News & Publications
Opinion: Is Commercial Aerospace Ripe For Disruption?
28 March 2016
What would it take to build a new commercial aerospace ecosystem?
As SpaceX, Blue Origin and other space disruptors are on their way to making expendable launchers and $200 million satellite launches a thing of the past, one may wonder what the future holds for large commercial aircraft manufacturers Boeing and Airbus. Should they start worrying? How long will it take for someone to do to airplanes what SpaceX did to launchers?
Indeed, as the waves of the digital tsunami keep crashing onto the shores of the Old Economy, industries are falling off the cliff one after the other: Telecommunications, media, banking, retail. . . . Automotive is clearly next, with the advent of driverless cars and innovative mobility solutions that are likely to revolutionize ground transportation. Yet, amid this landscape of creative destruction, one industry seems to hold out against the invaders: commercial aerospace.
Looking at the way an airplane is made today, it seems incredibly complex and old-fashioned compared to other high-technology products: millions of parts, hundreds of miles of electrical wire, tons of machined and formed metal, thousands of suppliers making bits and pieces, spread out all over the globe. It suffices to look at the wing of a commercial jet aircraft during landing and notice the intricate network of pipes and cables that run through to get a glimpse of that complexity.
On the face of it, therefore, a large commercial aircraft is a very expensive product to build, with a steep learning curve and huge entry barriers. The Chinese are getting there slowly, but only by replicating what Airbus and Boeing are doing, and so they are unlikely to find themselves on a very different “cost curve.”
But could there be another, much more disruptive, way to break through? Today’s aircraft architecture is the result of years of incremental evolution that has added complexity, rigidity and cost to the manufacturing process and the product itself, and has hence continuously pushed prices upward. It is reasonable to assume that anybody starting with a clean sheet could do things very differently and so cut the cost of making an airplane at least by half. Three-dimensional printing is meant to change the economics of aircraft manufacturing; wireless connectivity and innovative materials can do wonders to make an aircraft lighter and simpler; and a more compact and integrated supply chain would also save significant time and money.
Assuming it is feasible from a technical standpoint, would it be financially and commercially viable? Could a new player realistically break the duopoly of Airbus and Boeing with a radically different approach?
To answer that question, one needs to consider the four ingredients of a successful venture: money, talent, business model and vision.
Money is not the issue. The recent accumulation of wealth by a small number of individuals and companies on the planet makes it plausible for one of them to fork out a few billion dollars in seed money for such an endeavor. A small percentage of Apple’s or Google’s treasure chest would do the trick. Furthermore, venture capitalists are looking for ever bigger bets in a world that is increasingly unpredictable and seems to have no upper limit for potential returns on investment. They would be more than happy to get involved.
Talent should not be an issue either. SpaceX and other “New Space” ventures have demonstrated that thousands of talented engineers would love to leave the bureaucracy and stuffy atmosphere of incumbent companies for the excitement of something truly new and visionary.
As for the business model, it would have to rely on a clear value proposition and well-thought-out market entry strategy, but with the right resources and processes there is no reason why what the Japanese achieved in the automotive industry in the 1980s could not be achieved by someone in the aerospace industry today. What will be needed, however, is a “system” approach, meaning that it should not only be about producing a cheaper airplane but also about creating a whole new ecosystem around designing, building and possibly operating airplanes.
And that leads us to the final ingredient: vision. The goal of simply making a cheaper airplane is not aspirational enough. To seduce investors, engineers, airlines and passengers, the vision must embrace something that stretches the imagination, something that could revolutionize the experience and economics of air travel altogether, with a level of ambition embodied by the aviation pioneers of the early 20th century. And that is probably the biggest hurdle of all: Nowadays, those visionary, charismatic and daring individuals are a rare commodity.