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NATIONAL INSTITUTE FOR AVIATION RESEARCH

Wichita State University

Overview of Composite MaterialTrends in Aviation Manufacturing

John TomblinTel: 316-978-5234

Email:[email protected]

National Institute for Aviation Research (NIAR)National Institute for Aviation Research (NIAR)

WICHITA STATE UNIVERSITY

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The aviation industry is a major contributor to the

economic vitality of Kansas and has the potential forsignificant growth as a national center for aerospaceinnovation.

Hawker BeechcraftHawker Beechcraft SpiritSpirit

CessnaCessna BombardierBombardier

BoeingBoeing

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Kansas Products

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1.3 1.3

2.3 2.2

3.5

5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Direct Payroll

in Billions $$

1990 1995 2000 2005 2010 2015

Year

Aviation Economic Impact in Kansas

36,500 direct jobs with a payroll of approx. $2.4 billion36,500 direct jobs with a payroll of approx. $2.4 billion

Each aviation job generates an additional 2.9 jobsEach aviation job generates an additional 2.9 jobs

Kansas delivers more than 50% of all U.S. general aviation aircrKansas delivers more than 50% of all U.S. general aviation aircraftaft(1,263 aircraft valued at $3.7 Billion in 2002)(1,263 aircraft valued at $3.7 Billion in 2002)

Total Economic ImpactTotal Economic Impact

Historical Projected

Kansas Aerospace Industry Forecast, for Kansas, Inc. May 2006

2016 State tax revenues2016 State tax revenuesforecast:forecast:

16% of total state payroll16% of total state payroll

$1.3B in state tax revenue$1.3B in state tax revenue

Wages expected to skyrocket inWages expected to skyrocket in10 years10 years$5.5 Billion/Year$5.5 Billion/Year

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Composite Material Definition Macroscopic combination of two or more distinct

materials having a recognizable interface between

them

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Fiber Reinforced

Composite Types

(polymer matrix based)

Aerospace CompositesAerospace Composites

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A Long History in Military & SpaceApplications

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Barriers to Expanded Application

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Boeing 787 Composite UsageNearly all of the exterior surfaces are composites, except the leading edges of thewings, the stabilizers, and the engine pylons

Carbon laminateCarbon sandwich

Fiberglass

Aluminum

Aluminum/steel/t it anium

Composites

50%

Titanium

15%

Other

5%Steel

10%

Aluminum

20%

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Boeing's Plastic Dream MachineExcerpts from BusinessWeek, JUNE 20, 2005 and Boeing News Releases

Boeing thinks its new 787 jet, built mostly of plastic composites, could remoldthe airline industry.

Jets made of composites require far fewer parts, so there's less to bolttogether.

since these plastics weigh less than aluminum, the planes should burn lessfuel. together with improved engines, 20% drop in fuel costs.

improve passenger comfort. The superior strength of the compositefuselage will allow the passenger cabin to withstand higher pressurization --equal to the air pressure at an altitude of 6,000 feet instead of the usual 8,000feet.

it's easier to control cabin temperature, humidity, and ventilation.

engineers are discovering that their composites are even tougher than theyinitially imagined. maintenance costs will be 30% lower than for aluminumplanes. corrosion and fatigue benefits are going to be astounding.

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Raytheons Premier I All Composite Fuselage

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Cirrus Design Corporation, Duluth, MN

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Adam Aircraft

Cirrus Lancair Starship

Citation X

Premier I

Scaled Composites

Bell Helicopter

Boeing 777 Boeing 737

Dreamliner

Boeing 747

Toyota Aircraft

The Institutes Composite Family

SpaceshipOne

Javelin

Horizon

Global Hawk

X45 UCAS

Boeing 767

Predator

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Informational Brief

www.AeroStrategy.com

AeroStrategy is a consulting firm devoted to aviation andaerospace sectors with offices in Ann Arbor and

Amersham, U.K.

A white paper highlighting trends in the aerospace supplychain can be downloaded athttp://www.aerostrategy.com/commentary.cgi

To learn more about AeroStrategy please contact:

Kevin Michaels, Principal

Ph: (734) 821-0220

[email protected]

Hal Chrisman, Principal

Ph: (734) 821-0227

[email protected]

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Aerospace Comprises Approximately 15% Of The $50BGlobal Composites Industry

Sources: JEC composites, European composite directory and report 2002 2003; aerospace figures from AeroStrategy

Aerospace excludes launch vehicles and satellites

Values are for end-use products

The global composites industry, notoriously

difficult to estimate, is worth $50B in 2004according to JEC composites

The automotive industry is the largestsegment and is worth in excess of $12B

Building and construction is a fast-growingsegment and is now worth $10B annually

Aerospace is the third largest segmentanda major consumer of carbon fiber given itsfocus on performance

Wind power is emerging as a significantmarket and is now worth nearly $1B

2004 Global Composites Market ($50 B)

Automotive23%

Building &Construction

21%

Aerospace

15%

Sports

11%

Wind Power

2%

Other

28%Appliances

Consumer

Electrical

Medical

Marine

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The Use Of Composites In Modern Aircraft Designs Is

Accelerating

Sources: Teal Group, Boeing, Airbus,Composite Market Reports

Military aircraft designswere early adopters of

compositesPerformance oriented

Less cost sensitive

Unique requirements (e.g.radar signature suppression)

The latest commercialdesigns, led by the B787,A380, and A350 XWB,feature significantlygreater composite content

Airbus recentlyannounced that it hasadded a hybridcomposite/metal fuselageto the A350XWB design

