November 1, 2006

Showdown In the Skies

With the aerospace industry using more composites, aluminum has lost a significant battle. But can it still win the war?

Aluminum has dominated the aerospace industry since the birth of the commercial aviation industry in the 1930s and 1940s. So it was a major blow when Boeing Co. unveiled its new-generation Dreamliner 787 with a fuselage made of composites. Answering the threat of composites will be one of the aluminum industry’s major challenges in the next five years.

Aluminum’s light weight made it the aerospace industry’s material of choice.

The body of the Boeing 747 is made up of 81% aluminum, for example. But composites are 20% lighter still, which can reduce fuel cost significantly. Although oil prices have fallen from recent highs, they are still near $60 a barrel.

“If the 787 succeeds as a test case, the next 10 years could see the launch of all kinds of composite-based aircraft,” says Richard Aboulafia, senior aerospace analyst at the Teal Group, aerospace consultants based in Fairfax, Virginia. “If composite works, they’ll be fighting a rearguard action. There will be a major chunk of demand [for aluminum] that will gradually disappear.”

It’s difficult for aluminum executives to get upset about this at a time of soaring orders for many of their products. Alcan Inc. forecasts that a 6.8% increase in demand this year will outstrip a 5.7% increase in supply.

If aluminum companies rely on the status quo and don’t diversify or think outside the box to find new solutions, aerospace sales in the aluminum industry could easily diminish, if not fade.

—Michael Merluzeau, director of aircraft systems, Frost & Sullivan

Alcoa Inc. spokesman Kevin Lowery says the company’s aerospace and transportation divisions have been growing at annual rates of 14% since 2002. With Boeing still cranking out its popular aluminum-based airliners such as the 747 and 777, the danger seems remote. Boeing forecasts the size of the commercial aircraft fleet will more than double to 35,970 by 2025.

“Over the long term, it does represent some threat to aluminum in the aerospace business,” Alcan CEO Richard B. Evans says. “But it really is longer-term.”

Aerospace applications represent only about 2.5% of aluminum consumption, which this year is expected to reach 26.5 billion pounds, data from BB&T Capital Markets of Huntington Beach, California, shows. (All transportation applications represent a third of total aluminum usage.) But aerospace materials are high value-added and therefore more profitable. Aerospace accounted for more than 10% of Alcoa’s 2005 revenues of $26.2 billion and 7% of Alcan’s revenues of $20.3 billion.

“It’s the glamour market of the aluminum business,” says Gregory R. Wittbecker, director of logistics and business development for Alcoa Materials Management in Knoxville, Tennessee.

The aluminum industry has a window of three to five years, which will determine whether composites become more dominant in commercial aircraft.

“It takes a generation for a major change to occur. Airlines won’t be redesigning their narrow bodies until five years from now,” says Kevin Michaels, a principal at Aerostrategy, an Ann Arbor, Michigan, management consulting company that specializes in aerospace. Boeing selected composites for the 787 fuselage because they performed exceptionally well in a wide-body plane.

Meanwhile, it will be up to the aluminum industry to offer competitive alternatives. The largest North American aluminum companies—Alcoa and Alcan—are developing alternative aluminum-based alloys. Keeping the metal’s price low and competitive could help buy some time. So if aluminum has lost an important battle, the war is still being fought.

Boeing’s move “has had a wake-up call effect for the aerospace and materials industries,” says Michael Merluzeau, the Washington, D.C.-based director of aircraft systems at Frost & Sullivan, a research and consulting company. It could ultimately loosen the aluminum industry’s long-standing stranglehold on aerospace.

“The future is not entirely under their control,” he says. “Because of the stress and pressurization, it’s not possible for the thickness of aluminum to be reduced and have a lighter aircraft. If aluminum companies rely on the status quo and don’t diversify or think outside the box to find new solutions, aerospace sales in the aluminum industry could easily diminish, if not fade.”

Meanwhile, composites, which are compacted carbon fibers (most common aerospace composites are fiber-reinforced plastics such as carbon fiber/epoxy resin), are gaining momentum. Aerostrategy forecasts that composite sales to the aerospace industry will nearly quadruple in the United States to $26 billion in 2026 from $7 billion in 2006. Globally, composite sales are about $50 billion, and of those sales, 23% stem from the auto market, 23% from building and construction, 15% from aerospace and 11% from sports equipment such as golf clubs and tennis racquets.

Clearly, aerospace’s share is on the rise, Michaels says. Military aircraft were early composite users. The material makes up 20% to 50% of the structure for modern fighters such as F22, F35 and Eurofighter, he adds.

Boeing plans to spend $7 billion to develop the twin-aisle Dreamliner, which will carry 250 to 330 passengers, and can fly more than 6,000 miles. The aircraft is considered a complement to the 777 and 747, and is expected to replace older A330s, 767s and DC-10s. The aerospace giant already has 393 firm orders (see Lining Up) for the 787, which will cost $142 million to $150 million each.

