FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1973
1973 - 0020.PDF
16 EUROPEAN COMMON AEROSPACE MARKET Fokker, for example, it was only about 2-4 per cent before tax in 1970. This suggests that there is little possibility of internally generated funds being available on any large scale to finance projects in the near future. Even a highly successful company such as Dassault has its resources now heavily committed to the Mercure. Over the next decade, therefore, the European industry must inevitably remain highly dependent on government support for civil projects, though if longer runs are achieved then enough profit might be generated to give the industry a freer hand for the next generation of aircraft. What then are the market prospects for Europe? It is sometimes argued that the recent recession in world air transport heralds a change in the fortunes of the civil aircraft industry. Careful studies both within the industry and, recently, an independent survey by one of London's largest merchant banks indicate that this not the case. A table in an article by Helen in The Journal of the Royal Statistical Society 1969 (page 268) shows that the "For some years Britain may have to shoulder something of a burden in joining higher cost partners." income elasticity for air transport is greater than that of any of the other 23 categories of consumption expenditure examined. This bit of jargon means that as incomes rise, spending on air transport rises proportionately more than any other form of spending. Since this is true in reverse— when spending falls—any recession will be very sharp; but given the expected rise in world incomes, the future demand for air transport and so for civil aircraft must be very bright. Civil aircraft sales, which were about £1,400 million in 1970 but considerably lower in 1971, should recover the 1970 level next year. By the extremely modest assumption of a 5-6 per cent per annum growth rate, compared with about 13 per cent in the late 1960s, they will exceed £2,000 million by 1980. The merchant bank study in fact suggests that they will be nearer £3,000 million. Europe's share of this market will depend heavily on the success of the A300B and of the Lockheed TriStar (because of the Rolls-Royce engines). Concorde and such new short- haul airliners as emerge will account for most of the rest. With European demand for air transport growing faster than world demand as a whole, with more concerted purchasing policies by European airlines and with greater competitiveness being derived in the form of longer runs from joint projects, Europe may possibly raise her present share of this market. Against that one must note the powerful US position as regards the new wide-bodied aircraft and the fact that the full gains from greater productivity in Europe will mainly come after 1980. The military scene is less sure, but estimates vary between £2,200 million (including spares) by 1980 from the SBAC's Future Plan for Britain's Aerospace Industry to an optimistic £2,800 million from the merchant bank— both excluding the US military market and the Communist Bloc, and all at 1971 prices. Here Europe's Mirage, Harrier, MRCA and Jaguar, to name but four, will be powerful competitors in world markets and there should be little call for European countries to fall back significantly on imports of American military aircraft. The merchant bank forecast gives EEC countries total aerospace sales of £2,500 million in 1980 compared with £900 million in 1968-70, implying a share of the non- Communist Bloc market (excluding US military) increas ing from 31 to 43 per cent, partly (it is said) because the European home market will grow particularly fast and because of greater competitiveness. The estimate is highly optimistic as regards both the levels of total trade and the European share, but is symptomatic of the general feeling of optimism about the industry now current. In general, therefore, the future seems encouraging. Given even the most modest market forecasts about the major new projects in which Britain is involved—Concorde, RB.211, MRCA, Jaguar, the HS share of A300B, HS.1182 FLIGHT International, 4 January 1973 as well as guided weapons and the anticipated Qtol project, any suggestion of a reduction of the British labour force is unrealistic. It would be necessary to reduce the British share of European output drastically to arrive at such a conclusion. Indeed, under quite pessimistic assumptions about the success of these projects it is difficult to push the UK share of the world aerospace market below its historical level of 15 per cent and even given increased productivity forecasts of total demand would seem to imply a distinct rise in the labour force. There is current a belief that the British industry is relatively inefficient compared with those of its European partners, and will therefore be a burden to them. In an article in this journal on January 20, 1972, I showed how misleading the general arguments about comparative productivity are. By using properly corrected figures at the right exchange rates I was able to prove that, instead of French output per man being some two-thirds above that in British aerospace in 1969, the difference was no more than 2 to 3 per cent. In large part because of the magnificent success of the Mirage, the French industry has enjoyed greater benefits from long runs than the British; but, with wage costs above those in Britain, France is at a disadvantage where overall costs are concerned. So for some years Britain may have to shoulder something of a burden in joining higher-cost partners, but the advan tages to be reaped far outweigh this and in any case it is to be hoped that the general wage level in Britain—at any given exchange rate—will close the gap. The British aerospace industry is entering the Common Market in excellent shape. Orders have been coming in during 1972 at an unusually high rate. Orders for the RB.211 with allowance for spares must be worth about £350 million.. Chinese orders for Tridents, the first firm orders for Concorde, the sales successes of the HS.125, refurbished Hunter, Islander, Trislander, Skyvan and Jetstream will add to the total. Every order for the A300B means new wing work for Hawker Siddeley. Business in missiles is booming too. At the end of 1971 the British aerospace industry's total order book stood at £983 million, equivalent to 6-6 quarter- years of work, taking an average of quarterly sales over the previous twelve months. By the middle of 1972 this had risen to £1,062 million, or 7-4 quarters of work. This is the highest figure since the end of 1963 when there were two years' of work on hand. But of course the future is less secure than the figures suggest. No new major subsonic project is being financed. It is here that the European links will first show how effectively they can work. However buoyant the sales figures promise to be for the rest of the 1970s, very largely they will depend on projects already agreed and under way. The truly important gains in lengths and in produc tivity should come around the end of the decade. Too much should not be expected too soon. Of course they will only be obtained if nationalistic aspirations are largely set aside in favour of organising work in a way which makes the best use of design capability and lowest cost of production. European airlines and defense ministries must be pre pared to help by co-ordinating their procurement pro grammes to the advantage of European projects. Given longer production runs, a European project must undersell any similar American project by a wide margin because, as I have pointed out, of lower labour costs for Europe in circumstances where the American productivity advantages are limited almost entirely to those derived from scale economies. The struggle for markets may take on other features. If experience after the end of the Korean War is any guide, when peace comes to Vietnam the Americans may seek to dump surplus weapons on world markets on a wide scale. Europe will then need all the skill in design and advantage of cost that it can muster. As in all other industrial spheres, the Common Market has much to offer aerospace but the participants will have to show that they have the flexibility of mind and single-mindedness of purpose to seize their opportunities.
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
