Neil Rub, our Regional Manager of Aviation & Aerospace Vertical in MAIR (Middle East, Africa, and Indian Subcontinent Region), sheds light on how startups in aircraft manufacturing are bringing new ideas and, therefore, special expertise when it comes to how they move their resources, prototypes, and more. And what do governments and airlines gain from startups' success?
Chris Parker: Hello, everyone, and welcome to the Expeditors Podcast, where we look at the logistics and freight forwarding industry through the lens of a global logistics provider. I'm your host, Chris Parker, and today's all about aircraft and aerospace manufacturing startups. The impact they have on this industry and how solid logistics, knowledge, and planning are key to their success. With me today is the regional manager of Aviation and Aerospace, Neil Rub. Neil, how are you doing?
Neil Rub: I'm doing well, Chris. Thank you for having me on this podcast.
Chris Parker: Absolutely. It is a pleasure to have you. Neil, before we get started on talking about startups within aerospace and aircraft manufacturing, I'm really curious to know a little bit more about you. What do you do as regional manager of Aviation and Aerospace?
Neil Rub: Okay, so in the MAIR region, you got healthcare, you've got mobility, and then you've got us. The verticals, by their sheer plan and design, were meant as subject matter experts to help with the development of customers within our regions, as well as helping the company set up solutions for the industry. Think of it like a close band of three or four people trying to drive the same universal message across the company and trying to develop customers for a mutual benefit.
Chris Parker: Yeah, absolutely. And when you say MAIR, which is M-A-I-R, it's an acronym here at Expeditors. What does MAIR mean? What region is that?
Neil Rub: Oh, yeah. You know how we love our acronyms. MAIR is Middle East, Africa, and Indian subcontinent region. So, long and short, if you take the region, it starts in Bangladesh, and it extends all the way across to the Western half of Africa. So, it's a very large geographical region, very diverse, speak multiple languages, culturally very, very different. But, also super exciting.
Chris Parker: Yeah. Yeah, for sure. And, on that note, what is most exciting to you about this region, or whether it's just the India market itself? Because you're based out of Mumbai, correct?
Neil Rub: That is correct. I'm based out of Mumbai, so yes. Obviously, the India growth story is here for everyone to see. It's one of the fastest-growing economies in the world. Also, in terms of aviation aerospace, it has a tremendous scope for growth, and I believe the stats were saying something like a couple of thousand new aircraft to come in the next four or five years.
Chris Parker: Wow.
Neil Rub: But, interesting, the rest of the region is also very exciting. If you look at the Middle East as a driver of growth in this industry, three of the largest carriers in our region and potentially also in the world are from the Middle East, you've got Emirates, you've got Etihad, and you've got Cathay Airways. When you have such large airlines, and you also have governments that are cash-rich and willing to fund growth, the growth of airlines will automatically see the growth of the industry because you'll have new terminals being built. You'll have a lot more aircraft; you'll have a lot more spare parts being shipped, and so on, so forth.
Neil Rub: The Middle East, as a driver of growth, is going to be very, very strong for the foreseeable future, both in terms of how the airlines will grow, as well as how infrastructure is scheduled to be growing because the governments want to invest in that infrastructure for the future. Africa, again, it's a latent continent. It's a continent where there's tremendous growth potential and, therefore, growth that can be exponential. So, we are looking at a region that has established economies, that has high growth path economies, that has cash-rich economies. It's very, very diverse and very, very interesting.
Chris Parker: No kidding. Yeah. There are so many directions to go.
Neil Rub: Absolutely.
Chris Parker: All right. Let's switch over to the topic today, which is all about aerospace and aircraft manufacturing. Could you set a baseline here and help me understand how this industry works right now? And, I guess also walk me through the steps of where certain suppliers come in.
Neil Rub: Excellent question. Let's start by first understanding that historically, there've been the large OEMs or original equipment manufacturers. You can name them: Airbus, Lockheed Martin, Boeing, obviously the biggest one. Traditionally, their role has all been about designing, building, testing, selling, and then maintaining the aircrafts. What's missing in this entire story is the physical manufacture of parts and components, which these OEMs don't do themselves.
Chris Parker: Oh, okay.
