The South African civil aircraft industry and the national economy

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Introduction and background

Air travel with its reliability, affordability and reduced time spent compared to land travel, is becoming more convenient for business demands that are associated with globalisation and competitiveness. The aircraft industry has been described by Eriksson (1995) as part of the high- technology sector that “includes the airframe companies that are manufacturers of the basic structure and assemble for that structure components supplied by other branches of the aircraft industry, the engine builders and equipment manufacturers including aviation electronics (avionics).
In this study, the civil aircraft industry forms part of the broader aerospace industry, which is described as a technological sector covering elements such as research and development (R&D), design, manufacture, support, maintenance, conversion and upgrade of both rotary and fixed wing aircraft, as well as their relevant subsystems and components (CSIR, 2003). The aerospace market is cyclical, with the cycles being closely linked to global economic performance. Prior to 2001, the civil aircraft industry was operating at full capacity with high production levels. Then, a global economic slowdown occurred.
It was believed to have been aggravated by events such as the attacks of September 11, 2001; the uncertainty in the Middle East, including conflicts in Afghanistan and Iraq; and SARS outbreak in Asia. The resulting decline in passenger air-travel led, in turn, to a decrease in demand for civil aircraft products. From 2005, the civil aviation sector began to recover, with civil aircraft manufacturers planning increased production that year, with further increases planned for the following years (House of Commons Trade and Industry Committee, 2005). The aircraft industry is broadly seen as an advanced, technologically complex and competitive sector that has a strong impact on other industries and on the national economy, and which is therefore strategically important for strengthening national competitiveness and international trade (Cho, 2000).
This view is in line with that of the House of Commons Trade and Industry Committee (2005), which described aerospace as a high-technology manufacturing industry that provides high-value goods and services to a wide range of markets. Eriksson (2006) also supports the view when indicating that aerospace industry is the ‘archetypical knowledge- intensive sector’, ‘characterised by complex, very high-value added products in relatively small quantities, produced by relatively few players’, with potential for linkages and spillover to other sectors. Eriksson (2000) indicated that “in many industrialized countries the aerospace industry together with some high-tech industries is strongly regarded as a source of technology renewal and thus a strategic industry that will foster spin-off and economic development”.
This has recently been seen applying to a number of developing and newly industrializing countries, especially in East and Southeast Asia. Advancements in technology have played a major role in the industrial development and economic growth of developed countries. It is acknowledged that the civil aircraft industry in these countries has kept pace with technological changes and has been innovative so as to remain competitive in the transport business market. Most developed countries have promoted the aircraft industry as an engine for continuous economic growth and advancement in technology (Cho, 2000). This is true for countries such as the US and France, which have succeeded in facilitating economic growth through the development of the aircraft industry. Kleiner, Leonard and Pilarski (1999) state that the aircraft industry is of particular importance in the US economy as it has been one of the dominant export sectors of high value-added goods.
It also recorded a trade surplus of $21,3 billion (on about 57% of total civil export volume) in 1995, and a trade surplus of $27 billion in 2000 (De Bruijn & Steenhuis 2004:382), which rose to a total of $32 billion in 2004 (Napier, 2005). During that period the industry was also the second largest provider of manufacturing jobs in the US behind automobile manufacturing, with an estimated annual average of 583 900 employees in 2004 (Napier, 2005). The manufacture of large civil aircraft is currently the largest single component of Europe’s aerospace sales, accounting for over €20 billion annually (Europa, 2005). In the EU, the aerospace industry contributed €1.9 billion to the EU trade balance (De Bruijn & Steenhuis 2004:382, 383).
However, the aircraft market is cyclical as it is dependant on airline acquisition plans, which fluctuate considerably, especially during times of uncertain economic prospects and global security concerns. The industry is of critical importance in the areas of maintaining superior defence technology, promoting rapid-growth industries, and improving productivity (Cho, 2000). For defence aircraft, demand is dependent on the defence budgets and the procurement policies of governments, which in turn depend on geopolitical developments and the changing perception of threat (Europa, 2005). It is essential for the aircraft industry to have as much predictability and stability as possible in both the civil and defence segments as the products in both these segments have many commonalities. This increases the chances of making best use of the knowledge base to optimise technical, human and financial resources, and increases the likelihood of each segment complementing the other during demand fluctuations in either one.

