In a recent conversation with an Aerospace and Defense (A&D) executive, we asked a simple question: “what worries you most about the future”? The answer was not competition, or even tariffs, but talent. Where on earth was he – and others in the value chain his company was a part of – going to find the thousands of engineers to design, build, and certify the next generation of aircraft?

He was not alone, a series of quiet conversations with industry insiders followed, all saying similar things. In our recent Engineering Pulse Report, 73% of A&D executives said talent shortage is a threat for Engineering and R&D functions over the next 3–5 years and 41% said talent was a major challenge to delivering at speed and scale.

The pressing people problem

There are no official figures, but putting rough numbers together based on the conversations we had, we reckon there will be a shortfall of at least 150,000-200,000 A&D engineers in Europe and North America in next five years. China – which is growing A&D spending – also has a talent problem, but a less serious one, meaning the drag of talent on Chinese growth will be felt far less than in the West.

Yet for all the private worries, the industry leaders are not grappling with the problem. Perhaps there are more short term problems that are occupying their minds. Perhaps they hope universities will naturally up their engineering course sizes by a hundred thousand. Or perhaps they think the current cohort will all come and work for them when they need them – if so, they better be prepared for an expensive competition on price.

Why are we facing this dramatic talent cliff edge? A&D is seeing huge demand for new defense programs and new, energy efficient aircraft as airlines look to cut fuel and operational costs. Each new aircraft or defense program consumes tens of thousands of engineering-years before a single aircraft is certified or defense system is used. Yet many manufacturers are already unable to meet surging demand for existing systems due to shortages of engineers and technicians. At the same time A&D face an ageing workforce and high attrition rates.

Rethinking A&D talent strategy

So, what to do?

First, accept the reality and act now. There are simply not enough engineers near to current A&D factories to meet demand. But that doesn’t mean the skills will not be there. A global industry needs to think more globally about talent.

Why has A&D struggled to globalize?

A&D is not an industry that traditionally relishes global engineering models. Sovereignty constraints, export-control rules and habits have kept most engineering tightly clustered in certain parts of Europe and America. The result is a delivery model that is geographically rigid and ill-suited to a world of global shortages in qualified experts.

Many countries – from India or Morrocco to Egypt – house talented, and ambitious young people excited by careers like engineering. Some countries excel in particular areas in the value chain from component design to embedded software to compliance management and innovation. Many countries, including those closer to home, have mechanical, software, industrial and systems engineers that can be retrained. Such talents will be needed to swell the ranks of the future workforce, if traditional A&D hubs cannot yield sufficient numbers of engineers.

So why has aerospace not been able to deliver this in the way tech and others have. Two reasons stand out. Firstly, the slow pace of digitization that would allow joined up global working. Secondly, and more importantly, a lack of the absence of a strategic approach to adopting a distributed workforce model as a programme of systemic business transformation.

Digitization is a necessary step towards harnessing global talent, but not sufficient

In any engineering industry the backbone of efficient, agile globalized operations is digitization. With a fully digitized design, production and support process, A&D organizations become untethered from their physical locations. The A&D organization becomes less monolithic engineering offices and more global virtual design and management environments, where teams anywhere can plug into shared models and simulation platforms.

But this has been well known for 10 years. Most major OEMs are well advanced overhauling of their product‐lifecycle‐management (PLM) and related systems in this way.

For those still completing such digitization initiatives, this should be the first priority. As they do so, they should consider how they can integrate new AI-assisted engineering tools, and AI workflows to accelerate certification, testing, and variant design to boost efficiency of the teams.

But digitization is just the enabler. Once complete, it needs to be backed by a whole new approach to accessing global talent.

How to build an agile organisation powered by global talent

To solve its talent problem, A&D needs to see global delivery in a new light. A&D will need ‘global engineering factories’ capable of delivering high value programmes of work, end-to-end, orchestrated across top engineering talent in multiple countries.

One can imagine a typical structure: system architecture and safety-critical leadership teams remain close to the aircraft or system and production lines in Toulouse, Düsseldorf or Seattle. But embedded software could be carried out in India; stress analysis in Egypt; hardware integration in Romania; and systems testing in North Africa. Each is not only aligned to relevant global talent pools, but setup with modern digital systems to optimize efficiency and so reduce the overall talent need. Such configurations are not theoretical – similar setups already happen in automotive.

How can one start to think about this strategically? A practical way for A&D companies to decide what work can be relocated – and what must remain in-house – is to adopt a rigorous Core/Context assessment, popularised by Geoffrey Moore and proven in many engineering transformations.

This framework forces organisations to distinguish between Core activities that create market differentiation and Context activities that don’t. Context activities can still be valuable and mission critical – think certification – but they do not differentiate you from your competitors. These activities often make up most of the business’s work, and can usually be safely outsourced to trusted engineering partners in locations with more favourable talent pools.

For A&D companies facing a talent shortfall, a Core/Context approach provides exactly the discipline needed to expand global delivery without jeopardising quality or security. It helps identify context activities – such as validation, testing, documentation, non-IP-critical mechanical design, or the maintenance of mature product lines – for outsourcing. It provides a process of breaking these down into clearly defined tasks that specify inputs, outputs, competencies, toolchains and KPIs. Once codified, these activities can be shifted to regions where engineering capacity exists, under controlled ‘engineering factory’ models, whilst keeping core or sovereign activities close to the company’s own facilities.

Proper planning prevents poor performance

The stark conclusion is that the current A&D operating model cannot support the demands being placed on it. Without radical changes in how work and innovation is distributed, digitized and delivered, flagship aircraft programs risk delay or cancellation. But those companies that embrace new models – anticipatory reskilling, strategic outsourcing frameworks, global engineering factories, and digital workflows augmented by AI – will have a fighting chance.