The aerospace and defense industry ecosystem contains:

 Players or companies that build planes, depicted under 'Develop'.

 Airlines/Airports who use these planes, depicted under 'Operate'.

 MROs or Maintenance Repair and Overhaul companies that provide repairs

and services, depicted under 'Maintain'.

Aerospace and defense value chain consists of three major segments such as:

 Develop
 Operate
 Maintain

Click/Tap the down arrow hotspots to understand these segments in detail.

Develop segment deals with design, manufacture and integrate parts, components, sub-
assembly, assembly to make an aircraft.

Develop segment deals with design, manufacture and integrate parts, components, sub-
assembly, assembly to make an aircraft.

Under operate segment the aircraft was used to fly passenger/cargo between airports.

Maintain segment deals with maintenance, upgrade and modify and completion of aircraft to
increase the useful life of aircraft.
The role of Airframer industry is buy the aircraft from airframer industry

Aerospace and defense value chain consists of three major segments such as:

 Develop
 Operate
 Maintain
The companies that come under develop segment are as follows:

 Tier Companies
 Aero Engine Companies
 Airframer

Tier companies design and manufacture aero structures, aero systems, interior commodities and
avionics components. They supply these to Airframer.

Aero engine companies design and manufacture complete propulsion system. They also take help
from Tier companies for engine parts and components.
Both Tier and Engine companies supply their final product to Airframer.

Few in this category are also referred to as Risk Sharing Partners (RSPs). Here, the companies
carry out their own Research and Development (R&D) and develop the product and supply to the
Airframer. The profits are shared.

Airframer

Airframer are integrators, who assemble the final aircraft. Airframer own the concept of the

aircraft and also manufacture critical parts. A single airframer can manufacture all the

aircraft, helicopter and Unmanned Aerial Systems (UAS). There can be airframer who is

dedicated to a single type only.

The companies that come under operate segment are as follows:

 Airline Operators
 Airports and Travel Intermediaries
 Air Navigation and Communication

Airlines, depending on the mission requirements, choose and buy the aircraft from Airframer.

Airports are places where airlines fly and park the aircraft.

Global Distribution Services (GDS) enables automated transactions between travel service
providers (mainly airlines, hotels and car rental companies) and travel agencies. It may also
help storage and movement of cargo.

Travel Agents and Travel Management manage travel, travel policies, negotiations with
vendors and day-to-day operations of travel program.

Air Navigation and Communication provide air traffic management, airport-related information, and

weather-related services to fly the airplane from point A to point B. 

The companies that come under maintain segment are as follows:

MRO, Modifications, Completions

Like any vehicle,

aircraft also

require periodic

maintenance,

repair of faulty

parts, and

overhaul.

Maintenance,

Repair, and

Overhaul (MRO)

industry ensure

that aircraft are

maintained in airworthy conditions to safely transport passengers and cargo.

Given the business potential and revenue growth of MRO industry segment, many airframer

and tier companies are now entering this segment. Aero engine companies were always

present in this market segment.

Once an aircraft is flown for a certain time duration, it needs maintenance. This

activity is carried out by an MRO organization in accordance with Part 145.

There are many airlines whose engineering division carry out MRO on its own as well
as other airline aircraft.  In addition, there are independent 3rd party MROs that also
carry out these activities including aircraft mid-life upgrades/modifications and
completion.

Let us have a look at the aircraft maintenance activities in details.

The airframer manufactures aircraft without any cabin interior.  The aircraft is delivered to a

completion center for interior outfitting. This is called aircraft completion.

When an older aircraft is changed to accommodate latest technology upgrades for better amenities or

changed for a different purpose, it is called as aircraft modification.

In other words, some MROs will have the ability to perform line and base maintenance on a

large variety of aircraft, others will be approved only to do line maintenance on a 737NG

type, while even others will only be approved for the overhaul of hydraulic actuators of a

given part number.

OAM deals with Tier1 supplier who later deals with Tier2 and Tier3 supplier.
OEM/RSP is responsible for major parts of an aircraft. These parts could be the aero engine,

large structures, and fuel system.

These companies can also be called as OEM in their respective category.

E.g. Rolls Royce is an Aero Engine OEM.

 Tier 2 supplier works predominately with Tier 1 supplier.
 Tier 1 supplier engage with Tier 2 supplier in the complete lifecycle of
sub-assembly/component development.
 Tier 2 supplier manufacture various sub-assembly/component and supply to Tier 1 supplier
for integration in the larger assembly.
 The specification of the sub-assembly/component is given by Tier 1 supplier or sometimes
OAM.
 Tier 2 suppliers depends on Tier 3 suppliers for manufacturing of sub-components required
for their products.

The aerospace and defense industry ecosystem contains:

 Players or companies that build planes, depicted under 'Develop'.

 Airlines/Airports who use these planes, depicted under 'Operate'.
 MROs or Maintenance Repair and Overhaul companies that provide repairs
and services, depicted under 'Maintain'.

