For more than a century, the aviation industry has developed and brought about massive changes in both civil and military transport. Multiple aircraft have appeared including civil and military transport, regional and corporate plane and jets, helicopters, combat planes etc…
Avionics appeared with the electronic and IT era. The civil and military avionic industry brings together a wide range of complex systems and electronic equipment that contributes to aircraft piloting, passenger comfort or in the military field, operational missions (rescue, surveillance etc…). Due to the long lifespan of aircrafts and consequently its equipment, support and maintenance services are essential.
What does it mean to understand and anticipate a market in this type of field?
Avionics is an integral piece of the aviation industry which represents a major stake for the great historical powers and more recently the BRICS countries. By its structure, this market is intimately linked to geopolitical and international economic developments.
The evolution of threats and geopolitical crisis, globalization, economic growth and urbanization of society in BRICS countries, the evolution of oil prices and currency variations (euros, US dollars) are all factors to be considered in the evolution of markets and have a significant influence on customer strategies (aircraft manufacturers).
It is therefore important to understand the objectives and expectations of a very small number of customers, aircraft manufacturers, who are identifiable and spread geographically. These aircraft manufacturers evolve in an ecosystem with many players.
Firstly, states or countries with multiple roles (end customer, prescriber, financial source, regulator), aeronautical regulatory and certification authorities, then international funding bodies, pilot training organizations, universities and research centers, direct and indirect competition, and finally the end customer.
End customers can vary in nature: airline companies and their passengers for transport planes, companies and individuals for corporate jets and helicopters, armed forces for military aircraft… Understanding these ecosystems, the actors, their respective roles and weight, interaction between them are all essential elements in anticipating the market, as each individual, will influence at their level, the definition of the aircraft and its onboard equipment.
The opportunities of new aircraft or retrofits if limited in number and spread out over time.
Anticipating the market means anticipated these opportunities, often planned in great secrecy by the aircraft manufacturers.
Large international companies have an avionic purchase process with complex tender, purchasing and decision-making cycles. It is vital to have an in-depth understanding of the customer, their needs and expectations, and their organization, in order to anticipate and influence the tenders. This is based on quality relationships, established over time, at all levels of the company and constitutes a real partnership.
Based on the duration and complexity of projects, the quality of relations can help limit risks.
The limitation of risk is even more important due to the very long cycles.
It is common to work on call for tenders two to three years before the tender is even published, and the response and negotiation phases can take another few years. The project itself contains several phases: development (3 to5 years), production (20 to 30 years), maintenance (10 years). There is sometimes a mid-life retrofit phase also.
The length of the project cycle allows to quantitively anticipate the market for a 10-to-15 year period. However, it is important to distinguish between total or potential market and the accessible market for a given company.
While it is relatively easy to calculate the total fleet or production forecast for aircrafts for 10 to 15 years, it is essential to identify the portion accessible to a system operator. This depends on several internal and external factors, which must be assessed in addition to production forecasts for “acquired” aircrafts including:
- type of system and equipment required – some need to be double source, while others are at the discretion of the end customer
- geopolitical situation
- quality of prior and existing relationship with aircraft manufacturer
- applicable regulation
- level of suitability of the solution to anticipated needs from a technical and economic perspective
- competition
- etc…
Anticipation of the avionics markets involves multiple elements: economic, geopolitical, complex network of actors, regulations, technologies. It concerns macro-economic levels as well as an understanding of the end customer. The accessible share of the market is at the cross-roads of macro-economic analysis and project anticipation.
This can change significantly depending on external factors but also internal such as the ability to win a new tender. This is based not only on the quality of the relationship between the aircraft manufacturer and the system operator, but also on the suitability of the solution with the anticipated need, from a technical and economic standpoint.
