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The aerospace and defense (A&D) industry continues to transform at a dramatic rate. This transformation is fueled in large part by digitization that permeates every aspect of the sector.

The rapid changes are happening in each part of the value chain, including R&D, production, supply chain and service.

There are five drivers of these transformation, each of which touches on several of those value chain areas. Together, they represent both challenges and opportunities for A&D companies.

1. Commercial demand

More than 3.5 billion passengers are expected to fly in 2016, according to the International Air Transport Association. a 6.5 percent increase over 2015. For 2017, passenger volume is projected to reach 3.8 billion, a 6.8 percent increase.

A&D companies are already responding.

Boeing projects that the global commercial airplane fleet will double in the next 20 years, from 21,600 aircraft today to 43,560 by 2034. Those figures equate to 38,050 new airplanes in that time, with an aggregate value of $5.6 trillion.

In late 2015, Airbus announced it was increasing its monthly construction rate of single-aisle jets from 42 to 50 in 2017 and 60 by 2019.

With that growing demand comes a likely production backlog. OEMs that provide operational excellence in manufacturing and supply chain will differentiate from competitors.

2. Digital products

The Internet of Things (IoT) is a significant disrupter in many industries. The IoT consists of products that are equipped with sensors, software and connectivity. These "smart products" can collect, store and send data; monitor performance and detect and in some cases repair problems.

Customers with high-cost assets today expect higher usage. To address this reasonable demand, OEMs are using sensor-based information to gain insights on products. As a result, downtime can be reduced and feedback provided to engineering teams.

Passengers, too, expect information at their fingertips as they navigate airports and airplanes. With digital products, companies can find partnerships and provide services not possible several years ago.

One example of innovative use of digital products is EasyJet, which partnered with London's Gatwick airport on what it calls the Mobile Host project. Combining data from airport and airline systems with indoor maps from Google, passengers get personalized updates. Information on airline gates, baggage drops/claims, and departure updates are pushed to passengers' phones.

3. Future workforce

The A&D workforce is changing creating significant risks to the industry. With the average worker age in the A&D workforce at 45, there is a looming retirement wave that will result in the loss of institutional memory and needed skills.

Companies need detailed insights into their workforce's abilities and skill gaps. They need systems that will help identify, recruit, train and retain the best employees to run businesses in a digital economy.

4. Environmental concerns

R&D resources are rising to innovate in engine development, energy and cockpit functions in order to improve fuel efficiency and reduce emissions. Other initiatives are focused on lessening the environmental footprint in other manufacturing and operational areas.

Airbus and Aerospace Valley, a French R&D cluster, announced in May 2015 four projects they would pursue with small- and medium-sized companies. The partners selected the four from submissions of projects focused on reducing aircraft noise, lowering emissions, bettering fuel economy, improving cabin eco-performance and efficiency, or developing alternative energies.

The four selected projects will explore new de-icing systems, improved jet fuel consumption, efficient airport ground movement and using biomaterials on cabin interiors.

5. Diversification

Shifting market conditions in defense are prompting OEMs to consider new revenue sources. Big Data, for example, allows for the collection and analysis of data that provides companies the opportunity to offer services previously not possible. By providing customers with outcomes and services, not just high-ticket products, companies can gain separation from competitors.


Up and down the value chain, A&D companies are recognizing the need to evolve. With digital advances, there are new possibilities for innovation, new revenue streams, and gains in market share.

With demand for air travel growing dramatically, an aging workforce and continued concern about environmental issues, A&D companies face myriad issues. Recognizing those challenges, and new approaches to business models and business processes, will undoubtedly lead to better and safer products and improved passenger experiences.

To find out more about Digital Transformation for the Aerospace & Defense Industry, click here.