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Aviation History
1997
1997 - 0018.PDF
BUSINESS Racal close to clinching Aerad deal KlERAN DALY/LONDON RACAL AVIONICS is in advanced talks with British Airways over the acquisition of the airline's wholly owned flight-doc umentation subsidiary Aerad. Racal provides worldwide navi gation data for flight-management systems and sees Aerad's business as complementary. The UK avionics company declines to confirm that the talks are taking place, but a source famil iar with the process says that a deci sion is due in March. Options other than a straightforward purchase of the business are also understood to be under discussion. Aerad's products are a global flight-documentation service, in cluding charts; a European execu tive flight-guide for general/ business-aviation users; and ad hoc trip products on demand. British Airways is the company's major customer, but Aerad has other third-party airline business. Meanwhile, the head of the world's second-largest documenta tion and flight-planning concern — SAS Flight Support—is urging his European competitors to join forces to challenge J eppesen's mar ket domination. Jan Petterson, managing direc tor of the SAS unit, wants to see die creation of what he terms "Euro pean Flight Support", through either joint ventures or mergers. "We would like to make sure that there is a second supplier in the market in the future. We don't want to do that by stealing cus tomers from Aerad or the others. I would like to see, and I think it is possible, a European Flight Sup port formed out of several of the European airlines," says Petterson. Candidate partners include Aerad, to which Petterson has already talked; the Iberia/Air France Atlas unit; Swissair, which works with SAS through KSSU; and KLM, which supplies its own needs. SAS Flight Support manager of marketing and sales Bjorn Olsson adds: "We have many airlines negotiating with us. Sometimes it is because of price, but sometimes it is because they think it would be a closer relationship, rather than dealing with a big company like Jeppesen." 3 US aerospace industry shows first signs of steady growth in five years T HE US aerospace industry ended 1996 with increases in sales, orders and its workforce, rep resenting the first rise in fortunes since the recession began in 1991. The improvement is expected to be followed by further growth in 1997, according to the Aerospace Industries Association (AIA). At its peak in 1991, the industry had achieved sales of more than $139 billion, but by 1995 that had slumped to a decade low of $106 billion. The AIA estimates that sales were on the rise again in 1996, giving a preliminary estimate of a 6% increase, to $112 billion. That is expected to jump by another 11% in 1997 to reach $125 billion. Despite the better news, AIA president Don Fuqua comments that the last decade "...has been one of wrenching transitions and brutal changes", which has never theless produced "...increased competitiveness and savings to the US Government". The surge in sales largely stems from the recovery across civil mar kets. AIA estimates that Boeing and McDonnell Douglas delivered 271 aircraft worth close to $19 bil lion in 1996, and predicts that that figure will soar to 415 units, worth $29 billion, in the coming year. The two companies have a com bined order backlog close to break ing the $100 billion mark, which has not been breached since 1991. Military-aircraft sales also in creased in 1996 as a rise in foreign deliveries, which fed through from •l«tH:;.MJiMJi;i,i^l;tf.-l!liaM:llll!,!?n] Total Civil Military sales aircraft aircraft 1991 139.2 37.4 38.5 Missiles 11.0 Space 29.2 Other 23.2 1992 1993 1994 1995 1996e 1997f 138.6 123.2 110.6 106.3 112.4 125.0 39.9 33.1 25.6 24.0 27.7 40.6 34.0 32.7 32.1 31.1 32.8 31.4 11.8 8.5 7.6 6.3 5.6 5.2 29.8 28.4 26.9 27.3 27.6 26.9 23.1 20.5 18.4 17.7 18.7 20.8 Source: AIA. NOTES: e=estimate f=forecast the surge in orders following the 1990-1 Gulf War, helped to offset a decline in US defence spending. Sales are expected to fall again in 1997, while the long-term slump in missiles is due to continue. The US Department of Defense is project ed to buy $38 billion worth of weapons from US arms makers in 1996, accounting for about one- third of the industry's total busi ness, down from 56% in 1987. US aerospace employment in 1996 rose by 20,000 jobs, bringing the total to 806,000. This is due to rise again by 2%, to 82 5,000, in the coming year, led by the civil-air craft-industry surge, which will add another 17,000 direct jobs and 3,000 in related industries. The military-aircraft sector is due to cut 2,000 workers however. • NEWS IN BRIEF • AM WEST SLOW-DOWN America West Airlines is scal ing back its two-year expan sion plan because of a rise in the cost of leasing aircraft. The airline had planned to increase capacity by up to 29% over the next few years, but says that a growth to 24% is more likely. A maximum of three new aircraft is due to arrive in the 101-strong fleet in 1997, although the airline expects to repeat its 1996 rise of 11 % in available-seat-kilo- metre capacity. Continental calls halt to merger talks C •ONTINENTAL Airlines <says that it has broken off merger talks with rival air carriers, believed to include Delta Air Lines. In a message to employees, Gordon Bethune, Continental's chairman and chief executive, dis closed that the fifth-ranked US air line had recently undertaken "preliminary" merger discussions with "many different air carriers". He adds, however, that those talks have ended. "We are not in any dis cussions, nor do we have any plan to have any discussions with any one," says Bethune. He does not say why the negoti ations broke down. Bethune also fails to identify any airline with which Continental has talked. He says that he was speaking in response to press speculation and to workers' questions. The Wall Street Journal reported towards the end of 1996 that Delta, the third-largest US airline, was studying a merger with Con tinental. Both carriers have also signed codesharing partnerships with Air France. Continental, which has declared bankruptcy twice in its history, is controlled by Air Partners LP, an investor group. In recent years, it has secured a financial turnaround under the leadership of Bethune. 3 Bethune: no longer talking FLIGHT INTERNATIONAL 1 - 7 January 1997
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