With demand soaring in both the commercial and military sectors, aircraft manufacturers will enjoy record sales of new planes in the next several years—taking metal suppliers along for the ride.

The only gray clouds on the aerospace horizon are the much-publicized delays of two high-profile commercial aircraft programs: the Airbus 380 and the Boeing 787 Dreamliner. So far, say aluminum and titanium suppliers, the delays have not hurt much.

“Demand has dropped a little, but it’s still going strong vs. historical levels. It just isn’t at the same frantic pace it was running six to eight months ago,” says Bill Sales, senior vice president for nonferrous operations at Reliance Steel & Aluminum Co., Los Angeles.

“The aerospace market is the best it has ever been,” asserts Richard Aboulafia, vice president of the Teal Group, Fairfax, Va. “This is the first time in 25 years that I’ve seen it this strong in both the commercial and military aerospace sectors. It is unprecedented.”

Matt Grimison, spokesperson for the Aerospace Industries Association of America in Arlington, Va., was just as glowing in his assessment of the market. “It’s going like gangbusters. This is very uncommon. Usually when one sector is strong, the other is down or flat. But both [commercial and military] are on high peaks, and it looks like this demand will be sustained for a while.”

Aboulafia predicts this expansion could last another seven to eight years, maybe even longer. Much of the demand is coming from airlines in emerging markets such as India, China and the Middle East as the economy globalizes and standards of living improve.

In this favorable business environment, even the domestic airlines can make money, he says. “The U.S. airlines finally have their heads above water. They aren’t quite ordering new planes yet, but it is a good sign that they are now focusing on profits.”

Given the age of their current fleets—an average of 35 years old—it is likely U.S. carriers will join their international counterparts and start placing orders for aircraft in the next two to three years, Grimison says.

Domestic carriers are starting to make sufficient returns to invest in new airplanes and to add new routes both inside and outside of the United States, agrees Bob Mraz, vice president of sales and marketing for TW Metals Inc., Exton, Pa.

Growth in the commercial aerospace market, which is by far the largest segment of the aerospace industry, has been “astounding,” says Aboulafia. “I think it will peak in 2010-11 with $83 billion in deliveries, up from a low of $40 billion in 2003-04.”

The AIA estimates that 2007 civil aircraft sales will reach $54.58 billion, up 15 percent from 2006 when Boeing reported a record 1,058 orders and Airbus 824 orders. Already this year, Boeing has received almost 900 net orders, which is exceptionally strong. “It is too early to say whether we will equal the order numbers from 2005 and 2006, which were record years, but it’s much higher than our historic average,” says Ann Schmidt, spokesperson for Seattle-based Boeing Commercial Airplanes. Airbus’ 2007 order numbers were not readily available.

Aboulafia attributed this surging demand for aircraft both to the newly found financial discipline of the U.S. carriers and expansion among foreign carriers—both supported by a resumption of air travel in the developed and the developing world. “There has been fantastic growth in India, China and the Middle East,” he says.

In the United States, people fly an average of twice a year, notes Jeff Wise, vice president of sales and marketing for Titanium Industries Inc., Rockaway, N.J. Even in India, one out of every 44 people has flown, which is substantial given its billion-citizen population. Air travel within that vast country is likely to rise even more as India improves its infrastructure.

“Air travel is going to grow at a 5 percent annual rate over the next 20 years, driven by economic growth, world trade liberalization and the availability of new, more efficient airplanes,” says Schmidt. “Growth coupled with the need to replace older, less-fuel-efficient aircraft will lead to a demand of 28,600 airplanes over the next 20 years.”

New planes, new approaches

Both Boeing and Airbus have introduced several new aircraft to address this demand. The first Airbus 380, the largest airliner in the world with about 550 seats, was finally delivered to Singapore Airlines in mid-October after a well-publicized two-year delay due to design and production problems. Now, with those problems apparently behind it, the European airframe manufacturer says it will book about 30 orders for the largely aluminum jumbo airliner this year, up from its original target of 20. As of mid-October, Airbus had received 189 firm orders for the A380 from 16 airlines. The company expects to sell more than 800 in the next 20 years.

Some industry observers question how much success the A380 ultimately will achieve. “The design wasn’t very popular from a commercial standpoint. It’s too big,” says Aboulafia. The huge A380 was designed to fit a “hub and spoke” flight pattern, which involves flying passengers between larger “hub” airports where they can then transfer to smaller jets for the journey to their final destination at regional airports.

Adopting a different philosophy, Boeing has designed its smaller next-generation 737s, as well as its new 787 Dreamliner, to meet a perceived need for increased frequency and non-stop flights. “The market seems to have spoken very loudly about which it prefers,” given the apparent popularity of the 787, says Aboulafia.

