The Aerospace Valley World Competitiveness Cluster allies the Midi-Pyrenees & Aquitaine regions to constitute Europe’s leading pool of jobs in the field of aeronautics, space and embedded systems: - bi-regional and the largest R&D cluster in France-130,000 industrial jobs-1,600 establishments-1/3 of France’s workforce in aeronautics, and over 50% in the space sector-8,500 researchers-2 of France’s 3 prestigious aeronautics and space engineering schools

The headquarters of Aerospace Valley is located in Toulouse. Chair of the cluster is Agnes Pillard, who is also vicechair of Airbus France.

Aerospace Valley

The Aerospace Valley cluster is comprised of seven « collèges » or bodies :

-SMEs -Industry leaders-Training organizations-Research centers-Economic development organizations-Public and regional bodies-Trade organizations and related partners. Facts and Figures:Number of companies: Large companies: 60; SME: 260

Number of employees: Accumulated: 130,000 employees in industry

Number of research institutes Research: 17

Other cluster members Training & Education: 45 Headquarters:- located in Toulouse, and a local office in Bordeaux, the cluster covers the two

geographically adjacent regions Midi-Pyrénées and Aquitaine. Cluster Management:- Organizational form: Association LOI 1901- Financing: 1/3 French National State 1/3 Local and regional authorities

1/3 Membership fees

Main Actors:- OEMs: Airbus, Dassault-Aviation, Sogerma, Thales Alenia Space, - Electronic suppliers: Alstom, Freescale, Continental Automotive, Thales

Avionics, - equipment suppliers: Alema, EADS Composites Aquitaine, Creuzet,- Research centres: ONERA, INRIA, CNES, CEA, CERFACS- Universities: ISAE (merge of Supaéro and ENSICA), ENAC, EMAC,

Universities of Toulouse, Bordeaux and Pau. Science $ Research: - 480 R&D projects (with an accumulated total budget of 725 M€; of which

307 M€ are public funding) between industry and research organizationsExample: ONERA, the French Aerospace Laboratory is the major element of

French aerospace strategy.

https://www.youtube.com/watch?v=qnTLxcViP8I

R&D Support ONERA, the French Aerospace Laboratory is the major element of French

aerospace strategy. ONERA has 2000 employees including 1500 researchers and technicians, at eight locations in France. (Total budget in 2010 - € 227 million.)

Tax credits and tax deductions Loans - Besides R&D support, France provides repayable launch investment (RLI) for

new aerospace products through its Department of Transportation. Government would advance up to 33% of the program cost, and the loan must be fully repayable if the project is successful over a 17-year period, with a 0.25% interest rate plus the cost of government

Export Support: COFACE (Compagnie Française d’Assurance pour le Commerce Extérieur). COFACE is a private sector credit insurance company that manages French exports, whose main client is Aerospace industry. (40%)

Educational Support Toulouse is home to several prominent universities, known as Grandes Écoles, including the French Civil Aviation University (ENACiii) and Higher Institute of Aeronautics and Space (ISAEiv), which both train hundreds of engineers and conduct advanced research on subjects related to aerospace.

Aerospace industry is gaining more market share, while the other clusters from France are declining in world market share

The growth regions of Africa, Asia/Pacific, Latin America, Middle East and Russia & CIS, where long-term GDP growth is forecast above average, will require a significant number of new aircraft to support the growth of the aviation industry

Emerging clusters in Asia are estimated to compare one third of the future airframe demand

The client-supplier relationship changes... becoming more integrated consequently, OEMs limit the number of suppliers on their new programs

Global competition in lower tiers is becoming very fierce

•Low cost manufacturing workforce that can deliver good qualityMexico China US India Russia Brazil Malaysia Morocco• Projected growth of 20% per year in A&D manufacturing• Opportunity for the Mexican A&D Industry & Government to gain global attractiveness by:– Raising the level of expertise through technology transfer– Investing in related sectors of Education and R&D– Improving national infrastructure and security• Same geographical advantages towards US Industry that have long favored Canada

Within the last years emerging aerospace clusters in Canada, Brazil, and China will increasinglythreaten Toulouse’s leadership. Indeed, Bombardier, Embraer, and COMAC respectively are competing in the narrow body aircraft market.

Competition across the World

In the next 10 years, innovation in the aerospace area will be more incrementalImportant factor, but should be focused on cost reduction, improvement for customers (very present in Airbus for instance)

Radical innovationIn the defense sector, radical innovation is no more profitable: actors cannot invest anymore in new planes with the low volume soldIn civil sector, because of the new actors on the market ( Russian, Chinese, …), practicing radical innovation can be risky.

The Cluster Value chain

The Toulouse part of the cluster is most prominent in final integration, which is the largest value added step -> the OEM must tightly manage the systems development throughout the chain to ensure that all modules are interfaced properly and delivered on time in order to not hold up an aircraft or spacecraft.

Airbus Value Chain

Airbus has created a global value chain that contributes to its commercial aircraft product line.Airbus outsource manufacturing many of its aircraft main parts to key partners inside and outside the cluster.Partners inside the clusters such as Composites Aquitaine to manufacture Frames, Wings Fairing panels, and Fuel Tanks Partners outside the clusters such as GE and Rolls Royce to manufacture engines.Airbus maintain Modular Relationships with those partners, regarding to the highly complex and codified transactions.

Aerospace valley located in France which R&D intensity remained in the range of 2.07-2.21% of GDP, about 16% above the EU-27

average.

Intensity of the interaction with the RIS

The French cluster policy and support is characterized by strong focus in limited regions besides Aerospace valley, there are two more clusters which were approved in 2007 (Ast tech in le de France and PEGASE) These two clusters have set up strong links under guidance of Aerospace valley.