Boeing sees advantages in composite’s resistance to fatigue and corrosion. Because of their strength, composites allow higher levels of pressurization and do not wear out as quickly, says Lori Gunter, a Seattle-based spokeswoman for the Dreamliner project. The lighter weight should lead to a 20% savings in fuel costs, she adds.

Composites also could help lower maintenance costs by 30% over the life of the aircraft. With composites, the fuselage may undergo a heavy inspection every 10 to 12 years, compared to every seven years for aluminum, says David Strauss, an aerospace and defense analyst at UBS in New York.

Based on what he was told by Boeing, Strauss expects the aircraft producer to make extensive use of composites on its planes in the future. Gunter says, “Each new airplane has slightly different requirements, so I wouldn’t want to answer with any certainty. However, the material set is proving efficient and durable, so it would make sense.”

Composite will constitute about 50% of the 787, Boeing says. The balance is 20% aluminum, 15% titanium and 10% steel. Previously, the highest percentage of composite on a Boeing plane was 12% on the 777, made of 70% aluminum (See “Flying Into New Territory”).

Europe’s Airbus also is moving ahead with composite design, but is taking more incremental steps than Boeing.

The company’s new A350XWB, a next-generation wide-body plane, is slated to contain about 40% composite, and its A380 Superjumbo will have 25% composite. Roland Thevenin, senior expert in composite structure conformance for Airbus based in Toulouse, France, says Airbus introduced composite in the structure of its A310-300 in 1985 and increased the use of the material for that plane to 25% from 7.5% in the course of the next 20 years. In fact, he says Airbus will be using composite for 30% of its A400M.

“We are a little more cautious about the performance characteristics, so we have chosen to use them in places where their applications have been thoroughly proven to be advantageous over more conventional materials,” says Airbus spokeswoman Mary Anne Greczyn.

Composites are not without problems for Boeing. Published reports this year cited testing failures such as bubbles in the skin of the fuselage that could lead to weakening of the material and cracks. Gunter refers to these difficulties as inevitable parts of the testing process.

“That’s the point of a development effort—to try different possibilities and find the best,” she says, noting that the Boeing project team built another barrel, the assembly including the below-deck cargo area, using a different approach, and it turned out fine. None of the nine barrels built during the development will end up on the actual aircraft, she says.

Still, the verdict is out on whether composite is durable enough to withstand constant commercial use. “Airplanes face a fair amount of fatigue, and it’s a lot harder to monitor cracking and fatigue on composite,” says Strauss of UBS.

Although the aluminum giants are playing down the threat, they continue to work on a new generation of alloys. Evans says Alcan is developing aluminum-lithium alloys that were first examined during the energy crisis of the 1970s. He notes that Alcan already is supplying a proprietary alloy for the Dreamliner that will be used for structural parts, or the plane’s skeleton.

The good news is that the war isn’t over because the cost benefits of composite—including its maintenance—have not been proven over time.

Interestingly, Alcan already manufactures composites for other transportation applications and for construction, and Evans doesn’t rule out moving into aerospace composites. Lowery of Alcoa agrees that there is a lot of aluminum content in the 787 aside from the fuselage. The jet engines manufactured by General Electric Co. and Rolls-Royce plc, for example, contain a high percentage of aluminum.

“We would like nothing more than to have everything made out of our product,” he says. “But that’s not realistic.”

Alcoa, he adds, continually meets with its aerospace customers to “ask them what we can bring to the table from a material and design standpoint to help address their needs.” The aluminum giant also has developed a proprietary aluminum titanium alloy, which it says is 20% lighter than aluminum. Asked why Boeing opted for composite over Alcoa’s alloy, the Boeing spokeswoman said, “We tested many materials and picked the one we felt was right.”

Even if composites do take over the fuselage in commercial jetliners, there still is ample opportunity for metals companies in high-value alloys used for structural parts, says Drew Magill, Boeing’s director of marketing for commercial airplanes. The 787, for example, uses more than 300 pounds of extrusions for beams and framing. Moreover, Boeing used to machine these parts, but now has them supplied by machine shops and service centers. “We look to outsource the value added in the machining process to draw on the latest technology and processes so that we can meet our aggressive targets on strength and weight,” he says.

Distilling the aerospace market to a composite vs. aluminum controversy would be an oversimplification, says Wojtek Misiolek, the director of the Institute for Metal Forming at Lehigh University in Bethlehem, Pennsylvania. The aerospace industry is striving to find lighter, more cost-effective alternatives to aluminum, and composite may be one of many on the drawing board.

For the aluminum industry, the answer is innovation and finding better alloys at a lower cost, he says. The good news is that the war isn’t over because the cost benefits of composite—including its maintenance—have not been proven over time.

Yet it’s also too early to say if aluminum-based alloys can compete effectively with composite and its
many strengths.

Rather than face a dwindling market, aluminum companies can offer metallic and composite materials, says Michaels of Aerostrategy. They don’t need to be wedded to the metal, but should develop materials that will help Boeing and other manufacturers with their next generation of aircraft.