Though Boeing’s first few 787s are expected to be delayed about six months, that hasn’t dimmed this rising star, which reportedly is having the most successful launch of any aircraft. Still more than a year away from its first delivery, Boeing already has over 750 orders for the ultramodern, fuel-efficient widebody, which can be configured to seat from 290 to 330 passengers.

Grimison notes that Boeing has made several technological leaps forward with this aircraft, making it roomier with a more humid, more normal atmosphere. The biggest advance, however, is on the materials front, with 50 percent of the primary structural components, including the fuselage and wing, made of carbon composite.

Likewise, Airbus plans to use carbon composite materials in its most recently announced plane, the 350-seat A350, which is not expected to begin deliveries until 2014.

The trend in aircraft design toward the use of new lightweight, space-age materials instead of conventional aluminum and other specialty alloys has raised eyebrows among metals suppliers. But the current growth of aircraft production will more than compensate for any material substitution in the foreseeable future, say executives.

“While the new planes do have a significant amount of composites, they also have a significant amount of aluminum, including for many structural parts,” says Keith Harvey, vice president of sales and marketing for aerospace and general engineering products at Kaiser Aluminum Corp., Foothill Ranch, Calif.

With its monolithic construction, the 787 uses a lot of heat-treated aluminum plate. This construction technique, which combines several parts into one structure, starts with a large piece of plate that is machined down to its final shape. “Even with the amount of material that is machined away, it is more efficient,” Harvey says.

While he admits that aircraft composites are here to stay, aluminum isn’t going away. “There is no doubt that composites have been successful, but it isn’t all nirvana,” Harvey says. “There are some manufacturing challenges and problems with reparability, as well as cost. We provide a competitive product.”

What this competition has done, he says, is challenge aluminum producers to come up with new, innovative products. “We aren’t just sitting back on our laurels. We are developing new alloys and new technologies.”

As older, less-fuel-efficient planes get replaced with new models, the sheer volume of aircraft production will carry all types of suppliers, says Mraz at TW Metals. “With the preponderance of the plane remaining aluminum, even if the amount of aluminum per plane is down, total aluminum consumption will continue to grow.”

Material substitution is only occurring in the newest commercial planes, and such military aircraft as Lockheed Martin’s F-22 and F-35 Joint Strike Fighter, not in the manufacturers’ legacy bread and butter lines. “Right now the best selling commercial planes are still the single aisle Airbus 320 and the Boeing 737, both of which are primarily aluminum,” Mraz notes.

“The 737 has been a workhorse,” says Grimison, calling it one of the best-selling aircraft ever. “Its demand has been unabated in the 20 to 30 years it has been around.” Likewise, the A320 is Airbus’ highest seller. Both should continue to see strong sales for the next three to five years, he adds.

With a higher composite aircraft, what is aluminum’s loss is titanium’s gain, say the experts. Unlike aluminum, titanium is very compatible with carbon fiber composites. Scott Hundemer, senior manager of procurement for Lockheed Martin Aeronautics, Fort Worth, Texas, explains that when aluminum is joined with composites, there is a likelihood of corrosion. That does not occur when titanium is joined with composites.

According to Wise at Titanium Industries, each Boeing 787 will contain about 240,000 pounds of titanium vs. 110,000 pounds on average in Boeing’s 747 or 777 models. This extra titanium displaces about 130,000 pounds of aluminum.

Smaller aircraft soaring, too

Sales of other smaller commercial aircraft, which use conventional aluminum construction for the most part, are also doing quite well, experts report, including regional jets, business or corporate jets and the newly emerging very light jet (VLJ) market.

Of these three, regional jets are not showing the same kind of growth pattern. Bill Chadwick, director of research for the AIA, explains that when the commercial aerospace industry took a hit after the 9/11 terrorist attacks, demand actually increased for smaller regional jets. “They are still doing well, but not as well as several years ago,” he says. On the plus side, newer models tend to be larger.

Meanwhile, growth has been “phenomenal” for business jets, says Aboulafia. Globalization, strong corporate profits and executives’ frustration with congestion and delays at airports are all fueling purchases of private planes. “Americans need to get where they are going,” adds Mraz.

Eclipse Aviation Corp., Albuquerque, N.M., has been credited with creating the VLJ market. Andrew Broom, Eclipse spokesman, describes VLJs as jets that weigh under 10,000 pounds, have five to eight seats and sell for $1 million to $3 million—a bargain compared to larger business jets that cost $4.5 million and up. Eclipse was the first to get its VLJs certified, about a year ago, and to date has delivered over 50 planes. The company has a backlog of 2,600 orders. It plans to eventually ramp up production to 1,000 planes a year. A number of other companies, including Honda, Cirrus and Cessna, have also introduced, or plan to introduce, VLJs.