The companies that come under develop segment are as follows:

 Tier Companies
 Aero Engine Companies
 Airframer

The companies that come under operate segment are as follows:

 Airline Operators
 Airports and Travel Intermediaries
 Air Navigation and Communication

The companies that come under maintain segment are as follows:

 MRO, Modifications, Completions

An airframer is classified as an Original Aircraft Manufacturer (OAM) who integrates

aircraft and assemble them based on the assemblies/systems supplied by lower tiered

companies, such as OEM/RSPs/Tier 1 Supplier, Tier 2 Supplier and Tier 3 Supplier.

 Original Aircraft Manufacturer (OAM) manufactures customized business jets (LJ,

Mid size, Super Mid size) as well as the interior commodities.

Tier 2 supplier works predominately with Tier 1 supplier. Tier 1 supplier engage with

Tier 2 supplier in the complete lifecycle of sub-assembly/component development.

Tier 2 supplier manufacture various sub-assembly/component and supply to Tier 1

supplier for integration in the larger assembly. The specification of the

sub-assembly/component is given by Tier 1 supplier or sometimes OAM. Tier 2

suppliers depends on Tier 3 suppliers for manufacturing of sub-components required

for their products.

The Aerospace industry is no different from any other

manufacturing industry, when it comes to the organization

structure. 

Costing, pricing, engineering, manufacturing, deployment,

aftermarket and accounting - are all interwoven within the A&D

organization.

The business units of an A&D company are organized around customer segments:

commercial

leasing

space

military

MRO
Typically most of the Aerospace companies operate in all the segments. There are
very few companies who are purely into the commercial segment.

An example of such a company would be, Bombardier Aerospace.

The Customer Segment

00:20
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The Customer segment, is typically organized based on programs, for example, 787, 737 and
so on, in Boeing. These are supported by the business functions, that cut across the business
units – Finance, Engineering, Supply Chain, Human Resources, Information Technology
etc.

The Challenge
00:24
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This matrix of different business units supported by different business functions, brings in the
challenges to CXOs and senior management for deploying and standardising process and
tools across the organization. Also, A&D companies have grown historically by acquiring
other big or small A&D companies. Thus further increasing the challenge to have an
integrated and standard organization.

All A&D companies are under pressure to transform the way they
do business.  A&D companies are transforming in three key areas:
Product Engineering
00:31

 Development and adoption of emerging and matured technologies through the right
Research and Development (R&D)
 Tracking program activities to ensure compliance to design, regulatory bodies and
delivery schedule
 Productivity improvement to ensure on time deliveries through automation, digital
technologies and driving the First Time Right (FTR)/the On Time Delivery(OTD) culture
 Providing the common software/infrastructural backbone for product development across
programs

Engineering & Technology, Manufacturing

00:29

 Productivity improvement to ensure on time deliveries through automation, digital

technologies and driving FTR / OTD culture.
 Evolve and improve manufacturing efficiencies for increased throughput, meeting the
quality and regulatory compliance requirements.
 Ramp up the production/assembly lines in an accelerated manner to be able to deliver
the huge back log of orders.

Maintenance
00:22

 Identification of accurate maintenance history

 Equipping the team with maintenance information 
  Reduction in time for aircraft inspection and use technology for minimum Aircraft on
Ground (AOG)
 Bringing various historical and operational data together and analyzing it to predict
maintenance needs

Inventory, Supply Chain and Procurement

00:25

 Real time visibility of inventory/material requirements to ensure optimized inventory

levels  at a minimum cost
 Improved collaboration with supplier – informed and involved on demand and time
lines
 Common IT and Engineering systems integration due to consolidation among Tier
companies

Human Resource Organization

00:13

 Engage and develop  human resources

 Evolve collaborative, revolutionary and trust based organization models
 Manage an aging workforce

Sales, BD and Marketing

00:20

 Improve visibility of the company’s capabilities, solutions and brand with the
customers
 Convert Voice of Customer into configurable product
 Ensure a high level of responsiveness and consistent delivery excellence in meeting
Key Performance Indicators (KPIs)

IT Organization
00:27

 Improve year on year operational excellence and efficiency to reduce Total Cost of
Ownership
 Comply to  security and regulatory requirements (ITAR/EAR/ANSI)  
 Tie business processes, people & operations together through Digital thread /
technologies
 Simplify IT environment
 Adopt Digital technologies to enable business value

Finance Organization
00:20

 Accurate and real time visibility, across the enterprise to make informed decisions
  Single report with enterprise wide transaction visibility and its impacts
 Growth opportunities such as new business models, acquisitions, improve operational
efficiencies

Product Engineering
00:26

 Development and adoption of emerging and matured technologies through the right
Research and Development (R&D)
 Tracking program activities to ensure compliance to design, regulatory bodies and
delivery schedule
 Productivity improvement to ensure on time deliveries through automation, digital
technologies and driving the First Time Right (FTR)/the On Time Delivery(OTD) culture

Engineering & Technology, Manufacturing

00:29

 Productivity improvement to ensure on time deliveries through automation, digital

technologies and driving FTR / OTD culture.
 Evolve and improve manufacturing efficiencies for increased throughput, meeting the
quality and regulatory compliance requirements.
 Ramp up the production/assembly lines in an accelerated manner to be able to deliver
the huge back log of

