Kevin O'Toole/LONDON

With further mega-mergers apparently ruled out in the wake of Northrop Grumman's abandoned amalgamation with Lockheed Martin, the top of the US aerospace league began to look more settled at the half-year mark.

Yet aerospace stocks were on the slide by mid-year as first-half results largely failed to impress financial analysts and concerns grew over the timing of the next downturn.

Boeing again underperformed market expectations as it struggled to get airliner production back on track and wind down the McDonnell Douglas civil aircraft lines. The group concedes that its margins are likely to stay at only 2% for the full year before staging a modest recovery to 3-4% in 1999.

Lockheed Martin has now largely completed its post-merger consolidation, having stripped out more than $2 billion worth of businesses over the past year, but Northrop Grumman has been left struggling as the latest merger plans disintegrated. Not only were profits hit by a $186 million charge to cover the costs of the failed merger, but shareholders further cranked up the pressure with a lawsuit alleging that directors have "looted" the company through a series of share dealings.

Meanwhile, Northrop Grumman's sales are edgeing down, with the continuing tail-off on the B-2 bomber contract, which still makes up 15% of group business, and lower work volumes for the Boeing C-17. A planned cut in production rates on the Boeing 747 line, for which Northrop is the largest subcontractor, is also likely to wipe some $200 million off group sales next year.

Raytheon is also engaged in consolidation after last year's acquisition of the Hughes Aircraft and Texas Instruments defence operations. The group followed its first-half results with a deal, demanded by competition authorities, to sell off two seeker businesses, with sales of some $180 million, to DRS Technologies.

Elsewhere in the ranking, the newly reorganised AlliedSignal and TRW continue to rise up the league, helped by acquisitions, while BFGoodrich, now with the Rohr acquisition under its belt, makes its debut in the US top 10.

Source: Flight International