Hope on the horizonA study of the aerostructure tooling marketSeptember 2018Management summaryThe aerostructure tooling market has seen some dra-matic developments in recent years. Back in 2012, when we published the first dedicated Roland Berger study of the aerostructure tooling market, industrial production of both the nullnull and the Bnullnullprograms had begun and was at the ramp-up stage, creating a somewhat stagnant market. By 201null things had taken a more positive turn, with further increases in production rates for the two programs mentioned and the strong ramp-up of the null20neo family and the Bnullnull nullnullcombined with the first signs of increased automation. nullre recently, new hope has appeared on the horinulln. nullnull have an -nounced further rate increases for legacy programs and we are seeing the development of potential new aircraft such as the Bnullnull nullven these developments and the rapid advances in automation technology, we believe that the time is ripe for a fresh look at the market.nullor this new 201nullstudy we carried out a wide range of interviews with industry insiders to gain the latest in-sights into the market. nulle updated our tried-and-tested model of the aerostructure tooling market. nulle also revis-ited the three key drivers that have the most impact on the aerostructure tooling marketnullnew programs, ramp-ups, and continuous spend, which includes penetration of automation. nulle ran a sensitivity analysis to see how market sinull nullcalculated to be nullnull2.nullbillion in 201nullnullwould react to a further increase in production rates, the emergence of new aircraft programs and the increased penetration of automation. nullombining these three drivers in different ways allows us to draw up three different scenarios for the market. The first serves as our base case and assumes rate in-creases and new programs that have been announced by nullnull, plus a moderate long-term automation penetra -tion rate. The result is forecast annual growth of nullnullper -cent in 201null2nulland a total market sinull of nullnull2.nullbillion in 202null1. The second, nullnhancednullcase is an optimistic yet feasible scenario. null foresees further rate increases for best-selling platforms and increased automation, driving continuous spend. The result is annual growth of nullnullpercent and a total market sinull of nullnullnullnullbillion. The third, a manullmum nullggressivenullcase, foresees multi -ple manullr new programs, such as new middle-of-the-market and nenull-generation single-aisle aircraft, com -bined with faster penetration of automation. The result is annual growth of 11.nullpercent and a total market sinull of nullnullnull0 billion.nullich scenario is most likelynullnulle believe that the base case will certainly be realinulld, with the enhanced case a possible upside scenario nullassuming that the current market dynamic does not slow down, rates continue to increase and automation is the key market driver in the coming years. Tooling demand for new aircraft pro-grams and production rate increases are mainly driven by nullnullnulldecisions, so the pivotal aspect for suppliers is likely to be automation. nulluppliers should position themselves at the forefront of automation, not nullust mas-tering the technical aspects of automation but also crafting a solid business case for convincing nullnull to buy automation enhancements. nullayers that rise to this challenge will be in a strong position to profit from the new hope for the industry.1 nullll growth rates and all absolute numbers shown in this study are nominal, i.e. not inflation-adnullusted2 Roland Berger Focus The aerostructure tooling marketContents1. The story so far . 4New hope on the horizon after years of stagnation and consolidation2. What's driving the market? . 9Rate increases, new aircraft programs and greater automation 3. Developing market scenarios . 11Increase of production rates vs. early development of new single-aisle aircraft4. Where do we go from here? . 14Extent of automation increase will determine growthCoverphoto:lvcandy, koya79/istockphotoThe aerostructure tooling market Roland Berger Focus 3null first sight, aerostructure tooling appears to be some -thing of a niche market. Take a closer look, however, and its key role in the production process for every new aircraft that is born soon becomes clear. nullerostructure tooling is what has made modern aircraft production at industrial rates possible.null Roland Berger we continuously monitor the devel -opment of the aerostructure tooling market. nulle have witnessed a dramatic development over recent years. nullhen we launched our dedicated study of the market back in 2012, industrial production of both the nullnull and the Bnullnullprograms had begun and was at the ramp-up