Neil Rub: Traditionally, in the western world... And, I use the old western/east terminology, in the western world, most of the aircraft manufacturing is privately owned, which includes the likes of Airbus and Boeing, and so and so. Whereas, in the rest of the world, it's actually government-controlled. So, you have governments that invest and build and manufacture aircraft, including in China, in Russia, even in India. So, the basic ecosystem is that, at the top of the tier, you have the OEM, that is the one that's actually putting together the aircraft. I wouldn't use the word manufacturing. I use the word putting together. And then, below that, you have an entire ecosystem of tier one, tier two, and tier three suppliers. So, you have the tier ones, the likes of, let's say, GE Aviation or Raytheon Technologies. And then, you go below that to a tier two supplier that does assemblies and parts, and then below that to a tier three, and so on and so forth.
Neil Rub: So, it's like a pyramid, that at the top of the pyramid or the top of the hierarchies, the OEM and below them are all these tiers of those various suppliers of complexity and magnitude. Now, just as an interesting tidbit, Boeing as a company, operates an ecosystem of 12,000 suppliers.
Chris Parker: Wow.
Neil Rub: So, that's how large this ecosystem can get, and now you're looking at 12,000 for Boeing. I'm sure Lockheed has their own. I'm sure Airbus has their own. And these need not be the same suppliers. They could be disparate suppliers in different geographies. So, this is how the industry is currently set up to manufacture an aircraft.
Chris Parker: I'm assuming that this model has not changed for some time.
Neil Rub: It has not. And then again, like the old saying goes, if it ain't broke, why fix it?
Chris Parker: Sure.
Neil Rub: It's been working so well for them. It's profitable. It allows them to do what they do without having to... How should I say it? Change or inherit more risk. So, it's worked for everyone, and you can see that the distribution of wealth because of the production of an aircraft is beyond just where the aircraft is assembled. Every state, every city, every industrial tier gains from the offshoring of manufacturing, if you like.
Chris Parker: Interesting. Okay. Then, bringing in startups into the mix, are they challenging this model, or are they improving it? What do they do differently within manufacturing?
Neil Rub: Oh, absolutely. That's a really important question. The one thing to establish is that manufacturing has been pretty much the same over the last, I would say, two or three decades. You have the same general family of aircraft, you have the same general design methodology, you have the same engine design and fuel being used, and you're sourcing parts from the same specific certified manufacturers. Now, what the startups are doing, is trying to disrupt this entire microcosm and trying to create something new, so they are also pushing the envelope in terms of design, in terms of materials being used in the aircraft, in terms of what that aircraft has been used for, or its usage. And, in terms of technology, including very, very interesting things like 3D printing, and let me share with you, just today, I heard that a German manufacturer has actually begun to 3D print critical parts of a wing structure and hopes to eventually, do an entire aircraft 3D printed.
Chris Parker: Wow.
Neil Rub: Now, that is massive. Imagine it's as good as you and me sitting in our garage and doing it ourselves. So, they're pushing the envelope. They're not willing to take the established way of doing things. Most importantly, they're also willing to manufacture themselves, which the OEMs today don't do. So, these startups are saying, "Hey, we'll build it ourselves. We'll do everything ourselves." Of course, they inherit a higher risk, as they have no firm orders in place, and as you know, not every startup is successful. Maybe 1 in 10 or 2 in 10 succeed, but 8 in 10 don't. These startups are also flexible enough to try and look at new markets, new sourcing strategies, tech suppliers who hitherto have never worked within the industry. And quite honestly, I hear a lot of positive commentary about startups being the new coffee. The users like to hear what the startups have to do because these guys are thinking different, they're vibrant, they're brash, and they're willing to shake the system.
Chris Parker: So, then how do you think major manufacturers feel about startups and what they're doing?
Neil Rub: Well, actually, there is quite... How should I say? There is a meeting of minds. It's not divergent, though, it's not competitive. Lot of what the startups do will also be used by the major OEMs in some way or form, and I'll give you a simple example. I've read a case about a particular MRO... An MRO is a maintenance repair overhaul company that essentially does the maintenance of aircraft. So, this MRO is now using drones to do aircraft inspection, so rather than have somebody climb up and down and clamber up and down the body of the aircraft, they've got a drone that's programmed with a very, very high-end camera that can actually pick out defects, and it flies all across the aircraft, and finds out what it needs to find out. Now, here is a perfect example of a startup, a drone company, actually helping an OEM manage their maintenance, so it's not a clash of civilizations. It's actually a very healthy interchange of ideas.
Chris Parker: Yeah. It really is this new... Just new perspectives coming in and changing things up-
Neil Rub: Absolutely. It's just the new way of doing things.
Chris Parker: No, that's awesome. That's awesome. What other big breakthroughs, then, have you heard recently that startups are bringing to this market, this industry?