Maintenance
00:22

 Identification of accurate maintenance history

 Equipping the team with maintenance information 
 Reduction in time for aircraft inspection and use technology for minimum Aircraft on
Ground (AOG)
 Bringing various historical and operational data together and analyzing it to predict
maintenance needs

Inventory, Supply Chain and Procurement

00:25

 Real time visibility of inventory/material requirements to ensure optimized inventory

levels  at a minimum cost
 Improved collaboration with supplier – informed and involved on demand and time
lines
 Common IT and Engineering systems integration due to consolidation among Tier
companies

Costing, pricing, engineering, manufacturing, deployment, aftermarket and accounting

- are interwoven in and A&D organisation
The business units of an A&D company are organised around the following customer
segments:

 Commercial
 Leasing
 Military
 Space
 MRO

Typically most of the Aerospace companies operate in all the segments. There are
very few companies who are purely in to commercial segment only.
Customer segment is typically organised based on programs.

Matrix of different business units supported by different business functions brings in

the challenges to CXOs and senior management for deploying and standardising
process and tools across the organisation.

A&D companies are transforming in three key areas:

1. As companies expand their operations internationally, they are typically

developing new customer-facing capabilities in marketing and product support,
while also developing and supporting their supply base to ensure supply
continuity and security
2. Faced with the need to add increased value, reduce cost, and accept greater
program risk, companies are changing their business model internally and
externally. More focus on services and use of digital technologies to enable
services
3. As they focus on new technologies, materials and manufacturing processes,
many companies need to build new capabilities and skills

Traditionally, aftermarket services was part of the individual business segments,

however these days it is being carved out as a separate segment altogether. For
example, Boeing and Airbus

As A&D organisations reshape their portfolio of markets to secure growth, new investment
flows are emerging.
Supply chain failure continues to be viewed as a major risk for A&D organizations.
Investment in R&D, which will be massive, as A&D manufacturers start to compete on
innovation and new products or services.

A&D organisations are highly optimistic about growth prospects and are exploring
new and every possible opportunity of growth

As A&D organisations reshape their portfolio of markets to secure growth, new

investment flows are emerging.

Shaping the portfolio of product & services to enter new markets.

Supply chain failure continues to be viewed as a major risk for A&D organisations. 

Investment into R&D will be massive as A&D manufacturers start to compete on

innovation and new products/ services.

In the digital transformation of the A&D industry, there are technology enablers, such
as,

 Connectivity and IoT

 Cloud, Big data, Analytics, AI
 Factory of Future, wearables, MR and 3D Printing
 Collaboration and Social networks
 Cyber Security

Digital enables a change in Performance & Efficiency for existing and new products.
Technologies to watch out for in commercial aviation are:

 Flight Tracking
 Printed Engine
 Propfan Redux
 Managing Unmanned
 Supersonic Ambitions

Regulatory bodies, Air Navigation Service Providers and supporting industries are
developing technologies for full integrated operations across airspace

FAA New Regulation expected soon allows a single pilot to fly multiple small
Unmanned Aerial System beyond visual line of sight (BVLOS). 

ATM is a key linchpin.

Manufacturers of military unmanned aircraft enter commercial field.

There are eight new direction sin which the MRO market is heading. Namely:

1. Prescriptive maintenance
2. Predictive maintenance
3. Go Paperless
4. UAV
5. Training Needs
6. Interior Upgrade
7. Collaboration
8. Supply Chain Smarts

MRO:
MARKET FOR COMMERCIAL MRO WILL CONTINUE EXPANSION

$74.3 Billion is overall commercial MRO market in 2017 (up from 63.2 Bn in 2016)
Engine MRO demand strongest
Aircraft maintenance spending centred on narrow body aircraft

The slowdown in aircraft retirements due to lower fuel costs is driving MRO activities for
OEMs and tier suppliers. Additional shop visits for older airplanes will provide more
opportunity for cost-competitive third-party MROs.

AUGMENTED REALITY: Remote Assistance: Improving productivity using collaborative

tools
Immersive Technology for the worker of the future: The industry is facing a serious shortage
of work force. The AR/VR technology, will provide remote expertise on demand, from any
location. By using handheld/wearable devices, maintenance technicians in remote locations
can create a digital twin or send live videos/talk to supervisors, who in turn can guide them
through complex tasks.

IOT AND AIRCRAFT HEALTH MONITORING SYSTEMS:

The IOT enabled sensors continuously measure the aircraft parameters. The analysis of this
data is done for the aircraft health monitoring, thereby predicting the performance and
informing in case there are any faults, before it occurs.

This helps in reducing the aircraft AOG time drastically. Parts can be sourced and
maintenance for optimisation. The Possibilities are endless - increase operational and flight
safety, reduce flight cancellation.

PRESCRIPTIVE MAINTENANCE

Predictive analytics inform - ‘what will happen, when, and why’,

Prescriptive goes way further – it not only predicts what will happen, but it also offers the,
‘what if’ situation, to show how each event will impact the operations or the maintenance or
the AOG.
Prescriptive maintenance has the ability to revolutionise the MRO - It will be the asset tells us
how and when to repair an asset, explains to us what it needs, and how it needs it.