Structure of the Industry
Today, the manufacture of large civil aircraft is the biggest single element in Europe’s aerospace turnover, accounting for over €20 billion annually alone. This market is cyclical as it depends on the acquisition plans of airlines which fluctuate considerably, especially in a period of uncertain economic perspectives and global security concerns. On the defence side, demand depends on governments’ defence budgets and procurement policies, which in turn depend on geopolitical developments and the changes in threat perception. As products on the civil and the defence side have many commonalties, it is essential for industry to have as much predictability and stability as possible in both segments. This helps to make best use of the knowledge base, to optimise technical, human and financial resources, and to iron out fluctuations in demand when either segment encounters periodic difficulties.
The overall development of the market for large civil aircraft and the competitiveness of Airbus are key elements for the future development of the European industry. The general economic downturn, the terrorist threat, the Iraq crisis and SARS have had a significant dampening effect. However, Airbus has been less affected than its main international competitor, Boeing and this has helped the company to improve its market share to roughly equal that of Boeing with its current product range. Performance is expected to improve further, with the introduction of the new A380 super-jumbo.
On the defence side, the number of new programmes both in Europe and world-wide is limited. If brought to completion as planned, the US Joint Strike Fighter is expected to be the single most important programme for shaping the combat aircraft industry in the coming years and could constrain the possibility of developing new European products in this market segment. In helicopters, however, the European aerospace industry has developed a strong global position. Significant capabilities also exist in the areas of missiles and unmanned aircraft.
However, the lack of a predictable framework at European level affects industry. For example, with regard to military transport aircraft the procurement procedure of the Airbus A400M has been complicated and cumbersome. As far as missiles are concerned, the decision-making process on ammunition for the Eurofighter Typhoon has posed similar problems. Such situations increase the pressure for European companies to focus on the much larger US defence market and to seek alliances in order to secure access to new business that has a scale and continuity capable of assuring a stable flow of revenues and an acceptable return to their shareholders.
In the space sector, the drop in demand for satellite communications has affected both the satellite and the launcher business. No significant improvement is expected in the coming years. The resulting fall in orders has caused problems in the European space industry, which traditionally depends more than its competitors on commercial markets. In addition, the already high level of international competition in the launcher market from the United States, Russia, China and Japan, is set to increase further now that the Delta 4 and Atlas 5 rockets, initially developed by the US military, can be used to offer substantial numbers of launch services on the commercial market.
Consequences
Considerable progress in building a strong European dimension in important market segments, such as defence and space, is still needed to maintain a competitive European aerospace industry in the long run. The positive Airbus experience in the civil aircraft market should serve as the benchmark for other parts of the sector. Industrial restructuring combined with the development of relevant common programmes within a coherent political framework across European borders is essential for future success in all aerospace sectors.
