World Commercial Avionics Markets

Abstract

Waning Impact of Terrorism-related Events Revives Avionics Market

The effects of the events of September 11, 2001, on air travel are wearing thin and the avionics market, especially the regional segment, is expected to grow rapidly. Despite the existing security issues and the war in Iraq, people have begun to shed their misgivings about traveling by air. Once the economy regains momentum, the market is anticipated to recoup to its pre-2001 status. Orders for regional jets are likely to remain strong while demand for avionics upgrades will enable these aircrafts for communication, navigation, and surveillance/air traffic management.

This Frost & Sullivan research examines the North American World Commercial Avionics Markets. It offers revenue forecasts by market segments and covers key drivers and restraints affecting market growth. It also provides strategic recommendations to overcome market challenges. This report has been segmented into two markets: air transport (major and regional airlines) and general aviation (business, recreational, and rotorcraft).

New Generation of Low-cost Business Aircrafts Nudge out Majors

"Major participants such as United and US Airways have failed to contain costs and suffered from the emergence of new low-fare airlines that have captured significant chunks of their market," notes the analyst. The larger airlines alienated customers with frequent delays, penalties, and charged 30 to 40 percent more than their competitors did. In contrast, airlines such as Southwest, Jet Blue, and AirTran have been reporting profits since they provide better quality flying at lower operating costs and have shared fleets.

Several new names that will enter the business aviation segment are likely to drive the market for low-priced integrated avionics suites. After its anticipated recovery, air travel is expected to continue its shift toward low-cost airlines. Due to the majors' incapability to reduce capacity other than by retiring older models, they were unable to contain labor costs. "Major airlines' failure to adjust quickly to economic necessities and consumer needs means that a large number of former customers will simply not return to them anytime soon," states the analyst.

Commercial Aircraft Market Downturn Necessitates Increased Participation of Avionics Suppliers

The economic downturn experienced since mid-2000 is anticipated to persist in 2003. Therefore, avionics suppliers will have to continue to accept an increasing role in the design and risk sharing of current and future aircraft programs. Companies that will accept this role will see their success rates improve significantly over time. Solutions have to be developed to meet airframe manufacturers' increasing requirements such as lean manufacturing practices, flexibility, and lowest possible cost for the highest value operation.

Companies have to resolve issues such as reliability, cost benefits, and reputation with business jet operators and avionics installers. Secondary market participants need to focus on increased collaboration with tier one suppliers to gain indirect access to this market. "For companies targeting growth in business and general aviation, developing integrated avionics solutions is essential," remarks the analyst.