GE Capital: Aerospace Suppliers Ramping Up To Meet Surging Orders

The aerospace supply industry is still in the early days of a long-term boom in orders, say industry participants at a recent suppliers summit hosted by GE Capital at GE Aviation’s headquarters in Cincinnati, OH. The large majority of participants, who were split about evenly in serving wide-body and narrow-body commercial aircraft platforms said they plan to increase their workforce over the next 12 months (84%), expect to win new long-term supply agreements in the next three years (91%), and expect aircraft deliveries to continue to grow at least through 2016 (76%).

“We are in the midst of a ‘super-cycle’ of aerospace manufacturing,” said Gib Bosworth, managing director of aerospace financing at GE Capital, Corporate Finance. “Advanced manufacturing practices will play a very important role in how these parts and components are made, so we at GE see a valuable role we can play in helping these suppliers stay on top of this manufacturing technology curve as well as have the capital they need to build production capacity.”

When asked about their manufacturing future, 87% said they will be investing in new manufacturing equipment over the next 3 years. Regarding incorporating additive manufacturing, 27% are already doing it, 10% expect it to happen within the next year and 37% expect it in the next one to five years.

M&A activity is expected to be very robust over the next 12-24 months, with 92% of respondents said they expect it to increase. “The response makes sense. Record high backlogs for commercial aircraft give buyers an unprecedented level of visibility,” said Yair Reiner, aerospace and government services analyst with GE Antares Capital, a leading provider of M&A financing to private equity-backed middle market companies. “Plane makers want suppliers to become both stronger and leaner, which encourages and rewards consolidation. And defense spending, a significant thorn for the industry in recent years, is showing signs of stabilizing.”

To view the full GE Capital report, click here.

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