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The Future of Aerospace Aviation: The Timeless Industry BRIAN H. ROWE From an engineering perspective, we may be entering the most exciting, rewarding, and interesting time during which one can work in the U.S. air transportation industry. At the same time, we may be entering a period of steadily declining U.S. leadership in civil aeronautics—if we allow ourselves to become complacent. This paradox stems from the fact that world airline economics are in dreadful shape, even though opportunities for technical advances in civil aviation abound. To maintain our leadership in this environment, we must shift our focus from ''high tech'' to cost-conscious designs made possible through concurrent engineering, coupled with better-than-ever customer support. THE AVIATION INDUSTRY For the most part, I am optimistic about the long-term future of the aviation industry, 10 to 20 years out. I believe that, despite the current problems, a more streamlined, cost-efficient industry can and will emerge out of the ashes of 1991 and 1992, yet there are still some serious financial problems that will continue at least through 1994.
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The Future of Aerospace In 1991 the world's airlines sustained a record loss of $4 billion. Losses by U.S. airlines accounted for half of that total. Projections for 1992 were for more of the same. An upturn was forecast for the second half, but that will only slow down the losses, not eliminate them. Commercial air traffic was down in 1991, and fuel prices were up 50 percent because of the war in the Persian Gulf. Pan Am, Eastern, and Midway ceased operation; TWA declared bankruptcy. As a result, many aircraft orders have been canceled or postponed. Boeing cut its 737 line from 21 to 17 and then to 14 aircraft a month. Unsold aircraft stand idle in the desert. This disappointing picture is the result of global recession occurring simultaneously with the final phase of the airline shakeout that started 10 years ago. In addition, there has been a dramatic cutback in military production, which will continue and probably even accelerate over the next several years. There appears to be no uniform national strategy to encourage and accommodate the planned, healthy growth of air transportation. For example, the United States and other large industrial nations suffer from the debilitating congestion of their airports and related infrastructure. This situation leads to excessive delays and reduces the high level of service needed to keep old customers and attract new ones. Both market development and cost efficiency are adversely affected as a result. The United States is also showing an alarming trend toward losing its market share and cost-competitive technological edge in civil aeronautical equipment. American products have historically dominated civil aeronautics. The United States enjoys a worldwide market share of 70 percent for jet transport aircraft and 80 percent for jet propulsion. Aviation products designed and built in the United States are the bright spot for U.S. exports; the U.S. aviation industry contributed a $16-billion positive balance of trade in 1991. Yet its market share is definitely eroding. Part of the reason for erosion of American market share is that U.S. transports have lost some of the strong technical edge they once had as well as some of the financial ability to support their customers. Airbus Industrie is a strong number-two competitor to Boeing and is growing. Their backlog in number of aircraft is double
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The Future of Aerospace that of McDonnell Douglas. Airbus just came off their first profitable year in 20 years of business. They also have outstanding engineering, as the United States has, and we must not forget that. Their product families of A300s, A310s, A320s, A340s, and soon the A330, are strong and competitive. Coupled with the European success in the large aircraft market is the intense competition in the small, regional jet transport market for 50-to 100-passenger aircraft—a market dominated by foreign products such as the British Aerospace BAE 146, the Canadair Regional Jet, the SAAB 2000, and the Fokker 100. This erosion of market share applies to propulsion as well. Rolls-Royce is building good products. Their market share may currently be less than 20 percent of the world fleet, but that is primarily because Pratt & Whitney and GE Aircraft Engines are formidable competitors with large customer bases. Pratt & Whitney and GE Aircraft Engines cannot afford to become complacent in this uncertain environment. We must continue to strengthen our ties with partners such as SNECMA, IHI, MTU, and others. In spite of these economically difficult times and fierce international competition, air transportation is one of the world's sustained growth industries. I call it a timeless industry. In the global society we are becoming, people are increasingly relying on air transportation to cross geographical boundaries at greater and greater speeds. And aviation technology continues to evolve to meet the growing demand. During the past three decades, commercial aviation grew at an average sustained rate of 7 percent a year in revenue passenger miles, and it is forecast to continue growing at an annual rate of 5 percent for the next 20 years. Revenue passenger miles are projected to hit 2 trillion by the year 2003 and 3 trillion by 2015. Most of this increase in traffic will necessitate new aircraft, provided this new equipment is cost competitive with the old equipment currently in use. As members of the National Academy of Engineering, we must help to ensure that U.S. products maintain a significant share of this giant market. It is our game to win or lose. We have the brains; we just have to manage our resources better.
