Sergio da Cunha Oliveira, General Executive Manager of PEMAS (Portuguese Aerospace Industry Association).
Cluster culture allows more firms to be able to grow through the establishment of symbiotic relationships between each other.
In a few months PEMAS will celebrate its 10th How has the aerospace sector changed over Portugal in the last decade?
The changes in the aerospace sector in Portugal in the last decade were considerable and, PEMAS believes, have produced an important impact on the national economy.
From a scenario where the majority of the aerospace business was based in MRO and/or aircraft operation, Portugal evolved to become a player in manufacturing, supplying complex parts and sub-assemblies.
The local industry, although it had already several “point-to-point” commercial contacts with several international players, started off developing, through collaborative projects, a modus operandi of adding value to its offer and presenting itself as a common aggregated supplier.
Certainly, one of the major positive influences was the recent investments by Embraer in Portugal, allowing the national industry to benefit from the fact of having the operations of an OEM in Portugal, with two plants working as Tier-1 suppliers.
Public policies defining the aerospace sector as a strategic factor for economic development, together with a change of mind-set, also allowed the arrival of younger and more innovative companies, strongly contributing to the flourishing of the sector in recent years.
We like to think that PEMAS had a part in this process – since it now represents the majority of the industry – by fostering collaborative international projects, promoting the sector internationally and giving it much needed visibility.
Small and medium-sized enterprises play an important role in the aerospace industry. What are the main challenges they will face in the sector in the near future? Why is the cluster culture so important?
There’s wide evidence that dynamic SMEs spawn innovation and novel ideas. It is known that innovation is paramount to the aerospace sector hence SMEs will always have a key role in the aerospace industry value chain.
The future of SMEs (as of the whole industry) is bound for some changes in the status quo. The order backlog and the foreseen growth of the industry indicate that the supply chain has to adapt in order to cope with this expected growth.
Furthermore, and when aiming to externalize parts and processes so far conducted in-house, OEMs and major Tier-1 are, for some time now, passing on the message that the supply chain has to absorb more responsibility and, with it, more risk.
With this, the supply chain is following, in many cases, one of three paths: consolidate into bigger companies, cluster up or disappear. Although this notion is, of course, extreme, players in the supply chain, and SMEs in particular need to take this challenge very seriously, figuring out the best way to keep efficiency and competitiveness as part of their DNA.
The cluster effect of SMEs is the industrial equivalent to a school of fish in the ocean. Stick together, act together, seem bigger, swim faster and increase the rate of survival.
This allows for more companies to grow through the establishment of symbiotic relationships that often have several unforeseen externalities, favouring the entire surroundings and not only the entities directly involved. Because of these advantages and several other potential spillovers, the cluster organisation of companies is probably the most effective way to go.
Structures, materials and production represent a very important percentage of the core aerospace business in Portugal. Which other fundamental capabilities are expected to grow?
As referred to before, due to its size and the consequent size of its industry, Portugal has to take up the position of niche supplier. Portuguese companies can and are exploring the advantages of their relative size, given that, in a worldwide size comparison, they are relatively small.
They are dynamic, innovative, proactive and costumer-oriented, highly technological and maintain a very close relationship with R&D Centres and other knowledge gathering entities (Universities, Tech. Centres, Research Institutes, etc.); all of this put together opens new doors for new businesses.
Recently we saw growing activity in areas such as Embedded Systems, Structural Health Monitoring and advanced intelligent material solutions, novel composite materials and manufacturing processes, award winning aircraft interior design solutions (Crystal Cabin Award), UAV design and manufacturing and system development, all with very good outcomes.
We believe that as the cluster evolves, the companies will amaze us with other inputs to the industry.
The two regions of Andalusia and Portugal are very close, but perhaps they could be considered as being a long way from better aerospace cooperation?
Although PEMAS has a long lasting relationship with Andalusia – since before the creation of Fundación Hélice and Aeropólis – we believe that there is always more work to do and room to improve.
The obvious proximity and fundamental development aspects of the aerospace industry on both sides is a very important aspect for further cooperation and commercial development. Encouraging companies to establish relationships is always difficult at first, but entry through development projects is a possible way.
In recent years the growth in participation of Portuguese companies in international development projects has led to the establishment of several commercial relationships with the development consortia after the end of the project that introduced them.
Continuous coordination on regional support policies and funding schemes will remain helpful to ease the processes and promote collaboration between the Portuguese and Spanish entities.
More than 100 companies with a turnover of 1.72B€ make up the aerospace and defence industry in Portugal, employing approximately 20,000 people across the country. How can aerospace policies be improved?
It is not certain that the size of the cluster will experience a considerable growth in number of members in the coming years. We do believe that the critical mass of entities acting in this sector is about to be reached, but the efficiency of the cluster is far from being maximized and more can be done with the competencies already installed.
Public policies can also be a game changer in this process. The development of situations such as strategic definition of competitive areas and definition of a long term support programme focused on product development and the achievement of concrete results can, most definitively, change the current status.
So far, the funding/support programmes – mostly based on European support models – were generic enough to accommodate any industrial area, but the lack of a long-term strategic focus (and most probably also the lack of aerospace industrial “champions”) didn’t induce the companies to “row” in a single direction knowing that the “finishing line” would be found more or less in that defined direction.
Putting aside the rowing analogies, the policies that could eventually influence the aerospace market in Portugal have to be aligned with the timing of this market – long development processes and time-to-market, regulation barriers to the introduction of new ideas and/or products, joint commercial efforts to approach OEMs and large Tier-1 and a very established international value chain.
Don’t get the message wrong, if there is a time to enter this market, the time is now. The supply chains are bursting and have to be rethought, the demand for new airplanes is doubling in every decade and it shows no sign of slowing down.
Portugal is already on the aerospace map; now we will keep on working and joining our efforts to prove our value. Because we know that our players have it.
PEMAS, together with the National Defence Industry Association – DANOTEC and the Portuguese Space Industry Association, created AED Portugal as a national “super cluster”. Perhaps this kind of partnership will make cluster culture more competitive in the future?
The creation of AED Portugal was, for us, a natural and logical step.
From a long lasting cooperation with both DANOTEC – Defence Industry Association and PROESPAÇO – Space Industry Association and from a technological stand point of several cross sectoral applications within the companies’ competencies, the joining of efforts in a single entity was a step of natural continuity.
Joining the dots, we have the unquestionable and clear advantage of increasing the numbers by widening the scope – more companies mean more visibility and representation before decision-makers on public policies; more companies and a broader scope allows for more cooperation on projects. Technologically there are several areas that are transversal to aerospace, space and defence; the proliferation of dual-use technologies lessens the usage barriers between what is civil and what used to be exclusively related to defence and sSecurity, hence, the commonalities of the sectors are sufficiently established to mean that the differences between them are largely overcome.
The underlying logic that validates cluster association and its benefits was and is applicable in the definition of AED Portugal – the creation of a wider collaborative network that can find in its common interests ways to create value for all.