Air taxis utilizing VLJs and other small aircraft are showing promise in attracting corporate travelers, in some cases allowing passengers to purchase a single seat rather than chartering the whole plane.

Military business is booming

Sales of military aircraft, including fighters, transports and helicopters, are also strong, says Aboulafia. “I see strength continuing for several years, especially with much of the fleet being badly damaged by the war” in Iraq and Afghanistan, and with Lockheed Martin’s F-22 and F-35 Joint Strike Fighter programs ramping up.

Now in full production mode, Lockheed Martin recently won a multi-year contract to produce 20 F-22s per year, says Linda Zimmerman, director of procurement for the defense aircraft contractor. Meanwhile, the Joint Strike Fighter, still in the systems design and development stage, will soon be entering low-rate initial production. “The JSF is a 30- to 40-year program, so I see it having a strong, long-term future, she adds.

Some of the company’s older aircraft programs also continue to show promise. Zimmerman notes that while the U.S. Air Force has not received an F-16 fighter since 2005, “we hope to see it ramp up in the future due to international air force demand.”

Lockheed’s C-130 cargo plane also remains in strong demand. “We are currently producing one aircraft a month, and we anticipate that will increase to three a month in the coming years,” Zimmerman says.

Early next year, the U.S. Air Force is expected to award a huge contract to replace its KC-135 tanker refueler with a new aircraft. Grimison says that both Boeing and Airbus are placing bids for aircraft derived from some of their existing models, Boeing’s 767 and Airbus’ 330.

Defense spending should stay strong for the next three to four years, no matter what party is in charge after the next election. “A lot depends on world events, but I don’t see any GOP or Democratic candidate saying they will cut the defense budget when they get into office,” Grimison says.

With such strong demand across the board, supplies of materials used by aircraft manufacturers—aluminum, titanium, nickel-based superalloys and composites—are all relatively tight. The two-year delay of the A380, as well as moves by aluminum and titanium producers to scale up their production capacity, have loosened up availability of heat-treated plate and other alloys, executives report. The six-month delay in 787 production is not expected to have a significant effect on material supplies, unless Boeing is forced to announce further delays. “Most of the smart money factored in a three- to four-month delay anyhow. A couple more months than that isn’t a big deal,” adds Aboulafia.

Noting the “challenges inherent with game-changing innovations like the 787,” Boeing officials expressed regret over the delays in assembly operations caused by the need to rework some parts. While this will delay delivery of the first plane from May or June to November or December of next year, Boeing still plans to deliver 109 of the 787s by the end of 2009, as originally planned.

More importantly, Boeing is encouraging its subcontractors to continue to produce parts for the plane, which means that metals suppliers are continuing to supply those subcontractors as they had originally planned, says Sales at Reliance. “Once we hear from subcontractors that Boeing wants them to change their manufacturing schedule, that would be a red flag, but we are not hearing that at this time. I don’t think we are talking about another Airbus scenario.”

Currently, both heat-treated aluminum and titanium are still on allocation, but “there is definitely more availability,” says Sales, calling it “allocation, but with more flexibility.”

Metal producers are doing their part to expand capacity in anticipation of future demand. On the aluminum side, Alcoa was one of the first to increase its heat-treated sheet and plate production. In mid-2005, it announced plans to increase its global capacity by 50 percent within a year and a half. Shortly thereafter, Kaiser announced plans to increase the heat-treat plate capacity at its Trentwood, Wash., rolling mill. Since then it has stepped up investments at Trentwood several times, with the most recent announcement this June. Altogether, Kaiser will more than double its previously available plate capacity at Trentwood by the end of next year.

All the major titanium producers have announced increases in sponge capacity with many also increasing finishing, melting and remelting capacity. Allegheny Technologies Inc., Pittsburgh,  Pa., has announced increased sponge making capacity at both its Albany, Ore., and Raleigh, Utah, facilities, as well as adding melting and remelting capacity in Bakers, N.C., and plate finishing capacity in Washington, Pa.

In September, RTI International Metals Inc., Niles, Ohio, announced plans to build a 20 million pound per year premium-grade titanium sponge facility in Hamilton, Miss. RTI has not produced its own sponge since the early 1990s.

Wise at Titanium Industries says he is already starting to feel the effect of the titanium capacity additions. “Pricing is easing; availability is increasing,” he says. In fact, once the Chinese add new capacity as expected by 2010, the titanium market could be in oversupply. “But that isn’t necessarily a bad thing, as some markets have moved away from titanium because of price and availability.”

“The future looks extremely bright for the aerospace industry and everyone in that supply chain,” concludes Mraz. Recent moves by OEMs indicate that they will be delegating more responsibility to suppliers for parts, not just materials, which should mean additional opportunities for service centers. “This is a better fit for the distribution model than ever before,” he says.