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Area Development - Site Selection, Facility Planning and Workforce Development

Where Should Aerospace Companies Invest? Evaluating Aerospace Manufacturing Hubs

For executives considering where to build a future plant or R&D facility, the United States ranks first globally for the scope and size of its aerospace manufacturing sector. In terms of the state rankings, Arizona jumped to first place, which bumped Florida down to second.

Q3 2016
PwC recently released the 2016 Aerospace Manufacturing Attractiveness Rankings, the third consecutive year of analyzing the key attributes of countries and U.S. states
PwC recently released the 2016 Aerospace Manufacturing Attractiveness Rankings, the third consecutive year of analyzing the key attributes of countries and U.S. states
The manufacturing environment for aerospace companies is constantly changing. The commercial aviation industry has been booming, with new large aircraft production increasing by more than a third in the past four years, with nine years of backlog at current production rates, and further production increases expected.

In order to keep up with demand, many companies are looking to invest to expand capacity. But where should companies invest? To address this issue, PwC recently released the 2016 Aerospace Manufacturing Attractiveness Rankings, the third consecutive year of analyzing the key attributes of countries and U.S. states. The report is meant as a guide to help executives optimize their supply chain, streamline costs, and plan for the future.

For the 2016 rankings, PwC enhanced the methodology. Specifically, the tax category now includes unemployment and property tax. Also, the cost category removed general employment statistics and increased the weighting of average hourly aerospace wages. Industry and education variables stayed the same as last year.

Global rankings are based on metrics of cost, including tax burden, industry presence, and infrastructure, which includes risk factors such as corruption and political stability. The 2016 methodology utilized Oxford Economics data for pay and productivity, which is considered more reliable than self-assessment data from the World Economic Forum Global Competitiveness Report, which was used in 2015. This year’s methodology used productivity data, which included unit wage, manufacturing, and nominal costs.

U.S. as Global Leader
The United States took the top overall ranking, due to scope and size of its aerospace industry, which is seven times larger than the United Kingdom’s, the country with the second-largest aerospace industry presence. Many of the biggest companies made major investments within the U.S. toward increased manufacturing, engineering, and production. In addition, the U.S. attracted the most research and development investments. And while the U.S. cost and infrastructure ranks were relatively low compared to the rest of the top 10, they were offset by the massiveness of its industry rank.
Many of the biggest companies made major investments within the U.S. toward increased manufacturing, engineering, and production. In addition, the U.S. attracted the most research and development investments
Canada ranked second overall (based on metrics of cost, industry presence, and infrastructure), followed by the United Kingdom. Rounding out the top five were Singapore in fourth place, and Switzerland in fifth. Countries with high wages and productivity levels showed improvement as a result of using the Oxford Economics data, including Denmark, the Netherlands, and Finland, which came in 6th, 8th, and 10th respectively. Hong Kong and Ireland rounded out the top 10.

U.S. Leaders
In terms of the state rankings, Arizona jumped to first place, which bumped Florida down to second. Indiana and Washington were newcomers to the rankings, and the rest of the states remained in the top 10 since last year: Utah, Georgia, Missouri, Texas, Michigan, and Ohio.

Arizona was able to significantly improve its positioning due to its relatively high industry (6th) and operation cost (12th) ranks. In addition, the changes in tax methodology led to high scores in property tax (6th) and unemployment tax (3rd). Arizona is the center of a growing aerospace industry, which includes the manufacturing of guided missile systems, as well as space and defense systems, and aviation and aerospace. In addition, many of the state’s major industry companies posted large profits in 2015, leading to improved employment opportunities.

Florida dropped to second place but the state continues to be attractive for aerospace companies. Florida’s Space Coast is growing rapidly, with new programs developing in the region including plans for a major production facility for aerospace manufacturing to be built. Arizona is the center of a growing aerospace industry, which includes the manufacturing of guided missile systems, as well as space and defense systems, and aviation and aerospace

New addition Indiana saw large industry growth in the state, and the change in methodology saw improvements resulting from its property tax (5th) and unemployment tax (7th) ranks. The past two years have seen major plans in aerospace investment, with industry leaders pledging over $900 million in the state as well as the creation of 1,200 new sector jobs.

For companies considering where to build a future plant or R&D facility, these categories are indeed important, but there are other significant criteria to consider as well. Education, for example, will be a huge key for growth. An educated workforce is crucial not only to keep up with the demands of today, but also advancements in the future. A talented, tech-savvy workforce is the only way for the U.S. to remain competitive in global aerospace.

One recent example of this development can be seen in Utah, which is expanding its Utah Aerospace Pathways program. The program gives high school seniors the chance to shadow and train in aerospace manufacturing, with the opportunity to work with one of the companies that serve as partners. Other states also have important partnerships with educational institutions.

Companies may choose to weight key attributes differently than our methodology, but the report is a useful tool to evaluate investment decisions. The findings should be used as a guide for future strategy and planning. As the data shows, aerospace does look like it will undoubtedly be a major factor toward the future of the manufacturing environment.
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