MURDO MORRISON / LONDON
Our second three-monthly poll of Top 100 aerospace companies shows a marked change in confidence over quarter one
Aerospace companies are growing in confidence after a buoyant second three months of the year. Flight International's second quarterly Aerospace Trends Survey - produced with strategy consultancy Roland Berger - shows an upswing in optimism among a sample of Top 100 businesses following a grim first quarter.
A total of 45% of those surveyed say they are more confident about prospects than they were the previous quarter, with 13% less confident. This compares with 16% more confident and 31% less confident three months ago.
And 45% say the second quarter of the year was better in terms of orders than the same period last year, with just 10% reporting things have got worse. By contrast, back in April, 41% had enjoyed a stronger quarter than the previous year, with 22% claiming their performance had declined.
The survey questioned 40 companies during the last three weeks of June, around the time of the Paris air show. Eighteen are based in Europe, 17 in North America and five in the rest of the world. They represent a spread of enterprises from multinational giants to companies with annual sales in hundreds of millions of dollars. Their activities cover military and commercial sectors and they include airframers, engine manufacturers and systems and components specialists.
In our first survey in April we asked 32 companies identical questions (this time eight more responded). We will repeat the survey each quarter to give an ongoing picture of optimism and performance among Top 100 players.
After almost two years of job cutting across the industry, there is better news on employment. In April, only 6% expected employee numbers to rise over the next 12 months, with 28% saying they would fall. This time round, 18% hope to increase their staffing levels although the same percentage expects them to drop. The majority - 65%, almost the same as last time - thinks they will stay the same. Of the seven respondents who expect to increase jobs, five are in North America and two in Europe. Although this will be welcome news to the thousands of aerospace workers and executives laid off in cities such as Seattle, Toronto and Wichita after 11 September, it could be symptomatic of the more "hire and fire" attitude of US industry compared with Europe's less flexible employment practices.
The rapid conclusion of the Iraq war and the end of the SARS scare has clearly boosted confidence. When companies were polled in March, the Gulf conflict had just started and SARS was plunging Asian economies and carriers into crisis.
In the last survey, North American companies were more gloomy than their European counterparts. Then, just 15% of Europeans were less confident about prospects, compared with 43% of North Americans. Now, the picture has swung the other way, with just one of the 17 North American companies reporting feeling less confident, compared with three of the 18 Europeans. This could reflect concerns about the state of the German economy and an improving economy across the Atlantic.
The situation is similar with orders. In April, eight out of the 13 Europeans (62%) and four of the 14 North Americans (29%) had enjoyed a better quarter than the same period the previous year. This time, the figures are 50% for Europeans and 47% for the North Americans.
Two US companies cite progress on the Lockheed Martin F-35 Joint Strike Fighter as key to their increased confidence. "JSF has made us more buoyant in terms of prospects and jobs," says one*. Suppliers of munitions to the UK and US armed forces to replace those used during the Gulf also expect to be kept busy. "It will keep our orderbook full for the next 12 months," says one respondent.
In Europe, the long-awaited launch order for the Airbus Military A400M military transport has given hope to manufacturers keen to grab a slice of the $17 billion programme. "It's a relief that it's finally been agreed and that development funding should now be released," says one.
Neil Hampson, associate partner at Roland Berger, says events in the second quarter indicate a watershed for the aerospace industry. "The Paris air show was perceived as a turning point, particularly given the better than expected level of announced orders," he says. "The end of the Gulf war and the SARS panic have given a boost to both the military and civil sides of the business, which is in a better position now than it has been for two miserable years."
Any upswing could be stuttering. Another outbreak of SARS or a major terror attack in the West would deal a bodyblow to returning confidence. But this survey shows few of the big players believe things will get worse before they get better. And the marked change in mood between quarters one and two indicates recovery could actually come earlier and faster than most thought possible. October's survey will show whether this upswing is the start of a trend or simply a blip.
*All quotes are unattributedClick here for a spreadsheet with the detailed survey data.
Source: Flight International