Ai rcraft Composi te Content For Select Air frames% of structural weight

A380RAFALE

F/A-18E/F

F/A-22

EUROFIGHTER

777

GRIPEN

MD-11

A330/A340

B-2

A320

V-22

747-400

A300-600

F/A-18C/D

A310

MD-80 737-300757767

A350 XWB(latest)787

F-35 JSFA400M

0%

10%

20%

30%

40%

50%

60%

1975 1980 1985 1990 1995 2000 2005 2010 2015

Next GenerationNarrowbody Transport

(expected ~2015)

*Military Aircraft in Blue

A350(mid 2006)

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And Will Underpin A Quadrupling Of The Aerospace CompositesMarket Over The Next 20 Years

Source: AeroStrategyNotes: excludes UAVs, figures in 2006 dollars

Aerospace Composite Market Forecast ($B)2006 - 2026

0

5

10

15

20

25

30

35

2006 2011 2016 2026

MRO Services (all markets)

Business Aviation Production

Military Aircraft Production

Air Transport Production

Next generation narrow bodydesigns expected to be major catalysts

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Why The Shift?

Air craf t Com pos ite Co nten t For Select Air frames% of structural weight

A380RAFALE

F/A-18E/F

F/A-22

EUROFIGHTER

777

GRIPEN

MD-11

A330/A3 40

B-2

A320

V-22

747-400

A300-600

F/A-18C/D

A310

MD-80 737-300757767

A350 XWB(latest)787

F-35 JSFA400M

0%

10%

20%

30%

40%

50%

60%

1975 1980 1985 1990 1995 2000 2005 2010 2015


(expected ~2015)


A350(mid 2006)


A380RAFALE

F/A-18E/F

F/A-22

EUROFIGHTER

777

GRIPEN

MD-11

A330/A3 40

B-2

A320

V-22

747-400

A300-600

F/A-18C/D

A310

MD-80 737-300757767

A350 XWB(latest)787

F-35 JSFA400M

0%

10%

20%

30%

40%

50%

60%

1975 1980 1985 1990 1995 2000 2005 2010 2015


(expected ~2015)


A350(mid 2006)


A380RAFALE

F/A-18E/F

F/A-22

EUROFIGHTER

777

GRIPEN

MD-11

A330/A3 40

B-2

A320

V-22

747-400

A300-600

F/A-18C/D

A310

MD-80 737-300757767

A350 XWB(latest)787

F-35 JSFA400M

0%

10%

20%

30%

40%

50%

60%

1975 1980 1985 1990 1995 2000 2005 2010 2015


(expected ~2015)


A350(mid 2006)

Fuel & Emission

Reduction

Falling Production

Cost

Push To Reduce

Maintenance Cost

Improved Knowledge

Base (I.e. Better Design)

Emergence Of Sophist icated

Supply-Base (E.g. Spiri t, GKN)

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Aircraft And Engine OEMs Are Increasingly Focused OnSystem Integration

Source: AeroStrategy analysis

Aircraft Product ion Supply Chain

Ai rcraf t AndEngine

OEM FinalAssembly

Aircraf t AndEngine

OEM FinalAssembly

Aircraft /Engine OEM

InternalProduction

Aircraft /Engine OEM

InternalProduction

Tier 1 SuppliersTier 1 Suppliers

Tier 2 Suppliers

Tier 3 Suppliers

Tier 2 Suppliers

Tier 3 Suppliers

Raw Material

Suppliers

Raw Material

Suppliers

More focused on systems integration

Less internal product ion capability

Desire to work wi th a smaller number of Tier 1 primes

Significantly reduce direct dealings with Tier 2 and Tier 3suppliers

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Tier 1 Suppliers Have Significant Growth Opportunities


Aircraft Product ion Supply Chain

Aircraft AndEngine OEM

FinalAssembly


FinalAssembly

Aircraft / EngineOEM Internal

Production

Aircraft / EngineOEM Internal

Production

Tier 1Suppliers

Tier 1Suppliers

Tier 2 SuppliersTier 3 SuppliersTier 2 SuppliersTier 3 Suppliers

Raw MaterialSuppliers


Taking on more integration and supply chain management activi ties formerlyperformed by OEMs

Leveraging aircraft OEM aerostructures outsourcing available market growingfaster than overall market growth

Entering more risk sharing partnerships

Facing consolidation (e.g. Spirit BAE Aerostructures, GKN Teleflex AerospaceManufacturing Group)

Struggling with surging demand, rising raw material costs, and shi fting material

content

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Tier 2 And 3 Suppliers Face Significant Challenges


Aircraft Production Supply Chain


Final

Assembly


Final

Assembly

Aircraft / EngineOEM InternalProduction

Aircraft / EngineOEM InternalProduction

Tier 1 SuppliersTier 1 SuppliersTier 2 & Tier 3

SuppliersTier 2 & Tier 3

Suppliers



Shifting distribut ion channels: less direct dealings with OEMs; more withTier 1 suppliers

Vigorous competition from low labor cost suppliers

Struggling with surging demand and rising raw material costs

May face consol idated demand as Tier 1s consolidate

In the long run, must address shifting material content

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North America

Wichita Tulsa

Salt Lake City

South Carolina

Asia Pacif ic

Japan

Wichita Is One Of Several AerospaceComposite Clusters

Europe

Spain

Italy

U.K.

ansseC

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The Shift To Composites Highlights Several Key Issues

For Wichita To what extent will other

aircraft OEMs includingbusiness aviation followBoeings lead?

What are the implications ofthe shift to composites forsuppliers focused on metallicwork?

Are there enabling

technologies or processes thatcan improve thecompetitiveness of metalstructure suppliers?

How significant is theopportunity in compositeMRO services?

What is required to strengthenthe competitiveness ofWichitas aerostructures/composites cluster?

Porters Sources of Locational Competitive Advantage

Source: Michael Porter, AeroStrategy analysis

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