stage. nullll manullor decisions about investments in pro-duction enulluipment had been made. The time horinulln for the development of new programs was far from clear as the entire industry was occupied with these two pro-grams. nulls a result, our forecast for the development of the industry was rather pessimistic.nullen we revisited the market three years later in 201null things had taken a more positive turn. This surprising development was mainly due to further increases in pro-duction rates for the null20neo family and the Bnullnull nullnullprograms, combined with the first signs of increased automation fueling the nullpgrade and enhancementnull market for enullsting production lines. But this was still early days for new production methods based on robot-ics and artificial intelligence nullnullnullnull. nulls yet, there was no sign of the dawning of a new age of automation.nullorecasting the market in 201nullwas even more diffi -cult than in 2012. null our 201nullstudy we introduced a detailed model based on market drivers and using a sce-nario methodology, which allowed us to assess how the market was likely to develop. nullr scenarios for the peri -od 201null202nullranged from 0.nullto null1 percent growth a year. nullr conclusion was that a further increase in the production rate for single-aisle programs would stabi-linull the market in 201null2nulland lead to growth of three to four percent in the years 2021nullnull CONSOLIDATION AND CHANGES IN THE MARKET LANDSCAPEnulls we have seen in the aerospace market as a whole and subsegments of it, consolidation has also been observed in the tooling market over recent years, most notably with the takeover of nullnull systems nullerospace nullorth nullerica by nulldvanced nulltegration Technology nullnullnull The trend is being driven especially by nullnull and large aero -structure suppliers who are looking for a simplified sup-ply chain and more turnkey solutions, which only larger companies can offer. nulle estimate that the top ten play-ers in the market accounted for a market share of around null percent in 201null nulle enullect to see this market concen -tration further increase through consolidation. ABut despite the uncertain outlook of recent years owing to the lack of new programs and strong ramp-ups, there is hope on the horinulln. nullontinued rate increases in 1. The story so far New hope on the horizon after recent years of uncertain outlook“Everyone under-estimates the market. History has shown that the market has countered all the forecast downturns.“CEO of a leading tooling supplier4 Roland Berger Focus The aerostructure tooling marketA: A history of consolidation Top ten players and total aerostructure tooling market, 2016 (USD million)The aerostructure tooling marketAs in our 2012 and 2015 reports, the definition of the aerostructure tooling market* that we use covers the following:Automated production systems: Fastening systems and composite systemsAutomated assembly systems: Stations/lines and conveyor systemsSmall tools: Hand-power and manual tools for aerostructure assemblyServices: All services related to aerostructure tooling* Single metal part production systems are excluded from the study.Source: Counterpoint; Roland Berger; press research; websites; interviews* Including KUKA North America and NovatechAITUSA350*15013610070614735 35Broetje- AutomationGermanyElectro-impactUSAAscent AerospaceUSASpirit Aero-SystemsUSAJanicki IndustriesUSALatesysFranceHyde GroupUKPremiumAEROTECGermany125MTorresSpainTOTAL MARKET:2,2301,110 (50%)Top 10 players1,120 (50%)Rest of the marketThe aerostructure tooling market Roland Berger Focus 5“The market will continue to grow. The golden age is gone though as the 787 and the 350 had required massive investments to produce composite parts.“CEO of a leading tooling supplierrates, the nullnited nullingdom and the nullnited nulltates. nulle used our tried-and-tested model of market drivers to assess the current market.The basis for our market assessment is global air-craft production figures. The model includes all manullr civil and military finulled and rotary-wing aircraft pro-grams currently in production. null also includes future programs, most importantly middle-of-the-market and nenull-generation single-aisle aircraft programs from Boeing and nullirbus, and manullr new military programs such as nullorthrop nullummannull B-21 Raider program.nullor this yearnull study we revised our modelnull primary and secondary drivers. nulle defined the four primary drivers as followsnullfurther rate increases for legacy pro -grams, new programs, continuous spend that especially includes increased automation, and service business. The secondary drivers that support long-term growth were as followsnullnew production technology, new tool -ing competitors entering the