The eurozone financial crisis could be the key event in the current aerospace business cycle, according to a leading US sector analyst.
"European market strength is critical to growth of the sector," says aerospace and defence managing director Michael Richter of Lazard investment bank, speaking to Flight Daily News on the eve of the Farnborough air show. He adds that a return to a vibrant world economy is needed before the aerospace industry can truly continue in its current cycle.
European airlines, therefore, are a weak link for the industry, says Richter, as losses in Europe are mitigating air transport industry growth in North America and key emerging economies.
However, he says Airbus and Boeing are committed to increasing airliner production rates on high-volume programmes. And, as that ramp-up is going to translate into rising orders, suppliers with large order books may become attractive takeover targets.
Since being acquired is a realistic alternative to borrowing for capital investment to meet capacity ramp-up demands, the eurozone crisis could accelerate the rate of merger and acquisition deals.
Further accelerating M&As is the ongoing preference by Airbus and Boeing for dealing with fewer suppliers, says Richter, along with what he sees as a "rush" to acquire technologies.
European companies are also still looking for North American footholds, he adds.
Source: Flight Daily News