The recent cancellation of the RJX programme by BAE poses some interesting issues regarding the company's direction and quality of management.
The strategic direction of BAE seems to be clear: out of air transport and into defence. Major business publications no longer refer to BAE as an "aerospace company", but as a "major defence contractor". Given the realignment of BAE's major civil aerospace facilities into the new Airbus company, the RJX remained the only remaining in-house civil manufacturing programme to be tidied up. The events of 11 September provided the opportunity to do so.
No doubt the RJX took up a far greater amount of management time and energy that its revenue and profit potential merited. It also "competed" against offerings from BAE's largest partners: the Boeing 717 and the Airbus A318. From these perspectives, there had been presumably a clear set of choices for some time - fix it, sell it, merge it or close it. One wonders whether BAE has indeed made the right decision, and for the right reasons. From an outsider's perspective, the RJX had much in its favour:
low development costs: reportedly aroundÊ$100 million, most of which had been spent anyway. Assuming some inflation, net present value and a build of 120 aircraft over the programme, allocation of around $1 million per aircraft would seem to be a major comparative advantage against Embraer and Fairchild Dornier (regardless of their state aid); superior manufacturing processes: BAE had made much of its advanced design, development and build processes implemented for the Eurofighter and others. Presumably these processes map across to the civil business, and thus the RJX would have a further advantage over competitors; unique product advantages: contrary to some analysis, the RJX has many superior service features: bigger and more flexible cabin, extended range and a large installed base of (Avro & 146) customers and support infrastructure; market need: most of the ageing 90- to 130-seat aircraft put out to pasture in Arizona are not coming back, but their passengers are. Furthermore, the only growth markets in the next two years are likely to be regional aircraft replacing those older aircraft.No doubt some of the near-term deals would not have been commercially attractive, but neither is spending more than $500 million to close the project down. Surely a far smaller portion of that amount would have made sense as incentive allocations to structure deals that facilitated sales?
Contrary to conventional wisdom, being the "systems integrator" of aircraft design and final assembly brings very considerable value to an organisation.
Closing production centres destroys knowledge, capabilities and design excellence: most of the value retained in BAE today was originally built around being the system integrator.
John Mapletoft
Fort Lauderdale, USA
After threatening to do so a number of years ago, BAE Systems has finally decided to extricate itself from the field of civil aviation by the closure of the regional jet production line at Woodford.
The board of directors now seems to be quite determined to involve the company purely in multinational defence projects and they are quite content to concentrate upon the manufacture of airframe sections and similar components only, leaving design and final assembly of aircraft to US and French companies.
While accepting that, hopefully, assembly work on the Eurofighter will keep Warton busy for quite a number of years to come, the only visible follow-on project is the Joint Strike Fighter. However, this aircraft will be marketed under the name of its designer Lockheed Martin, which will undoubtedly take all the international applause and credit for what could very well turn out to be a fantastic piece of military hardware.
The management at BAE Systems will be quite happy to ship fuselage sections and other components to Lockheed Martin for final assembly and accept fat cheques in return.
J M Tracey
Liverpool, UK
Source: Flight International
