Why EADS needn’t be defensive

(This first appeared as a Comment in the 5 March 2013 issue of Flight International)

EADS chief executive Tom Enders can be excused for showing no job-security anxiety about the fact that one of his first acts as chief executive was to unveil an audacious merger proposal that failed spectacularly. By joining with weapons systems giant BAE Systems, he was going to resolve EADS’s big headache – that its defence business lacks global scale – but 2012 financials show EADS to be in rude health, even without growth in the military business. Enders says that, with budgets being axed on both sides of the Atlantic, maybe it’s not bad thing, as a business, to have relatively low exposure to defence spending.

He makes a point that begs a question: can the aerospace industry get along alright without defence?

As Airbus division results show, all indications point to rapid and durable demand growth for civil airliners. With budget austerity likely to last a generation on both sides of the Atlantic, military aerospace operations are starting to look like a drag on growth.

Anyway, military spending increasingly goes to electronic systems that make the difference in asymmetric conflicts. The aircraft platforms existing today are, arguably, good enough – so even another war might not boost traditional defence aerospace.

There is much talk of defence industry consolidation. Don’t be surprised if the result in aerospace is a separation into civil and military specialists.

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