Neil Rub: Oh, so let me start by saying that first off, there was interesting announcements made last year and the year before about IATA and its members committing to an ambitious target to make flying net-zero by 2050. So, net-zero, in terms of your carbon footprint. Now, that is a tremendous goal. You can imagine how difficult that is because today, we are all burning fossil fuels, we're flying thousands and thousands of aircraft. How do you actually become net-zero? The only way is through innovation, and this is what startups are doing. So, startups first, for example, let's look at fuels. The most basic thing that goes into an aircraft today, everybody uses standard aviation turbine fuel or ATF, which is a... How should I say it? It's like kerosene on steroids. But, it's a fossil fuel. It's going to create a carbon footprint.
Chris Parker: Absolutely.
Neil Rub: So, what the startups are doing is they're looking at working on something called sustainable fuels, or SAFs. S-A-Fs. So, sustainable fuels are all about trying to find an offset where you can get credits for whatever you do positively for the environment. There's also alternate fuels being used like hydrogen, ammonia. There's biofuels, there's vegetable oils, also that come from the waste in your kitchens and restaurants.
Chris Parker: Wow.
Neil Rub: There are all-electric motors being designed. There are hybrid electric motors being designed. So, in terms of sheer propulsion, there's a whole new universe that suddenly got excited about the fact that they need to be net-zero by 2050. And everybody decided to say, "You know what? I'm going to put my hand up, and I'm going to invent something as well."
Chris Parker: That's exciting. Very cool. Yeah. It's a giant race that's happening right now, huh?
Neil Rub: Absolutely. When you change the fuel type, you can imagine you've also got to change the engine type because the same engine can't operate with a different kind of fuel. So, engines are now being redesigned to operate on a new family of fuels. So, that means engines are now becoming more efficient. They're becoming more green. You could likely see new engine manufacturing come up. When you look at some of the other breakthroughs, other than fuel and the engines, let's look at the family of aircraft. We talked about earlier how the family of aircraft had essentially remained the same for two or three decades. Today, the family of aircraft is moving beyond that.
Neil Rub: So, we are talking from simple drones that may be handheld remote control. You and me can operate them. We're talking about unmanned flight, which are larger drones that don't really need to have a pilot. We're talking about flying cars that you can actually park in your driveway and then fly to work. We're talking about hypersonic aircraft that fly well beyond the speed of sound, and just so you know, today, commercial aircraft normally fly about 0.7 or 0.8 MACH, which is 0.7 or 0.8 times the speed of sound, hypersonic fly beyond the speed of sound. So, you can actually get to where you want to go faster rather than having to wait all those hours up in the air.
Neil Rub: So, the family of aircraft is changing, and as this changes, again, you can imagine various design elements of the aircraft, the engines, the skin, the structure, everything has to be redesigned. And this also leads to the next level of innovation, which is in manufacturing, because now you want to look at advanced materials. You don't want to use the same materials that you used hitherto. You want new materials, you want composites, you want to make something lighter, and you're going to look at advances in blockchain technology, 3D printing, the internet of things, AI. There is so much going on, Chris. It's almost like opening a door and seeing a room full of toys and saying, "I never knew this existed."
Chris Parker: Yeah, no kidding. That's fantastic. That's so crazy. It sounds like this industry is really exploded. Startups are popping up with all sorts of ideas, but this also means that they're moving into a well-established space. So, what are some of the challenges that startups might experience as they're starting to develop and grow and expand themselves?
Neil Rub: Right. Startups, by their very nature, it's not just aviation startups, but any startup; I would think the biggest challenge they all have is, one, acceptance of new technology. When somebody comes and says, "Hey, I've got this brand new way of doing things," there's a generic reluctance to accept something new, and that takes time. So, the test case scenarios take time to develop. This also leads for the startup to have a cash burn situation because they're burning cash, but there's no real business that they're seeing at the end of the day. Which ultimately could also result in failures.
Neil Rub: So, they're already under the pump. They're already challenged because, conceptually, they have an idea, but who's going to buy it? The second thing is that, outside of the expertise of, let's say, innovation and maybe manufacturing, they have no idea. So, supply chains for them are probably an afterthought. They've never even thought of it. "No, I've going to build this thing. I got this great idea," but if you ask them, "How are you going to get it from where it has to go, to where it needs to go?" There's no answers to those questions.
Chris Parker: It's not as easy as just using a courier service. Right?
Neil Rub: Absolutely. The simple one line that I can tell you is that they don't know what they don't know. That is the challenge that we've got to reach out and talk to these startups, to explain to them what it is that they're missing out.
Chris Parker: If those are the challenges, then what's helping them along? Who's supporting them? Who's rooting for the success of startups?
