Aerospace conference focus: Risks to industry, suppliers

LYNNWOOD — Commercial aerospace is booming, but it isn’t without risk.

And that risk is being increasingly shifted onto suppliers, who have to figure out how to ride the industry’s projected growth without getting swallowed up by it or exposing themselves to production downturns.

Hundreds of industry insiders are getting together to discuss these issues this week in Lynnwood at the Pacific Northwest Aerospace Alliance’s 14th annual conference.

The world’s biggest airplane makers — the Boeing Co. and Airbus Group NV — delivered more jetliners last year than ever before. And both have plans to increase production even more based on market projections of strong and sustained demand into the 2030s.

To meet those rate increases, suppliers need to start ramping up their production lines now.

But what if oil prices stay low or interest rates rise or air traffic doesn’t grow as quickly as Airbus and Boeing expect?

“There might not be a need to ramp up to the extent they’re discussing,” said Richard Aboulafia, an aerospace analyst and vice-president of the Teal Group in Fairfax, Virginia. He is one of several industry experts scheduled to speak at the PNAA conference.

“So, if they don’t do it, who’s left holding the bag? Suppliers,” he said.

Older airplane programs, especially for twin-aisle planes such as Airbus’ A330 and Boeing’s 777 classic, are more at risk than newer ones, he said.

But if oil prices rise a little — to around $60 a barrel, interest rates stay down, traffic continues to grow and airplane makers “don’t go nuts, we’re looking at a dream market” generating $100 billion a year in revenue for several years, he said.

Fuel prices are low now, but airlines still are pushing airplane makers and suppliers to keep costs down.

In the modification and retrofit market, smaller suppliers might have an advantage, said Ken Herbert, a financial analyst with Canaccord Genuity Inc. in San Francisco.

“We predict higher growth for smaller suppliers as they are able to more nimbly meet the demands of airlines with smaller fleets that larger suppliers can’t justify,” he said in an investment research note in December.

Other speakers include executives from Boeing, Airbus, Embraer, and Spirit AeroSystems, and industry expert Scott Hamilton of the Issaquah-based Leeham Co.

Noticeably absent is Bombardier, which is struggling to bring its CSeries regional jetliner to the market.

Brad Lawrence, Esterline Technologies’ chairman and its former CEO, is scheduled to deliver the conference’s keynote speech on Wednesday.

The conference is the largest of its kind on the West Coast. Last year’s event drew 455 people from 270 businesses from around the world.

Companies can set up short one-on-one meetings with larger suppliers and airplane makers on the last day of the conference.

Dan Catchpole: 425-339-3454;; Twitter: @dcatchpole.

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