ILMA Compoundings - July 2020 - 22

collapse of fuel prices removes any urgency from new product development.
"Most of what the aerospace industry does in terms of
R&D comes back to saving fuel, and all of a sudden, fuel
got a whole lot cheaper," he said. "Unfortunately, people
tend to think relatively short term. That's understandable.
Right now, everyone's focused on keeping their nose above
water, so R&D cutbacks are kind of inevitable."
And don't expect giant leaps toward futuristic flying
machines, added Aboulafia. The industry prefers a steady
gait and gradual evolution over disruptive innovations.
Instead, it's the suppliers and vendors such as lubricant
manufacturers that provide "the building blocks that
enable the incredible performance achievements we get
in this business year over year." Fuel efficiency increases
1% to 2% every year because the fuel and lubricant
manufacturers and alloy developers continually offer the
innovations they've developed.
"It's a fascinating tapestry," said Aboulafia. "That's the
strength of the industry. It's not the guy vending a jetpack.
It's lots of people working on enablers that cut fuel consumption and improve performance. That's the heart of it."

Globalization Continues

In the drive to reshape the global economy, many businesses
are thinking of shrinking their global footprints, tightening
supply chains against the threat of future disruptions.
Aboulafia doesn't see this trend as a retraction of globalization, although he admitted to "being a little bit contrary
here. Yes, there are going to be lots of stories about reconfiguring, say, away from China toward Mexico. That's still
globalization. It's reconfiguring globalization, but that's still
a reassertion of globalization."
He also foresees the possibility of trade peace replacing
trade wars, "because you're going to see some parts of the
world come back faster." Commercial aerospace is an 85%

JULY 2020

| COMPOUNDINGS | ILMA.ORG

"Unfortunately, people tend to think
relatively short term. That's understandable. Right now, everyone's
focused on keeping their nose above
water, so R&D cutbacks are kind of
inevitable."
Richard Aboulafia, vice president,
analysis, Teal Group Corp.
export business, and players will look for opportunities in
robust markets, wherever they are. In an atmosphere where
aerospace and other industries cultivate international commerce, policymakers will be compelled to follow with trade
deals instead of barriers.

Looking Toward Recovery

Looking ahead, Aboulafia sees some good news in the
potential availability of financing, unlike during the 2008
financial crisis. Government aid is key to restarting aircraft
production, although the concept of "pulling demand
forward" by using public aid to maintain some functions
merely has the effect of muting recovery.
"You're building in anticipation of recovery," Aboulafia
said. "When you're using government aid money to smooth
things over, the uptick is not going to look quite as sharp."
Lubricant manufacturers that adhere to business fundamentals will emerge from the pandemic crisis in a position
of strength. Damiani pointed to Radco's outstanding experienced management team with "years and years of financial,
manufacturing and marketing experience."
"We anticipate problems, we're prepared for problems,
and then when problems arrive, we're able to work through
them," he said. "We have a strong supply base. We have
strong management. They're able to shoulder through crises
like these. Always have."
McCormick is a Pennsylvania-based freelance writer and a frequent
Compoundings contributor.

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ILMA Compoundings - July 2020

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