Neil Rub: Okay. I can tell you that almost every player in the industry wants startups to succeed because they're going to bring in efficiency, they're going to bring in new technology, they're going to make flying safer and more fun for an average consumer. So, you've got everybody from the airlines to the terminal operators, to even governments and sovereign funds saying, "Hey, we'd like to be a part of this process. We'd like to help you grow and develop your technology."
Chris Parker: But, doesn't the support from airlines and from countries contradict the idea of a slow adoption of these new technologies? It sounds like manufacturers may be hesitant, but they also want to see them succeed. So, how does that... That kind of clashes, doesn't it?
Neil Rub: Keep in mind that not all ideas are adopted by people. So, for every one or two that you adopt, there'd be maybe ten or more that fail.
Chris Parker: Right. They're not all great.
Neil Rub: Yeah. The ones that are successful actually have... Should I use the word angel investing, perhaps? You have angel investors who come in the form of sovereign funds, or in the form of an airline, or in the form of somebody, in some capacity in the industry, saying, "I like that idea. I'm willing to support it, let me invest some money, and you can make it grow."
Chris Parker: And then, where would you say startups are having the most impact right now?
Neil Rub: From the point of view of governments and also the users in the industry, there's obviously increased automation and efficiency. There's great possibility of cost reduction. More importantly, the green aviation goals are going to be achieved, so whether it's regional flights, commuter services, you're able to finally make that green and not carbon-intensive. Interestingly, if you look at food delivery apps or the Amazons of the world, local and hyper-local delivery is a great area where everybody has interest in, and this is where a lot of startups are actually finding solutions. There's disaster management, air traffic management, agriculture management, and there's also the MRO activity like we talked about the drones for inspection, and of course, there's military. So, in all these areas, you are actually seeing the technology being adopted for various different usages.
Chris Parker: All right. So, let's go ahead and bring in freight forwarders and logistics providers here. What role do we play for the success of startups?
Neil Rub: I see the freight forwarder as playing the role of a junior partner, somebody who is a knowledgeable well-wisher, somebody who's going to guide that startup into not making the mistakes that they can very easily avoid. So obviously, we are not going to be moving these new fuels for them or these new hydrogen and ammonia and all that stuff, but we can certainly help with the infrastructure.
Neil Rub: You might be interested to know that we recently moved an electric aircraft within the network for a customer. We have the ability to help startups with navigating global supply chains, including all the challenges that come with managing an import and export process. For example, almost every startup will want to exhibit their freight somewhere or their product somewhere, which means they're going to go and attend exhibitions across the world, or air shows, or whatever you may have. Now, there is a science to moving freight into an exhibition and out of it. You need something that's called an ATA Carnet. That allows you to get into a country without paying customs duty and allows you to exit again for the purpose of exhibition.
Chris Parker: Okay.
Neil Rub: Now, most startups don't know this. They think it's simple. Just put it in a courier service, send it there, and everything should be hunky-dory. But imagine, and you've got an exhibition starting day after tomorrow, and your stuff has not cleared customs. Now, that's a loss of your reputation, it's a loss of your revenue, it's a loss of an opportunity, and here is what freight forwarder can tell them in advance. Don't make these mistakes. Let us help you plan it. Let us help you create schedules. So, we can create a time chart saying, if you want to be here by this date, this is the date by which you need to be ready to ship, ready to pack, have documents ready, and so on, and so forth. Also, the fact that we've got a network so we can upscale the offering today, we are offering them solutions in the UE. Tomorrow, we can be in Rotterdam, day after, we can be in Chile, we can be anywhere. Wherever they want to be, is where we can upscale to.
Neil Rub: The most important thing. The often understated element of supply chain is, one is insurance, which is risk management, and the second is packaging. Now, both of these ensure that your product stays safe, stays secure, and gets to where it has to go, in the condition that you intended it to get to. Now, a startup has probably little to no experience in these areas. Whereas we have loads of experience that we can share with them. We can tell them how to do the packing or what kind of insurance to get, and we can help them achieve this. So, all in all, what we are trying to tell the startup is, leave your logistics headache to the freight forwarder. Leave it to us. We'll manage it for you. You focus on innovation. You focus on product development.
Chris Parker: When I'm thinking of startups, I think of a small scrappy organization, right? And then, when I think of a freight forwarder, especially like Expeditors, or other logistics providers, these are global organizations. Are they too small for the global stage, and how does a large forwarder help that and help them grow?