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The Future of Aerospace THE TECHNOLOGICAL AND MARKET CHALLENGES I suggest three essential strategies to keep the U.S. aviation industry preeminent. First, we must lead in cost-competitive technology—and that includes product, manufacturing, and services. Second, we must continue to take the initiative in fostering international partnerships. Third, we must seek new ways to work smarter, more productively, and with greater speed. We must become more skillful with the capital and technical resources we have, because they are limited. I firmly believe these strategies will work. The classic categories of propulsion, aerodynamics, materials, avionics, and controls have formed the foundation of the aviation industry as we know it. Technology in these areas will continue to drive our future, but not as it has in the past. During the next 30 years, we can produce some dramatic advances in subsonic transportation. But to do so, we must have cost superiority in development and manufacturing. Part of this improvement will come from smarter design, better integrated manufacturing, and improved process development. Part of it will come from advances in manufacturing technology—better use of equipment, better factories, better systems, better quality control. The computer is revolutionizing design, development, and manufacturing. Just as important, we must build on the work we have done toward creating organizations without boundaries. The major part of future gains in development and manufacturing will come from the training and motivation of our human resources. A management revolution has already begun, and it must be accelerated. People must become an integral part of the process and the solution. Costs are a huge driver for our customers, who must make their decisions based on bottom-line payoff. At present the U.S. aviation industries are providing good value, but we need a more compelling edge to maintain our market share and worldwide partnerships. Substantial gains are available to subsonic aviation in environmental areas such as noise reduction and cleaner engine operation. More stringent environmental requirements are certain to be forthcoming. In addition, advanced U.S. propulsion will afford us an edge in market competition. The opportunities
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The Future of Aerospace for improvements in propulsion are still greater than in any other technology—even greater than those for advanced aerodynamic materials and airframe structures, but we must focus on how to make the best use of our technologies to reduce total cost. Reaping these gains will help ensure continued growth of air transportation through lower fares and a better environment. TECHNOLOGY AND MARKETS ARE INTERNATIONAL The United States should always strive to have a competitive advantage such as we currently enjoy in subsonic technology. The Europeans and the Japanese will continue to be aggressive in this area, and we must stay ahead of them if they are to continue to be our partners rather than the reverse. With the purpose of strengthening its national position, the United States should lead the world in bringing together the world's best human and technical resources toward a goal of creating more-affordable advanced subsonic flight systems. This strategy should be applied toward the development of the high-speed civil transport (HSCT) as well. We know that the Europeans and Japanese are moving into HSCT technology. They have strong support from their governments, and their efforts are progressing faster than ours in some key areas—takeoff lift and aerodynamics, for example. At the same time that we are working toward increased NASA emphasis on advanced subsonic initiatives, GE and Pratt & Whitney are advocating, in the short term, passage of a NASA budget that includes HSCT program dollars to get the concept accepted. The GE and Pratt & Whitney agreement to pursue propulsion development for an HSCT is perhaps the first step in putting the national interest over wasteful, duplicative uses of resources. This will generate interest from our foreign partners that we could have a real team effort for the development of an HSCT. A new effort of considerable magnitude and technical complexity will also attract the best and brightest people to our industry. Such an effort will help to make our industry an exciting place to work—a place in which young talent will set lofty goals as they plan their careers. As I mentioned previously, it is important to recognize that the United States is
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The Future of Aerospace unlikely to "go it alone" in the years ahead. For the foreseeable future, international partnerships will push technology. GE's relationship with SNECMA is a good example of how teams can work together and produce cost-competitive products. An important criterion for any partnership should be that it increases GNP, short-and long-term, for all concerned. This is the way GE and SNECMA viewed collaboration on their CFMI family of engines. The partnership has received orders for more than 10,000 CFM56 engines in the past 12 years, and we have extended the life of the DC-8 aircraft. The re-engining of the late DC-8s created jobs for GE, McDonnell Douglas, and our suppliers, In GE's case, that could include as many as 750 suppliers—smaller companies that count on us for their