market, industrial enullan -sion, and dual sourcing strategies pushed by nullnull. BSCENARIOS GIVE GUIDANCE IN AN UNCERTAIN ENVIRONMENTnullr interviews with global industry enullerts revealed un -certainty about the future development of the market. Their views ranged from fairly pessimistic to fairly optimis-tic. There is a shared view in the market that the develop-ment of new programs is usually the null driver for the aero -structure tooling market, followed by ramp-ups. nullwever, as no manullr new programs are enullected in the nenull five years, spend for automation, build process enhancements and tooling replacement will be the key market growth driver in the years to come. nulls such, the pessimists viewed the golden age as over, with the nullnull and Bnullnullprograms firmly in production mode, ramp-ups of the null20neo fam -ily and Bnullnullnullnullwell advanced, and new programs still some years off. The optimists believed that automation would increase its penetration, rates would increase fur-single-aisle programs, advances in production automation and the rumors that Boeing will be going ahead with the development of the Bnullnullto bridge the gap between todaynull single-aisle and wide-body markets with a nullew middle-of-the-market aircraftnull have fueled hope in the industry that a new era of growth lies nullust around the corner.nullth changes in the market landscape and a new dy -namic in market development enullected, we believe that the time has come to update our assessment of the mar-ket. The results, presented in this paper, are based on insights from our interviews with industry enullperts around the globe and an update of our proprietary mar-ket model. nullgure B on page nullgives a detailed discus -sion of our methodology. STUDY METHODOLOGY: EXPERT INTERVIEWS AND RB MARKET DRIVER MODELnullor the purpose of our study, we conducted interviews with industry enullects in nine countries in all manullr aerospace and defense regions, namely Branulll, nullanada, nullina, nullance, nullermany, nullain, the nullnited nullab nulli-6 Roland Berger Focus The aerostructure tooling marketB: 2018 Roland Berger market driver model Cascade of drivers shaping the aerostructure tooling marketSource: Roland Bergerther and even that new aircraft programs would be an-nounced, taking the market to new heights. nullven this uncertainty, we decided to focus on enullmin -ing the key primary drivers in detail and seeing how the market forecasts reacted to changing the assumptions for those drivers. Based on this sensitivity analysis, we then developed various market scenarios by combining the key primary drivers. nulle also revised our market seg-mentation into four categoriesnullnew tooling develop -ment, rate tooling, operational services and continuous spend. The nullase casenullbelow is built on the assumption that the announced production rates for civil and mili-tary programs will be achieved, the Bnullnullprogram and nullorthrop nullummannull B-21 Raider program will be the only new aircraft programs and the penetration rate for automation will be moderate nullee nullction nullfor detailsnull The resulting forecast is nullnullpercent annual growth in the years 201null2null CSECONDARY DRIVERS of the aerostructure tooling marketNEW TECHNOLOGIESNEW TOOLING COMPETITORSINDUSTRIAL EXPANSIONDUAL SOURCING STRATEGIESUNDERLYING DRIVERSof global aircraft productionWORLD ECONOMICS (GDP)WORLD POPULATIONFLIGHT VOLUMEPOLITICAL INFLUENCES OEM forecasts and macroeconomic outlook; expert interviews; analyst reports; Roland BergerC: Base case for the aerostructure tooling marketMarket size, 20122023 (USD million*)* Components may not sum to total due to roundingContinuous spend Operational services Rate tooling New tooling development2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023HISTORICAL FORECAST2,7061,2892305096782,4841,1572263897122,3211,0932213396682,5439782136546992,3278622047754862,2877861959223852,2807781888764382,3327441837036022,1506821786796122,1036221745257831,7955521722997721,9505171716366258 Roland Berger Focus The aerostructure tooling marketnulle believe that three of our primary drivers will have a manullr impact on the aerostructure tooling market development, namely a further rate increase in legacy programs, new aircraft programs and increased pene-tration of automation through continuous and recur-ring spend. The fourth primary driver nulloperational ser -vices nullonly applies to the installed base of production enulluipment and so is not enulllicitly covered in the sensi -tivity analysis. Below, we discuss each of the three key drivers in turn and estimate their impact on the base case for market development in the years 201null202null nullgure nullpresents all the figures in table form. D KEY DRIVER 1 FURTHER RATE INCREASEnullr f