Neil Rub: Chris, we have a startup philosophy within the company. There's a program that's already been put in place. There are, of course, criteria for when we can apply that program based on whether the startup has achieved certain capitalization. Have they achieved certain criteria? So, the long and short is for a startup that's actually very, very new, perhaps we wouldn't have the solutions that they need because they're far too early in their evolution. But, as the startup starts to achieve funding, and when they achieve the critical mass that we are looking for in a startup, we have a full flex program that we can offer, which includes a plethora of services, complimentary hours of consultancy. Really, really interesting package of services that we can offer to a startup, and keep in mind, startups eventually go unicorn, and that's what we want them to do because if we're with them when they were struggling and when they started out, they're going to stay with us when they get unicorn, as well.
Chris Parker: When they get unicorn, yeah. So then, for startups, what could they be doing to set them apart or set them up for continued success?
Neil Rub: Like I said earlier, one of the things the startups should do is look for a partner that's as committed as they are. Somebody that will support them through the growth pain, somebody that will support them through the evolution of their business model, someone who support them with a lot of other things other than just mere freight forwarding. There's the consultancy element, there's the hand-holding element. There's the explanation of how things work in different countries, rules, and regulations. All this is a science. So, a startup has to find a partner that knows how to help a company that, quite often, doesn't know what they don't know, and help them navigate those supply chain challenges, and set up a robust supply chain that can tackle any challenge that you could throw out there.
Neil Rub: So, once they find that particular partner, they're set. But, until that happens, there will be a series of hits and misses, a series of failures. So, as a freight forwarder, I think what we need to do is also step down a couple of rungs and understand that we are talking to a client who may not understand supply chain like we think he should or she should. And therefore, we've got to make it really simple for them to understand. We've got to ask them really simple questions. We've got to assume nothing. Assume that they don't have anything, and then help them set up.
Chris Parker: Right. Absolutely. I imagine there's a lot of education that has to happen or to make the conversations easy down the line.
Neil Rub: Yes. And therefore, you need a patient freight forward. Somebody who's got time for you.
Chris Parker: Yeah, absolutely. No, patience sounds certainly important. A question that I like to ask is, what conversations should a startup be having internally in order to set themselves up to be working at their best with a forwarder?
Neil Rub: A startup has to understand that because logistics and supply chain is a science, you can't just put just about anybody in that role and say, "Okay, this is now... You look after this." You have to have people who understand how that works. So, when they discuss internally, they've got to quickly established whether or not they have somebody within the team that has an understanding of supply chain, and if not, find a trusted partner that can take over that role and act as an independent, but still working as within the company. So, as long as they establish that, here is our lacune in our planning methodology, and we need to find somebody who can fix that lacune and become a part of our team, they're good to go.
Chris Parker: Okay. Before we end today, I want to ask one last question. What do you think is the most exciting thing for startups right now in this day and age that's going on?
Neil Rub: Oh, as this... I can tell you that we're currently engaged with a startup in India that is aiming to be the next SpaceX. Can you imagine a small company that has ambitions to launch their own rockets into space, launch satellites? It's a tremendous dream. It's so exciting to see young kids come up with these ideas and actually deliver on these ideas. So, I think that, for me, that's one of the exciting things.
Neil Rub: The other one was the electric aircraft that we actually shipped through our network. We've always talked about... We've all watched Star Trek, right? So, we all know about all the technology that we see there, but here is a perfect case of life imitating art. Where we're actually putting together technology solutions that we only saw on television. We only heard of flying cars. Now, we've actually got flying cars. So, there is so much that's happening that is super, super exciting, and we are just touching the... How would I say? It's a world out there, and the more you dig, the more you discover. I realize that I'm probably a little too old for it now, but I should have been here a lot earlier and learning these things as I went along.
Chris Parker: Well, beautifully said, Neil. I really appreciate you taking the time. Thank you so much—especially late hours over in Mumbai. Really appreciate you chatting this through with me.
Neil Rub: Not a problem, Chris, it's my pleasure, and hopefully, somewhere in the future, maybe you can fly your car and come and see me, and we can have a drink, and you can fly your car back home.
Chris Parker: At hypersonic speeds, no less!
Neil Rub: Hypersonic speed. There you go.
Chris Parker: Thanks for listening to today's episode. If you've got any questions or want to learn more about today's topic, check out the show notes for more information. And before you go, make sure you're subscribed on whatever podcast app you're using so you won't miss the next episode. To learn more about Expeditors, you can find us on LinkedIn, Facebook, Instagram, and Twitter, or simply visit us at expeditors.com. Take care, and I'll see you next time.