Bruce Andrews and Conor Barnard of Alderman & Company say that while the airline industry is likely to continue to take a cautious approach to AI adoption, there are signs that AI is impacting M&A activity. says it already exists.
From machine learning, already widely used in nearly every industry, to the recent emergence of generative AI and its transformative potential, the rise of AI is undeniable.
However, the aerospace and defense industry appears to be taking a more cautious approach to AI adoption than other industries.
This article examines the state of AI adoption in the aerospace and defense industry and why it takes longer to implement AI in this sector than in other industries.
A&D has been slow to adopt and implement AI, largely due to the stakes and risks associated with the industry.
For example, flaws in AI can lead to product quality and distribution issues in industries such as consumer packaged goods, but the stakes are higher when AI technology is flawed in the cockpit of an airliner or on the battlefield. it’s different.
We believe the A&D sector will continue to lag behind many other sectors in the adoption and deployment of AI because of the risks and risks.
Although the industry has been slow to adopt in many ways, it is still embracing AI.
Examples include contactless applications and solutions that require little or no human intervention, such as airport check-in and passport control.
We are also seeing AI enhancements to dynamic ticket pricing, which improves airline profitability by maximizing revenue based on load factor.
Other examples of AI deployment include more accurate delay prediction. This can alert the traveling public to find solutions faster and improve customer satisfaction.
Additionally, AI-powered tools that enable dispatchers to manage flight route optimization, crew scheduling, and predictive maintenance are rapidly advancing.
There are many other important areas in the A&D industry where AI is increasingly being applied clearly and effectively.
One such area is satellite management and maintenance. According to satellite manufacturer Phantom Space, the current cost of operating a constellation of satellites is hundreds of millions of dollars, but with the application of AI this number could shrink to between $10 million and $15 million.
In this case, AI enables the constellation to quickly detect and respond to changes in the environment to maintain optimal performance.
AI is now being implemented in aircraft production to help optimize production manufacturing by providing data analytics on how changes in manufacturing processes can reduce total costs.
Specifically, Germany’s Broetje-Automation is using AI to help design and implement skin tightening machines for aircraft fuselages.
Without AI, mechanics would have to manually turn the fastener feed feature on and off at their discretion.
Thanks to the benefits of AI, clustering, and genetic algorithms, these machines are having a significant impact on reducing the manufacturing time of aircraft sections.
Another important factor to consider when analyzing the potential growth of AI in A&D is funding for AI by the U.S. federal government.
In 2022, the United States Department of Defense (“DoD”) spent $874 million on AI technology, an increase of 50% over the previous year.
This number increased to $1.8 billion in 2023, an increase of 106% from 2022. The main forms of U.S. government support for AI include direct funding to AI contractors and funding for advanced AI research.
As federal funding for AI continues to increase, aerospace and defense companies are finding that AI integration is becoming increasingly important to securing federal contracts.
As the use of AI tools increases across the aerospace and defense industry, efficiencies should increase and profit margins will increase accordingly.
If the promise of AI is true and it actually leads to higher profit margins, then the corporate value of all sectors of companies that successfully apply AI should increase accordingly, and the M&A multiple should rise accordingly.
Until now, startups focused on AI in the aerospace and defense industry have raised money through venture capital.
However, as the market matures, these AI suppliers may increasingly turn to M&A to leverage the government relationships and established access to capital of larger, more established A&D companies. There is a gender.
However, many large A&D companies that don’t have the time or bandwidth to tackle AI R&D in-house will consider acquiring smaller AI players to accelerate the adoption of this new technology in their operations. Probably.
AI deals in A&D are already on the rise, including AeroVironment’s $120 million acquisition of Tomahawk Robotics, a startup in AI robot control systems designed for military applications.
Parsons Corporation also acquired Sealing Technologies, an AI-based cybersecurity solutions company, for $200 million. And Saab acquired CrowdAI, a visual automation AI company.
Over time, we expect to see more acquisitions like this as AI becomes integrated into operations across the aerospace and defense industry.
source:
Artificial Intelligence in Aerospace and Defense: Slow Path to Disruption
https://www.boeing.com/content/dam/boeing/boeingdotcom/features/innovation-quantly/archive/IQ_2019_April_Winter_FINAL.pdf