TABLE OF CONTENTS :

• CHAPTER I: BACKGROUND AND RESEARCH QUESTIONS
  • 1.1 Introduction and background
  • 1.1.1 The aircraft industry
  • 1.1.2 Overview of the world market
  • 1.1.3 The African aircraft market and investment
  • 1.1.4 The South African civil aircraft industry and the national economy
  • 1.2 General overview of the South African aircraft industry
  • 1.2.1 The South African aircraft industry and its market
    • 1.2.1.1 Market focus prior to 1994: Military market development
    • 1.2.1.2 Market focus post 1994: Civil market development
  • 1.2.2 The influence of the national environment on the South African aircraft industry
    • 1.2.2.1 Production factors
    • 1.2.2.2 Demand conditions
    • 1.2.2.3 Related and supporting industries
    • 1.2.2.4 Strategy, structure and rivalry
    • 1.2.2.5 Chance and the role of government
  • 1.3 The research problem and research questions
  • 1.3.1 Problem statement
  • 1.3.2 Research questions
  • 1.3.3 Reasons for selecting this study
  • 1.4 Expected contributions
• CHAPTER II: THEORETICAL BACKGROUND: THE CIVIL AIRCRAFT INDUSTRY AND NATIONAL TECHNOLOGICAL COMPETENCIES
  • 2.1 Technological competence and capacity building within firms
  • 2.1.1 The theory of dynamic capabilities
  • 2.1.2 Technological knowledge, learning and absorptive capacity
  • 2.1.3 National environmental factors and a firm’s competitive advantage
    • 2.1.3.1 The role of government in building national technological capabilities and competencies
  • 2.2 Innovation and technology challenges for civil aircraft development
  • 2.2.1 The need for technology advancement and sustainable development
  • 2.2.2 Technology transfer and its impact on technology development
  • 2.2.3 R&D investment and its impact on performance in the global technology trade
  • 2.2.4 Adoption theory of innovation
  • 2.2.5 The theory of innovation networks
  • 2.3 Technological competence and the capacity-building paths followed by various countries
  • 2.3.1 The United States aircraft industry
    • 2.3.1.1 Collaboration in America
    • 2.3.1.2 Lessons learned from US collaborations
  • 2.3.2 The United Kingdom aircraft industry
  • 2.3.3 The Japanese aircraft industry
  • 2.3.4 The South Korean aircraft industry
  • 2.3.4.1 Some of the lessons learned by South Korea
  • 2.3.5 The Brazilian aircraft industry
  • 2.3.6 Summary of other countries: Successes and problem areas
    • 2.3.6.1 The United States
    • 2.3.6.2 The United Kingdom
    • 2.3.6.3 Japan
    • 2.3.6.4 South Korea
    • 2.3.6.5 Brazil
    • 2.3.6.6 Theoretical relevance to the research area
  • 2.3.7 Some highlights of the South African aircraft industry
    • 2.3.7.1 Some challenges and problem areas
    • 2.3.7.2 Highlights of current initiatives by government and industry
  • 2.3.8 Situational analysis of various countries in comparison to South Africa
  • 2.3.8.1 Common paths and trends followed by various countries in developing technological competence and capacity building
    • 2.3.8.1.1 Strategic alliances and collaboration
    • 2.3.8.1.2 Research and development (R&D)
    • 2.3.8.1.3 Government policy in support of technology development
    • 2.3.8.2 Conclusion: What the common paths and trends mean for the South African aircraft industry
  • 2.4 The existing gap in theory and literature
• CHAPTER III: ANALYTICAL FRAMEWORK: DEVELOPMENT STRATEGIES WITHIN THE CIVIL AIRCRAFT INDUSTRY
  • 3.1 Current theories, models or methods applicable in the study
  • 3.2 Technological capacity-building framework/models used by other countries: Case studies
  • 3.2.1 The United Kingdom
  • 3.2.2 South Korea
  • 3.3 Development of new or improved frameworks or models
  • 3.3.1 Proposed conceptual framework
• CHAPTER IV: RESEARCH DESIGN AND METHODOLOGY
  • 4.1 Research design
  • 4.1.1 Type of research
  • 4.2 Research strategy and methodology
  • 4.2.1 Approach and strategy for performing the research
  • 4.2.2 Methodology
  • 4.2.2.1 Case study research
  • 4.2.3 Research instruments and methods of data collection
    • 4.2.3.1 Research interviews
    • 4.2.3.1.1 South African interviews
    • 4.2.3.1.2 International interviews

• CHAPTER V: DATA GATHERING AND ANALYSIS
  • 5.1 The data gathering process
  • 5.2 Analysis and discussion of findings
  • 5.2.1 South African responses
  • 5.2.2 International responses (South Korea, Brazil and France)
  • 5.2.3 Comparative analysis of South African and international findings
  • 5.3 Inference of new theories and propositions
  • 5.4 Finalising new theory and frameworks
  • 5.4.1 Framework for technology capability building through public–private partnership
  • 5.4.2 Institutional structure for the development of national aircraft technology
  • 5.4.3 The South African Aircraft Industry Corporation (SAAIC)
• CHAPTER VI: CONCLUSION AND RECOMMENDATIONS
  • 6.1 Interpretation of findings
  • 6.1.1 Answering the research questions
  • 6.2 Contribution to theory and applicability
  • 6.3 Research achievements
  • 6.4 Recommendations for policy and further research

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