Although the airline industry has not fully recovered from the devastating effects of 9/11, there are signs that the industry is starting to recover. At the recent Farnborough Air Show in the UK, Boeing released its 2004 Current Market Outlook in which the company projected a $5.4 trillion market for new commercial airplanes and aviation services during the next twenty years, which will bring about a doubling of the world's airplane fleet by 2023 and accommodate a forecasted 5.2% annual in increase in world air travel.
"The long-term market outlook remains positive," Boeing commercial airplanes vice president of marketing Randy Baseler said in a company statement. "Even severe downturns such as we've experienced during the past few years do not change the fundamental of economic growth and the need for people to travel."
In its annual report, Boeing projected that operators will invest $2 trillion for approximately 25,000 new commercial airplanes during the next 20 years.
These numbers bode well for the aerospace coatings industry as manufacturers of aerospace coatings who will see an increase in demand for their products.
"The airline industry is trying to recover," said Kevin Fleetwood, president and general manager, Akzo Nobel Aerospace Coatings (ANAC). "Overall, the global economy has strengthened, which has led to increased travel to near-2001 levels, pre-9/11. So, passenger enplanements are up, load factors are up and yield per available seat mile has increased overall. But fuel prices have increased dramatically�offsetting any improved profitability due to increased passenger loads."
Sherwin-Williams has hard proof that the market appears to be on a recovery run. The company reported sales to airlines were up over 50% this year compared to 2003.
|Accent, a new product from Sherwin-Williams aerospace, is used for accent striping.|
In anticipation of the recovery, many airlines are rolling out planes that had been shelved during the past few years.
"The airline industry has seen a recovery as compared to last year," said Chris Anthanasopoulos, international marketing manager, Deft. Inc. "Airlines are reevaluating their fleets and are making decisions as to how they will restructure to improve efficiency and reduce operational expense." Anthanasopoulos noted that the increase in fuel prices is a major concern for the industry and new planes like Boeing's 7E7 with improved fuel efficiency are of interest to carriers.
"Signs of airline recovery, albeit somewhat fragile, are based on industry metrics," said Paul Bowman, global business manger, aerospace coatings, PPG Aerospace. "For example, passenger load factors have increased to pre 9/11 levels and travel to destinations in Europe and Asia has also improved. We have also seen an increase in aircraft returned to service from storage, which positively impacts our sales volume to the maintenance market."
Another bright spot within the airline sector is the evolution of no fills, low cost carriers (LCC) particularly in Europe and Asia. In addition, many North America carriers are following suit, rebranding portions of their fleets to accommodate the LCC theme, improve passenger loyalty and gain market share, such as the TED spinoff of United and Song from Delta.
"These LCC changes translate to opportunity for aerospace coatings manufacturers to work with the airlines and the design firms to create unique liveries," said Bowman.
INCREASED PRESENCE IN ASIA
Aerospace coatings manufacturers have also set their sites on Asia. With leading manufacturers increasing their presence in the region.
PPG's Application Support Center (ASC China) in Suzhou has been opened for more than a year now. It was built in response to the industry shift in subcontractor work and the growth of airline maintenance business. This 60,000-sq.-ft. facility performs sealant filling and custom packaging operations as well as manufacturing of aerospace topcoats.
"These capabilities have created tremendous value for our customers by improving the supply chain and minimizing hazardous waste generation," said Bowman.
ANAC has had a solid presence in Asia for many years with a strong sales, service, distribution and technical support network already in place throughout the region.
"Our local resources have increased with market demand and will continue to do so," said Fleetwood. "Local inventories coupled with tint line compatibility ensures product is where and when it is needed for both OEM and maintenance customers."
Deft has also recognized the importance of the Asian market and has put in place a new program to service customers by assigning the responsibility to an international marketing director.
CLOUDS ON THE HORIZON
Of course it is not all good news in the aerospace industry. In an effort to bolster profitability, airlines are still holding back on their fleets and a significant number of aircraft remain in storage.
"In general, we see commercial fleet size worldwide remaining flat over the next few years," said Bowman of PPG.
The rising price of fuel, the overall economy and passenger concerns about safety dictate the rate and sustainability of recovery. Add to that the fact that airline fleet refinishing is considered non-essential maintenance during lean periods and it is easy to see why aerospace coatings makers are cautious about the future.
"From our perspective, OEM build rates are the key to defining the health of the industry," said Bowman. "In 2000, Boeing delivered an unprecedented 600 aircraft compared to 2004 estimates at 275 aircraft, a 55% decline. When airline profitability improves there is typically benefit to both the OEM and aftermarket sectors; a move to upgrade fleets to newer, more efficient aircraft and budgeted programs for existing fleet refinishing which positively impacts coatings manufacturers."
Deft reported that aerospace coatings consumption is still down due to reductions in production at major airplane manufacturers such as Boeing and Airbus. But, Anthanasopoulos said he sees light at the end of the runway. "Recent activity by airlines looks like it will improve production of new airplane. The coating recovery will come when both Boeing and Airbus increase production," he said.
"On the other side of the coin," Anthanasopoulos continued, "production with Bombardier, the manufacturer of the regional jet market continues to be strong and coating needs are up. Military production on new planes is stable. Painting of existing planes in service continues to be strong."
