The events of September 11th didn't change the airline industry as much as they accelerated the industry's progress toward a direction in which it was already headed-the consolidation of the hub-based premium carriers and the creation of new, low-cost airlines.

The aerospace and defense industry is facing a harsh new reality: Government largesse has been cut back sharply, growth is slowing, and companies now face intense competition when it comes to technology features, price and cost. The airline industry as a whole has seen passenger traffic fall more than 20 percent in recent years-several major carriers have even filed for bankruptcy-and used aircraft prices continue to fall. Now, after a decade of consolidation, only two or three companies remain in each of the major systems-integration segments.

Many airlines are making the necessary capacity reductions. The long-term winners will likely be large airline groups such as BA, Lufthansa, Cathay and Delta as well as the low-cost airlines such as Southwest and Ryanair. But second-tier carriers will find themselves under increasing pressure with some very difficult choices to make.

A few growth opportunities still exist in electronics and product support. But to win, aerospace and defense companies will have to choose projects strategically-and execute them flawlessly.

Bain's Aerospace and Defense experience

Over the past decade, Bain has completed nearly 200 projects for some of the world's largest aerospace and defense companies. We've advised our clients on topics that include growth strategies, merger analysis, corporate turnarounds and purchasing excellence to help them increase profits and build lasting economic value.

In the airline sector, specifically, Bain has advised 28 clients around the world on their most pressing business issues: fleet management, capacity planning, routing and scheduling strategies, growth strategies, and purchasing strategies to improve operations.

To find out more about Bain's work in Aerospace & Defense, please contact the practice.