Saturday, May 19, 2007

What I learned from Richard Aboulafia today

I was reading James Fallows's blog earlier today when he referenced, without naming, aviation writer Richard Aboulafia. As it happens, a Google search reveals that Aboulafia has a good archive of articles on the aviation industry. You could say he has a blog, too, but it's really just a list of his newsletters.
Here are a couple interesting exceprts of some of his articles.
On the near total absence of start ups in the aviation industry:
Sino-Swearingen’s success as a small, independent market entrant is quite noteworthy. Since 1960, only one other all-new company—Embraer—has succeeded in entering the market for jetpowered aircraft.... The military side of the industry is even tougher on newcomers. There have basically been no new military aircraft market entrants in many decades. (whole article)
Airplane manufacturers Cirrus and Eclipse have, of course, recently started up and disrupted the consumer market status quo by designing safer, more efficient, and faster planes, but these companies don't face the enormous costs required of building larger aircraft.

On the big business of fighter jet exports:
Teal Group forecasts a market peak of $17.5 billion in 2011, up from $13.5 billion in 2004. Overall, we anticipate production of 3,032 fighters in 2005-2014, worth $151.1 billion. (whole article)

And in an article published just last week, Aboulafia documents how the A380 disappointment(s) have hamstrung Airbus executives, who now need to scrounge for cash and invest in their wide-bodied A350 WXB to compete with Boeing's white hot 777 and 787. The A380 has finally launched, but orders never really materialized, despite the billions invested in R&D, and instead of facing a once-anticipated period of reduced R&D costs and rising profits, the company must sustain its potentially unsustainable investment spending of the last decade. Currently, their plan is to finance the new A350 by cutting 5 billion euros in operations costs by 2010, but success depends heavily on how well executives can navigate the company's unique organizational structure, which is a veritable minefield of internaional political problems. Read the whole article!

No comments: