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Sept. 2005, pdf, (2.2 MB)
According to the NACE Rev. 1.1 classification of business activities, the aeronautics industry is defined as “manufacture of other transport equipment”. This report focuses on the NACE group 35.4 embracing “manufacture of aircraft and spacecraft”. The emphasis of the analysis is, however, on the e-business issues in the aeronautics sub-sector, as sub-sectors spacecraft and the military transport equipment produce primarily for government agencies and differ from the other sub-sector.
The diffusion of internet access has nearly reached the saturation level in the aeronautics industry, advanced computer network infrastructures such as Local Area Networks (LAN) or Virtual Private Networks (VPN) are, however, not commonly used. Furthermore, significant differences in the quality of internet connections between small and large firms prevail and many small enterprises still use the dial-up modem technology to access the internet.
The aeronautics industry is far ahead of companies from other sectors in the use of Information and Communication Technology (ICT) solutions supporting business processes. The wide use of knowledge management and e-learning tools is compatible with the specific characteristics of the knowledge-intensive aeronautics industry. Companies in the sector frequently use Enterprise Resource Planning (ERP) systems as well. The importance of ICT to support inter-firm collaboration is illustrated by the intensive use of applications such as product design and demand forecasting.
Even though the high product complexity makes online trading difficult in the aeronautics industry, 65% of companies procure inputs online and there are no significant differences in adoption rates of online procurement between companies of different sizes. The majority of companies procuring online stated that the number of suppliers increased after electronic procurement practices had been adopted.
The diffusion of online selling in the aeronautics industry is close to the EU-7 all-sectors average. Companies in the sector use the internet for sales-related activities, e.g. marketing operations. However, the smallest firms remain particularly reluctant to launch a website and the adoption rates for Customer Relationship Management (CRM) tools are low. Companies in the aeronautics sector use the internet to sell mainly to international customers.
New empirical evidence emphasises the strategic importance of information technologies in the aeronautics sector: IT still matters as a potential source of competitive advantage, as it enables innovation. Moreover, the results suggest that ICT-enabled process innovations are positively associated with increasing turnover among firms in the aeronautics industry. Yet, innovative firms are not more profitable than other firms, suggesting either that profits triggered by innovations take more time to materialise in this sector than in other sectors, or that firms in the aeronautics industry have some particular problems appropriating private gains from innovative activities.
According to recent survey data, when considering ICT investments, SMEs pay considerable attention to standards and systems interoperability. The absence of standards might hinder the diffusion of e-business and unnecessarily increases the costs for SMEs. Fortunately, SMEs in the aeronautics sector benefit from successful standardisation initiatives, such as the Boost Aero project, which aim at creating industry-wide standards. Furthermore, the development of uniform standards and e-business solutions is relatively easier in the aeronautics industry than in, for example, the automotive industry, because the adoption level of legacy systems such as EDI-based applications is low.
Many companies are already experiencing difficulties in attracting and retaining skilled personnel. Further progress of e-business and value chain integration will require more technological competency and e-skills from SMEs. This, in turn, might increase the burden SMEs have to face when implementing e-business applications. In the long-term perspective, firms that will not keep pace with the digitisation process might eventually be forced to abandon the business.
ICT-driven innovations play an important role in the competitiveness of companies in the aeronautics sector. It is, therefore, a priority to encourage companies to implement e-business solutions to introduce new products, services and ways of doing business. However, any action supporting innovativeness should particularly address the issue of appropriation of private benefits from innovation. In this context, the subject of fair benefit sharing between electronically cooperating companies is of great importance.
The process of e-business diffusion in the aeronautics sector follows a clear top-down pattern. Prime contractors together with major system integrators define the requirements of new applications and develop them. Then, whenever necessary, companies at lower layers of the supply chain are required to adopt the pre-defined standards. It is vital for SMEs that their interests are taken into account during the standardisation process. Since SMEs often lack the necessary negotiation power, public bodies can ensure that the voice of SMEs is heard as well.
SMEs’ awareness about the benefits offered by e-business still remains low. A large share of SMEs see their size as the prime reason not to engage into e-business although numerous ICT applications offer benefits independent of firm size. In light of this finding, increasing the awareness of ICT potential among SMEs in the aeronautics sector remains an important challenge at both the European and national level.
Companies will be able to identify the potential of e-business and take advantage of ICT applications only if they have educated and skilled workforce. Improving the availability of skilled workforce and enhancing its qualifications are important prerequisites for further development of e-business and, in the long term, strengthening the condition of the European aeronautics industry and increasing its competitiveness.
There is a communication barrier between companies and IT providers. SMEs complain that there is a shortage of inexpensive and uncomplicated solutions meeting their needs. Supporting the dialogue between companies in the aeronautics sector and IT providers seems to be a possible solution to this problem. This process can be facilitated by, for instance, the creation of regional e-business platforms enabling an exchange between manufacturing companies and ICT service providers.
Since the mid-nineties the industry experienced sound growth of sales volumes and employment. After a sharp drop in the industry turnover of 9% in 2002, the European industry was above its 2000 level of turnover and in 2003 achieved the third best year in its history. Within the last decade, the European aeronautics industry has exhibited a considerable turnaround in operating profit margin. The positive results are not only attributed to a more favourable economic environment, but also to the industry’s efforts to cut costs and to improve the bottom line.
The sector was covered as part of the "Transport equipment manufacturing" in sector studies of 2004.