The recent growth of aerospace business in South Carolina is undeniable. Although the aerospace industry is not new to the area, the addition of a Boeing final assembly plant in Charleston has certainly expanded the aerospace discussion to a whole new level. The South Carolina Commerce tag line "South Carolina - Just Right" is catchy and easily remembered. But, is the South Carolina aerospace climate just right? Will the warm climate continue or is a cooling trend coming?
I've worked in the aerospace industry for most of my adult life. As I look around South Carolina, I find plenty of reason for optimism. Lockheed Martin recently announced that the Greenville site has been selected to be the home of the T-50 production line. Boeing is increasing their engineering presence in the Charleston area by creating two major technology centers. The 787-10 will be made exclusively in Charleston. Toray is establishing a large carbon fiber manufacturing facility in Spartanburg. Numerous other participants in the aerospace supply chain are relocating to South Carolina. Home grown startup companies are entering the aerospace supply chain. If the past is an indicator of the future, we should have a healthy aerospace economy for many years to come. Unfortunately, the past doesn’t guarantee future success. Even with all this great news, there are indicators that the climate may be changing.
There have been reports from pundits as well as Boeing and Airbus that the market may be softening, particularly twin aisle aircraft. Twin aisle aircraft (like the 747, A380, and 777) sales are diminishing. For instance, the 747 production rate has slowed to a near stop. Meanwhile, the A320 and 737 (single aisle airplanes) are in hot competition. Both companies are increasing production rates to meet the demand. At the same time, both companies are concerned about over production. The duopoly of Boeing and Airbus is also being threatened by competition from Asia. China, Japan, and Russia are all developing aircraft that will compete in the single aisle market. Although Bombardier has been struggling to sell the C-series, it appears the Canadian government is stepping in to provide financial assistance. Bombardier could be yet another threat.
It is well known that the aircraft industry is cyclical. In my experience, it seems that the commercial aviation business is usually slightly out of phase with the DoD cycle. This mismatch is usually a good thing. Companies that support both military and commercial aircraft find more stability than those focused only in one area. Companies that produce a product variance (a combination of twin aisle, single aisle, or smaller aircraft) also find some stability as the market tends to balance. So, even though the twin aisle business is not as productive as single aisle, Boeing and Airbus should remain relatively stable, at least until a viable competitor emerges. Since both also participate in DoD projects, this also helps to blend out the fluctuations. There are also political factors that tend to play in that can also provide stability, especially for these behemoths. But, how does this impact the South Carolina aerospace climate?
Boeing's investment in South Carolina goes beyond the obvious twin aisle 787 production. Product development supporting the 737 MAX program is happening in Charleston. Boeing South Carolina engineers are also supporting space and defense projects managed out of California. Further, Boeing is not the only game in town. If Lockheed wins the T-50 production contract, this could open up additional supply chain growth opportunities. This will increase the upstate position in the aerospace market. Geographically, South Carolina is ideally located in close proximity to several aerospace OEM’s. The South Carolina government continues to be pro-business and is attractive to companies looking to participate in the southeast aerospace sector.
So, to the original question “Aerospace in South Carolina – is the climate right?” The forecast looks promising for continued “warm” weather. However, the fall season will come. It would be wise to make sure that we are prepared for the cooler climate by ensuring that our businesses are diversified to support all forms of mobility (aerospace, automotive, etc) and continue to find ways to mix commercial and DoD/Governmental aerospace participation. By doing so, our climate will continue to be “just right”.