FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
2001
2001 - 0028.PDF
EADS and most recently between Raytheon and Thales on ground-based air defence - fall far short of the deep alliances or mergers diat would most benefit companies. Consolidation at tier one level continues - Smiths Industries buying TI Group, for exam ple - and Hampson predicts that "the disap pearance of tiers two and three will continue for the next 10 years". The year 2001 will be big for EADS, which has shrugged off general disinterest in its flota tion but remains more exposed to the vagaries of the market than most, given its reliance on Airbus and civil manufacture. The move to the Airbus Integrated Company and the A380's launch are as important to EADS as to Airbus, but the A3 80 is capital intensive and EADS is footing most of the bill. Investors will therefore regard it warily. Also, the integration of its con stituent companies, spanning three nations, remains a huge challenge as it seeks to extract synergies while combining different business cultures. It has at least made a start by revamp ing its Defence and Civil Systems unit. EADS will be keen to build its defence port folio, but ties to the US A and its massive defence market remain relatively weak. BAE, by con trast, now has a major presence in the USA, aided by big deals in 2000, and is now a defence systems integrator with rump civil activity. US industry has worked hard to overcome die difficulties of a few years ago, with a series of sectoral disposals in 2000 aimed at improving focus. Lockheed Martin, for example, sold its control systems and electronic war fare businesses to BAE, and Northrop Grumman sold its aerostructures unit before die Litton buy. Looming over die indus try in 2001 will be die prospect of a US economic slump. Though die defence market remains flat, die soft landing apparendy in store for die civil sector means confidence remains high after a year in which die sec tor generally performed above expectations. "From what we have seen, it has not been as bad this year as everyone pre dicted," says Hampson. "It Aerospace and defence mergers: the last 10 years — with key deals 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 GE Aerospace Cessna ft -Other Grumman^ IBM FSC /<^~ Lycoming __4~-Other Lockheed Martin Unisys V E-Systems ^ j Other Westinghouse Rockwell Space/ \ /Defence ^ ' Other I Hughes Aircraft' McDonnell Douglas TI Flight Safety Int'l BDM Int'l , DSEG —^ \Rohr L- Utd Defence Other \ Notes: Chart lists businesses taken over. 1991-1999 figures are for deals completed during those years. 2000 figures are for deals completed or announced during the year to November, ie does not include Northrop Grumman's Litton deal. PanAm Sal Gulfstream Sundstrand Honeywel Marconi Defence Lucas-Varity y - Coltec ^Aeroquip-Vickers Other FLIGHT Hughes Space & Comms , Honeywell Cordant Tech TI Group COMSAT \ EADS|PO \ I // Racal Other 0 10 Source: Roland Berger 20 30 40 50 Deal volume ($bn) 60 70 80 The post-merger aerospace ranking 60 50 r £301 15 2° 10 •i III s £ 6= Note: Chert based on combined figures for most recent financial yeans. Assumes all deals will go through.'lncludes Hughes' satellite division. "Excludes IM Control Systems and Senders, sold to BAE Systems. ^Includes LM Control Systems and Sanders. • Includes Litton OARETHBURGESS 01 was not diat drastic. People have generally done well, and we diink 2001 will be even better." One factor diat should les son die sector's exposure in choppy waters is die rela tively modest ratio of ordered aircraft to aircraft in service, which should help airlines and manufac turers manage a slowdown. Analyst Chris Tarry of Commerzbank says die air line industry's orderbook is in far better shape tlian it was before previous indus try shocks. "Part of die problem in die Gulf War was massive over-ordering in 1986-90." Boeing chief Phil Condit ill HJSHX. sees no reason for pes simism. "We're not seeing any effect on airline demand," he says. "We see 4-5% growth and 3% air craft replacement, which equals 7-8% of fleet diat needs to be ordered every year. And we have not gotten into a situa tion where airlines order higher dian demand and hope to get market share from someone else, which leads to higher capacity. Load fac tors are as high in die USA as ever, and we have great confidence in the US economy." Any downturn die industry does endure will give a furdier nudge in the direction of new types of business activity, including space and communications, information technology, finance and service provision in general. The primary manufacturers all now acknowledge die importance of services, widi 2001 set for a major expansion in diat direction. "Services are die big diing," says Hampson. "The sector offers growdi of 6% a year against 3 -4% for manufacturing. And services is a frag mented market not well served by primes, so it's ripe for someone to come in." Ironically, while GE has seized die initiative at a strategic level widi its Honeywell move, it is also ahead of die rest as a services provider, widi all-conquering GE Capital. Yet it may not be unassailable. "At least airframers have a better idea of cost," says Hampson. 26 FLIGHT INTERNATIONAL 2 - 8 January 2001
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
