Is Aerospace Finishing Filled to Capacity?
As Boeing and Airbus demand more finishing capacity, the challenges faced by owners of finishing businesses are pressing, as both customers and regulatory agencies amp up demands for management attention and resources.
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The surface finishing industry is experiencing a business environment unlike anything seen in the last 20 years. The strength of today’s operating environment has led to outstanding revenue and profitability growth, allowing finishers to fully recover from the recession.
In particular, the commercial aerospace industry—through expanding build-rates for new plane platforms such as the B737, B787 and others—has created a substantial amount of additional work for machining and finishing shops throughout the country, providing a direct benefit to providers of anodizing, plating and thermal spraying.
But the challenges faced by owners of processing businesses are pressing, as both customers and regulatory agencies amp up demands for management attention and resources.
Supportive end-market dynamics, combined with a rapidly changing customer base and industry, have led to a dramatic increase in the number and valuation of mergers and acquisitions among private, family-held metal finishing companies.
In 2013 alone, we’ve seen Precision Castparts purchase Protective Coatings, as well as the Curtiss-Wright takeover of F.W. Gartner Thermal Spraying. In 2012, it was Triumph Group buying out Embee, Norman Hay taking over SIFCO Industries, Precision Castparts purchasing Southwest United Industries and Pioneer Metal Finishing acquiring Parts Finishing Group and Superior Metal Finishing, among others.
Traditionally considered a cyclical industry, commercial aerospace is in the midst of what industry experts call a “super cycle.” The introduction of new, more fuel-efficient platforms such as the B787—as well as increased demand from emerging economies such as China—has both Airbus and Boeing pushing the global supply chain to support increased build-rates.
According to a study by Deloitte, Boeing and Airbus had combined production delivery of 1,189 aircraft in 2012, the highest production level achieved in large commercial aircraft history. The report said the commercial aircraft segment revenues increased 16.1 percent in 2012, while defense segment revenues decreased 1.3 percent.
Price Waterhouse Coopers estimates that the long-term forecast for commercial OEM aircraft is more than 30,000 deliveries in the next 20 years at a value of around $4 trillion.
PWC estimates that the 1,189 planes delivered by Boeing and Airbus in 2012, an 18 percent increase over the record year in 2011, will balloon to 1,700 annually—a 40 percent increase.