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Aviation History
1996
1996 - 0029.PDF
rViizaASj'fs level. There has been plenty of talk over die need for new cross-border "structures" to end Europe's famous duplication in research, tech nology and manufacturing capabilities. There appears to be a growing pressure at political as well as industrial level to put the talk into action. That means going further than die existing consortium structures, which have too often been used to avoid, rather than resolve, the questions of national duplication. As so often in Europe, Airbus is likely provide a blueprint. Germany has joined the UK in pushing for a more conventional corporate structure to give Airbus a greater ability to raise funding, control costs and manage its expansion. The lead proposal is for some kind of hold ing-company structure, with a series of majori ty-owned subsidiaries covering military, regional and other aircraft projects. Among the benefits would be die ability to bring fresh funds and partners, in particular Italy, into the projects without unsettling the delicate balance of power between the four original partners. Expect to see greater pressure over the next 12 months for this kind of solution, even if action is typically a little slower in Europe than it is in the USA. DEFENCE CONSOLIDATION In defence markets, too, there are stirrings. The agreement between BAe and Dassault on com bat-aircraft development will get others think ing about their futures. Meanwhile, in the USA, die message is to continue to expect die unexpected. Corporate America at large, and die aerospace industry in particular, has come out of recession thinking big and bold, with little regard for traditional orthodoxies. The 1995 Lockheed/Martin Marietta merger made it clear that die US aerospace market is no longer one for the timid. News diat Boeing and McDonnell Douglas are holding strategic talks has underlined the point. Whedier these latest talks will actually go as far as merger is hard to say, even for the compa nies themselves, but die very fact that negotia tions have taken place makes some fall-out inevitable. For example, die prospect of a merger between the Boeing and MDC helicopter divi sions has accelerated interest in consolidation within the overcrowded US market. United Technologies has admitted that it is waiting in the wings with a bid to put Sikorsky at die centre of any consolidation, while Bell Helicopter Textron had already held talks widi Boeing, its V-22 partner. Consolidation in the US avionics and defence electronics market has furdier to run among the country's second tier of suppliers, as the E- Systefns purchase by Raytheon showed mid year. The year now seems certain to begin with the auction of Westinghouse's electronics arm. In short, the world aerospace industry will again continue to get smaller but sharper in 1996. • o O) O) •r— O) O) CM o> O) CO o> o> *f CD O) tf) CD O) <3> o> o> c- co o> O) en CD CD Growth forecasts for scheduled passenger traffic 1990-1995 f=forecast Airlines KEVIN O'TOOLE/BUSINESS EDITOR THE WORLD AIRLINE INDUSTRY finally shook off the recession in 1995, to produce what are likely to be the highest profits on record. Barring unforeseen disasters, the industry should con tinue to forge ahead in 1996. The figures have yet to be collated for 1995, but the best guess from the International Air Transport Association (IATA) suggests that carriers should could be on course for a net profit of better than $5 billion on their international services. If true, diat will be a best-ever performance and go some way towards offsetting the $16 billion lost during the four years of recession. In short, the cycle has turned, but the cele brations come with a note of caution. Although demand has recovered, putting international passenger volumes back on a robust long-term growth rate of around 5% a year, the real success has been in damping down the excess capacity which plagued the industry throughout the recession. A renewed round of optimistic aircraft-ordering could yet spoil the good work, but none is yet in evidence. Preliminary year-end figures from the International Civil Aviation Organisation suggest that passenger traffic grew by 7%, a comfortable percentage point ahead of capac ity growth. Yields, too, have recovered a little of their poise during 1995, but no-one is questioning that the underlying trend is for continuing long-term decline, albeit at a slower pace. Again, the trick has been to keep unit costs falling faster. The US industry is a prime example. The major network carriers, which only a year or two ago were still heading the list of the world's largest loss-makers, will emerge from 1995 with collective net corporate profits of around $1.5 billion. The transformation comes not from a leap in demand — traffic and capacity have remained static throughout the 12 months — but from a dramatic rebalancing of the cost- yield equation. COST-CUTTING CONTINUES As the results of cost-cutting programmes feed through in earnest during 1996, expect to see further gains, with Delta Air • FLIGHT INTERNATIONAL 3 - 9 January 1996 27
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