RECOVERY IN SIGHT
Despite concerns, the consensus among aerospace coatings manufacturers seems to be that the market is beginning to regain its strength.
"The recovery is well underway," said Fleetwood of Akzo Nobel Aerospace Coatings. "Maintenance and OEM sector recovery began in the fourth quarter of 2003 and continues to improve, although prolonged high fuel prices could jeopardize any recovery. The recovery in the general aviation sector has lagged behind the commercial sectors, but we are seeing the beginnings of recovery in both new build and maintenance."
Sherwin-Williams reported that sales for 2004 have been "dramatically better than 2004," with a strong showing in the recoat side of the business and increased production by OEMs.
There are two distinct signs that business is improving, according to Bowman. "The first is an overall improvement in aerospace coatings sales to the airline maintenance market versus prior year. Our open order log has increased considerably," he said.
The second positive sign, he said, is new program startups at the OEM level, "particularly with Boeing and Airbus in support of 7E7 and A380 respectively. There are significant coatings development programs underway, driven by aircraft structural design changes and environmental legislation. Chromate reduction in primers is a major focus as well," he said.
Along those lines, PPG has launched a new non-chromate exterior primer, CA7501. This new primer contains a chrome-free corrosion inhibitive pigment package that can be used on both metallic and composites structures, according to company officials.
"Airlines have been actively seeking this technology to eliminate chromates from the waste stream when refinishing aircraft," said Bowman. "CA7501 has been successfully applied to three wide body aircraft thus far."
Other new product launches from PPG include Desobond CA100, a reactivation coating that eliminates the need for mechanical reactivation (sanding) of previously primed or painted substrates. It saves manhours and eliminates any ergonomic or repetitive motion injuries, which usually stem from sanding operations. "Additionally, through trials at various OEMs and airline maintenance facilities, we've also found that Desobond CA100 provides for a superior bond to a wide variety of aircraft substrates in preparation for painting processes, including difficult substrate like titanium and stainless," said Bowman. "Subsequent primer and topcoat layers adhere better to these substrates with Desobond CA100 than without."
PPG has also launched a new special effect clear topcoat which incorporates a new non-metallic flake. The technology, which was transferred from its automotive division, provides for a much more brilliant appearance and is very simple to repair versus the traditional mica coatings. Two key livery applications include the Delta Airlines 75th anniversary plane and a Boeing promotional aircraft�an Air Berlin B737 sporting Boeing's new corporate livery and 7E7 scheme.
While aesthetics certainly play an important role, environmental concerns remain paramount. "Along with special effect pigments such as micas and pearls being used for aerospace topcoats, there are many active development programs addressing issues like VOC reduction, film weight reduction and coating application process efficiency cycle time reduction," said Bowman. Examples of these products include waterborne zero or near zero VOC chrome-free primers for aircraft interiors, low VOC flexible primers for composites and low density, flash dry basecoat/clearcoat systems for aircraft exteriors.
The continued push for lower hazardous material emissions has led to the development of ANAC's Aerowave series of waterborne structural coatings which include primers, topcoats, pre-fillers and cleaners. The coatings can reduce VOC emissions 29% compared with current low VOC waterborne coatings, according to the company. "Future development will eliminate chrome-containing compounds from corrosion inhibiting primers," said Fleetwood. "To address airlines and manufacturer's desire for products that increase their efficiency and throughput ANAC is developing an exterior basecoat clearcoat system that will reduce paint times by at least one day," he added.
ANAC's Aviox advanced series primers and topcoats address efficiency of use and weight savings for airlines with exterior primers, topcoats, mica topcoats and clearcoats. The Alumigrip range of topcoats is specifically designed for the business and general aviation market. Alumigrip conventional topcoats, Alumigrip HS high solids topcoats, Alumigrip AP accent color topcoats and a full range of special effect topcoats of metallic and iridescent finishes.
Deft is also making a major investment in the development of chrome-free primer for both the military and commercial markets. In addition, efforts are being focused on the development of zero VOC primers and topcoats. Among its new products Deftane ELT/APC fluorinated polyurethane topcoat, which features increased exterior durability that has been qualified to MIL-PRF-85285 and DMS-2115 specifications. The product is currently used by the military on all major programs and Boeing is using the material on new C-17 and F-15 production planes.
Deft has also recently introduced a zero VOC polyurethane topcoat that is presently in use by Air Force bases for repainting existing planes. The firm has also introduced a zero VOC polyurethane topcoat and zero VOC primer used by Sikorsky.
Sherwin-Williams has several special effect coatings that are being developed for interior and exterior applications, including a soft suede interior finish that is currently being tested, according to Stevens. "We are also developing a non-metallic finish that could be used around radomes for a metallic look," he said.
In addition, Sherwin-Williams has a new complete system available which includes a corrosion resistant epoxy primer, a urethane sanding surfacer and Jet Glo Express which is a faster drying, buffable topcoat. A new product, Accent, for accent striping will be available later in the year.
ANAC has developed a number of special effect coatings that utilize mica and metallic pigments. Customers include Aeroflot, Northwest, Platinum Jet Air, Gulf Air, Cirque de Soleil (for its Global Express) and LAN.
CLEAR SKIES AHEAD?
The number of new products being developed is one promising sign that things are starting to look up for the aerospace coatings industry. And while it is still too soon to officially call the airline industry slump over, indications point to a promising year ahead.