Example: periodic reviews and evaluation of R&D projects are conducted, best practices are shared and international initiatives are coordinated.

Innovative initiative project to support SMEs.Today around 30 SME-companies of Aerospace valley have benefited from this initiative.

Being part of a large community: annual forums and fairs, seminars.

Strong Cooperation with foreign clusters>FORMAL Bilateral cooperation agreements with:Montreal, Canada - AéroMontréal (MoU), GARDN, CRIAQ (cooperation)São José dos Campos, Brazil CECOMPI (MoU)Liège, BelgiumSkywinWallonie (MoU)Hamburg, GermanyAviationClusterHamburg (MoU)Farnborough, UnitedKingdomFarnboroughAerospaceConsortium (MoU)Tianjin, ChinaTianjin Free Trade Zone (cooperation)Bilbao, SpainHegan (MoU) Note: Collaboration R&D projects,

exchanging the experience and knowledge;Creating international initiatives;

A government sponsored Institution For Collaboration (IFC):o to enhance the cluster capabilities through bolstering R&D collaboration

and by establishing ties with other aerospace clusters in Europeo charged with coordinating scientific research and promoting the cluster on

the global arenao fostered an increasing number of R&D collaboration projects among its

~600 members, and is gradually building ties with other European IFC s. Ex. Supported the exchange of trainees and develop of joint degrees studies with the Hamburg Aviation cluster

Member of Aerospace Cluster Partnership:

- 39 IFCs from 13 countries

- promoting knowledge exchange and innovation between partners

- improving collaboration between clusters and companies to increase European competitiveness in aerospace

Contacts with Tianjin in China, particularly the Tianjin Airport Industrial Park

in 2007, several aeronautical schools have signed an agreement with the Civil Aviation University of China in order to train Chinese aeronautics students following European training standards

Another informal exchanges with e.g. Hegan(ES), BavAIRia (DE), etc

The process of globalization leads to structural changes inside the cluster

An international value chain: Parts Manufacturing and Subsystem Assembly (different systems constructed in different cities, primarily in Europe)

Outsourcing outside the cluster

OEM’s and Tier 1 Suppliers move to emerging markets:To stay connected with the market that will drive demandTo find new suppliersTo reduce pressure from New Players: SUKHOI, COMAC, etc. To innovate by using strong IT labor in developing countries (India)

Essential for sustained, profitable growth and long-term productivity

Enable the OEM’s to match their global demand for innovation with worldwide sources of talent and capital

New ideas, new fresh outside perspectives A replacement for the vertically integrated

approach to innovation Lets players co-invent with customers, source

and market innovations anywhere, anticipate and respond to supply and demand changes worldwide

Government ownership on France’s private sector can have a negative impact on the competitiveness of French enterprise:

Lower pressure on businesses to increase long term profits, leads to bureaucratic oversight meddling in corporate affairs regarding, employment and

corporate strategy For instance, the sale of government stakes in large French corporations,

including Airbus parent EADS, would generate well over €70 billion in revenue to the government for:

R&D research Investing it in public debtEstablishing new engineering centers in developing countries and inside the cluster

Despite a high level of investment in R&D, France suffers a lower degree of patent development per capita than other developed countries:

Attributed to the fact that in France, it is largely unclear who owns intellectual property rights for inventions created in state funded research institutions.

A report by the EU Economic Policy Committee characterizes France’s universities as “poorly organized to address the complex issues of patent rights.” (qtd. in Siepmann, 2004)

Solution: France should introduce new legislation similar to the U.S. Bayh-Dole Act, which permits government funded agencies to retain intellectual property rights to inventions derived from the fruits of government-funded research.

their work towards areas where new patents may be awarded. Also, kick start entrepreneurship: researchers would then be

able to convert the patented inventions into new businesses push more advanced technologies to existing clusters.

Airbus and other OEMs in the Toulouse cluster should seek to limit the extent of outsourcing on their products in order to keep core research and development and manufacturing capabilities in-house. Otherwise, the long term

viability of the cluster is at risk by the erosion of the competitive advantages in design and integration.

Indeed, leadership in innovation is critical to create revolutionary platforms such as the A380 jumbo jetliner

Compete effectively against the low-wage clusters that may go upmarket in the next decades.

Outsourcing of peripheral and non-leading edge capabilities is recommended in four cases. 1. Coproduce locally is acceptable when it gives access to protectionist markets with large demand such as China, India, and Russia. 2.Cost reduction to continue competing successfully. Ex. Malaysia, Mexico, Romania, or Ukraine. 3.Give access to human capital or specific raw material like titanium.4.Can mitigate the effects of a strong Euro against the US Dollar. Thus, Airbus could send basic non-core production either to lower-wage overseas countries with currencies pegged to the US Dollar, or to the USA for a natural hedge (ECORYS, 2009). .

Big companies like Airbus could offer some grants to students Invest in innovation: invest in innovative start-ups, based near schools campuses, and make cooperation between business and engineering

students Tax advantage: to stimulate innovation within the country, the government should reward

innovative companies, by avoid them to pay a tax if they launch an innovative project Accelerate innovation – by increasing the yield on product and process innovation to

accelerate top-line growth • Reduce time-to-market – through lean processes, a higher yield on designs and faster

cycle times • Leverage globalization – through real-time collaboration with global partners and

suppliers • Optimize resources – greater efficiency through the product lifecycle and digital

product and process validation • Ensure compliance – by incorporating customer and regulatory requirements at all

stages of the product lifecycle and by automating the process of documenting compliance

Presentation maid by:1. Khatab Alqararah2. Victoria Rosca3. Ussenov Manas4. Yousra Zaghdoud Bernichi