Deborah Haynes, Foreign Affairs Editor, Sky News provided an international industry outlook, discussing the issues for the sectors and answering questions posed by members.

Kevin Michaels, Managing Director, AeroDynamic Advisory gave a presentation on some of the thoughts on the impact of the COVID-19 on the aerospace supply chain. He said the crisis was unprecedented in the jet age and recovery would be linked to global vaccine distribution and penetration. His insights included:

Cargo – a “bright spot”

Michaels said that air cargo activity recovered by the end of last year. “What’s happening now is that we’ve had an explosion of eCommerce and particularly online shopping across the world that has led to new distribution channels, new behaviours – we really accelerated online shopping.”

He said the supply chain and companies such as Amazon were using air freight over slower, less expensive transportation alternatives.

He suggested that cargo would experience further growth as economies recovered: “In normal times, cargo accounts for 12 per cent of airline revenues, last year it was 30 per cent, so definitely one of the bright spots in our industry today.”

Less twin aisles, more single aisles

Michaels predicted a shift away from twin aisles to more single aisles – a trend which would take four or five years to reverse. “So this means aircraft like the A321 are going to benefit, but we’re going to certainly see less production in the B787, and so forth and that is a real challenge of course for Rolls Royce.”

A recalibration of vertical integration strategies

Michaels said with the predominant trend of sales of companies and assets, vertical integration strategies were a “pendulum which has probably swung too far.” He added very ambitious plans that were in place before COVID were definitely being recalibrated.

What does it mean for the supply chain?

Michaels said that Tier 1 suppliers would restructure, taking a “right size” approach and pursuing mergers and acquisitions. He said: “I think we’re going to see the pursuit of scale without synergies really go away.”

Avionics and systems suppliers were least vulnerable to the pandemic, given their market diversification and aftermarket exposure.

But Michaels warned that sub-tier suppliers would suffer the most, with attrition particularly felt within aerostructures and interiors. He added this could lead to a potential unwinding of poorly constructed in Tier 1s.

He added diversified suppliers serving the defence or non-aerospace customers would be best positioned to weather the pandemic.

Missed the live event? Watch the whole ADS Live event here

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