Chris Jasper/LONDON
Twelve months ago the US aerospace industry seemed set for yet another major upheaval, with Lockheed Martin poised to merge with Northrop Grumman in a move that would have created an entity big enough to challenge the pre-eminence of Boeing.
A year on, the league of major US aerospace players is little changed, with the restructuring of industry abruptly stalled by the outlawing of the Lockheed-Northrop deal by the US regulatory authorities and Lockheed Martin trailing in second spot after returning disappointing results during 1998.
Indeed, following a long period of rapid consolidation in the USA, last year effectively saw the industry pause for breath and take stock of the new-look aerospace scene.
Boeing's performance was modest, but was still a major improvement on that of 1997, when, despite reclaiming the number one spot through its merger with McDonnell Douglas, it made a net loss of $178 million.
Last year saw a much healthier -- although unspectacular - performance, with the Seattle giant making a profit of $1.12 billion from turnover which increased by more than $10 billion.
Boeing's Commercial Aircraft business accounted for almost all of this revenue gain, with airliner deliveries ramped up to record levels. Yet high production costs and pricing pressures ate into profits to a frightening degree, squeezing margins on commercial jets to 4%.
Boeing's Information, Space and Defense division - responsible for one-third of revenues - generated the bulk of the group's profits.
Lockheed Martin's year was essentially static, with profits down 23% and turnover dropping by more than 6%. The company admits that its space and missiles and information products segments performed particularly badly, with delays to space launches and military aircraft deliveries hitting sales and earnings growth. Fourth-quarter figures were particularly poor, partly because of a charge relating to its CalComp subsidiary.
The biggest loser last year, though, was Northrop Grumman, which struggled to recover from the disappointment - and financial impact - of its failed tryst with Lockheed Martin. Turnover edged down and profits were almost halved, with chairman Kent Kresa blaming "external economic forces, termination of the merger with Lockheed Martin and certain programme issues".
The only major merger or demerger activity reflected in the 1998 financial round-up involves Raytheon, given a massive earnings boost after the Hughes merger. The company reorganised itself following the deal, and warned that the shake-out would see "some of the most dramatic changes ever at any defence company".
That shake-out - which involved plant closures and swingeing job cuts - ensured that the Hughes business was neatly accommodated within the newly formed Raytheon Systems. Chief executive William Swanson says it has "-made unprecedented progress", achieving "ambitious 1998 cost-saving goals".
Raytheon's turnover grew to $17.5 billion in 1998, with profits up to $864 million, allowing it to leapfrog United Technologies into third place in the rankings.
Company projections for financial performance over the next few years vary according to sectoral strength. Boeing, for example, anticipates 3.3% growth in turnover, to $58 billion, for the current year, when airliner deliveries are due to peak at 620, with profits rising to $1.5-1.8 billion. For 2000, however, when deliveries are expected to fall to 480 aircraft, it expects turnover to drop back to $49 billion and profits to diminish to an unspecified level.
Source: Flight International