livelihood. Moreover, these engines gave birth to a new line of Boeing 737s and to the Airbus A320 and A340, the production of which also created jobs. Efficient, clean engines, like the CFM56 family, in the medium-range class, helped make the hub-and-spoke strategy possible. As a result, more jobs were created. I should add that our successful military engagement—Desert Storm—was helped considerably by the vastly improved, re-engined KC-135R tankers with CFM56 engines. When I look at international technical and economic partnerships, I see two blades of grass growing where one grew before, and that is good for everyone. Today in Cincinnati, there are Italian, Japanese, and French technologists working side-by-side with us, and we have engineers in their countries. We have teamed to protect our technology in these partnerships, and, today, SNECMA is a valued partner and not a competitor. Our partnership with SNECMA is a good example, but GE also has successful partnerships, joint ventures, and co-production arrangements with 12 other international companies. We have learned that we must share to gain. If we do not share, our foreign customers will go elsewhere. If we share, we will increase U.S. jobs, improve our balance of trade, and hold our market share. We should not plan on total domination of the market, however. I expect that during the next decade, the emergence of a flight system for high-speed travel will be a world system and not controlled by any one country. Such a system demands too many capital and technical resources
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The Future of Aerospace for the United States, France, Germany, or Japan to dominate. I would like to see us lead this effort, but we must earn this right by having the technology base on which to build a superior product. THE FLIGHT PATH TO THE FUTURE As we look to the future, consider these two points. First, we are grossly mistaken if we start believing that profits on a sale are created in marketing. Profits are created when design, engineering, and manufacturing work together to create and execute cost-competitive technologies. The initial challenge is to make better quality products at the lowest possible cost and to deliver the best value to the customer with improved speed and quality. The resultant products must anticipate the changing dynamics of the marketplace and give a company its edge. Clearly, the customer and the marketplace dictate price today. That is true for the airlines as well as for manufacturers. If manufacturers price a flight system too high, the airlines will not buy. If airlines price the seat too high, the public will not fly. That is why the lower a company can drive down production and operating costs, the more successful it will be as a supplier. In the final analysis, we are all suppliers. We supply technology, airframes, and engines; the airlines supply seats. The more that U.S. companies can help expand the aviation market by making travel more affordable to the ultimate customer, the more secure they will make the United States in maintaining its leadership in aviation technology. My second point is this: Our industry needs well-reasoned U.S. economic policies. There are many ways to generate resurgence in this economy. An accelerated depreciation allowance and an investment tax credit to businesses that invest in improving productivity and quality would be good places to start. The Congress should work with the airlines and manufacturers to look for ways to make the aviation infrastructure perform better. We need airport improvements and extensions as well as continued investment in air traffic management. We need rapid transit systems connecting airports with central cities to im-
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The Future of Aerospace prove passenger access. We need to take the inconvenience out of travel. We also need investment to help improve the competitiveness of our industry. There is no question that the years ahead can be exciting, but there are also no guarantees of the necessary economic growth. The civil transportation industry has the right products and the right talent, but industry, higher education, and government must work together to aid the growth of the economy in this sector. This requires eliminating the petty boundaries that exist. In every one of the businesses I manage at GE—large commercial, small commercial, marine and industrial, and military engines—we are looking at a "clean sheet of paper." The new ways of operating that emerge will provide the foundation for developing the cost-competitive technology that will power us into the next century—efficient, high-quality, and reliable technology. To the engineer in me, that's exciting. To the businessman in me, that means incredible opportunities and growth ahead. The future is opportunity, but it is also challenge. Sustained economic growth for U.S. aviation will come about only through a renewed national interest in aviation technology. As a country, we need continued investment in resources that push technology as well as a new cooperative spirit between industry, government, and universities. We need a civil aeronautics initiative that makes the aviation industry a national priority. Finally, we need the youth of the nation to be engaged by the vision and excitement that this industry holds for their future.
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