Top 100 Special Report: 2010 a year of rebound

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This story is sourced from Flight International
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Global financial markets are looking fragile. Oil is priced stubbornly high. Major world currencies are under pressure. Nobody who worried through the summer of 2008 - those phoney war days before Lehman Brothers fell and the financial crisis sucked global economies into the steepest downturn since 1929 - really needs to be asked whether it all sounds familiar. Nor do they need to be reminded of the agony of 2009, when aerospace industry revenue defied expectations to hold firm - but profits dropped sharply, by more than 17%. Summing up 2009, and also in defiance of expectations, Airbus and Boeing delivered a record 979 airliners - but saw orders plunge to just 413, from a whacking 1,439 chalked up in 2008.

But while financial markets, and thus the real economy, are keeping fingers crossed this summer, it's nice to be reminded that 2010 was, for aerospace, a year of buoyant rebound.

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As the latest Flight International Top 100 survey, compiled in association with PricewaterhouseCoopers (PwC), shows, revenue grew by a healthy 2%.

That's far from the double-digit growth days of 2006-2007, and even less than a third of the growth in 2008, despite its horrific fourth quarter. And the 2010 aerospace industry growth didn't keep pace with global gross domestic profit, which bounced back from a 1% fall in 2009 to gain 5% last year, as Western economies rebounded and key developing regions continued to power ahead.

But on the profit front, 16% growth in 2010 nearly reversed 2009's 17% decline. And - again standing as a quick summary of the industry's year - Airbus and Boeing fell just a handful of deliveries short of the all-time high set in 2009, while net orders surged back into four figures, at 1,104 - enough to push their joint backlog to within sight of 7,000 aircraft.

GROWTH

Over the year, most of the Top 100 companies enjoyed revenue growth, with a tail of about 30 companies experiencing sales decline.

Expansion by the fastest-growing firms far outpaced backward movement by those at the tail end of the rankings.

The Top 20 companies still dominate the Top 100, accounting for 79% of both revenues and profits. In 2010, there was just one new entry into that Top 20, as strong revenue growth pulled Dassault Aviation up from 23rd in 2009 to 20th place, bumping out Embraer, which closed 2010 in 22nd place, and has seen revenue fall every year since 2007. Mitsubishi held on in 21st position.

At the top, Boeing held the crown it ­regained from Airbus parent EADS in 2009 - though EADS closed the revenue gap a bit in this battle of titans.

aircraft at sunset, airteamimages.com
 © AirTeamImages.com

The pair remain far out in front by revenue, nearly half again bigger than third place Lockheed Martin, and about twice the size of fourth place General Dynamics.

In the defence sector, growth is running well below historic levels. PwC assistant director, strategy, Anna Sargeant notes that companies in this sector are reassessing future priorities. In a sector that is seeing spending pressure, Lockheed Martin nevertheless managed 7.2% revenue growth, to take the top slot from Boeing, which dropped back to second place.

Another company to watch is Thales, which has been seen as an underperformer, but is undergoing a restructuring; the company moved from 10th place to 8th, despite a decline in revenue. The aero engines sector is also one where growth is small, by historic standards.

Rolls-Royce's 7.4% revenue growth far outpaced its peers.

Geographically, North America and Europe continue to dominate the Top 100 by revenue and number of companies, though Asia is growing. However, Sargeant points out that neither Chinese nor Russian companies feature in the Top 100 - their financial data is either unavailable or incomplete - but PwC hopes to overcome this hurdle in future.

ACQUSITIONS

In the background, merger and acquisition activity also picked up sharply last year, after falling into a trough as the financial crisis started to bite. Separate figures from PwC show 2010 featuring not only a dramatic bounceback in the number and value of buyout and merger deals, but the return of $50 million-plus deals.

Total deal value nearly doubled year-on-year, from $10.9 billion in 2009 to $20.2 billion in 2010. As PwC's London-based global aerospace and defence practice leader, Neil Hampson, noted earlier this year, the resurgence of merger and acquisition activity highlights the powerful trends driving the aerospace industry in 2010 - notably the fact that commercial aerospace recovered from the recession faster and stronger than most analysts predicted.

This was also while looking to respond to new competitors and capitalising on a growing market and a changing landscape, as the customer base shifts toward the Asia-Pacific region. The largest revenue growth in the Top 100 was achieved by Triumph, due to its acquisition of the remainder of Vought Aircraft in June 2010.

United Technologies, for example, made some $3 billion worth of acquisitions in 2010, including a $1.8 billion purchase of GE Security.