Annual figures released by aerospace, defence and security and trade association ADS confirm that in 2016 the global aerospace industry delivered a record-breaking number of aircraft for the sixth consecutive year. Adding together the figures published by Airbus, Boeing and those published by other commercial aircraft manufacturers around the world players apparently add up to a total of 1,443 commercial airliners being produced and which, in terms of value according to the trade association, was worth £27 billion to the UK’s aerospace industry – an increase of £4 billion on 2015.
These are undoubtedly good figures and in the shorter term, the outlook remains good despite a cyclical slowing down in number of orders received that might in my view, last just a couple more year at most. The point is that with over 13,500 new passenger airliners on order and production, according to ADS, working out at 1,500 plus deliveries a year, the delivery figures for 2017 should be even better.
But there are serious straws in the wind for the huge and crucially important UK aerospace industry caused by Brexit and many questions are yet to be answered. For instance, how would tariffs imposed on UK-EU trade impact on the industry and its supply chain? What impact might Brexit have on the location of both international and European company operations here in the UK long terms and on their attitude to future investment in the UK? Importantly, what specific non-tariff trade barriers and licensing requirements will the need to be put in place after Brexit to allow the intra-European aerospace component industry to freely trade? How significant is continued or equivalent access to the EU’s Free Trade Agreements (FTAs) with third countries to this sector? And finally, which countries would be the most important for the UK to negotiate a Free Trade Agreement with post-Brexit?
There can be no doubt that the imposition of tariff barriers and rules of origin for trade with the EU will seriously impact on the UK aerospace, defence and security industry unless the UK Government and the EU agree a strategy that allows freedom of movement between the UK and EU member countries. It is only since the Brexit vote that we have begun to realise just how many aerospace and defence related components go backwards and forwards between members states before they end up in the completed aircraft or propulsion system.
The problem for UK aerospace, defence, space and security companies of our not remaining a member of the customs union are a cause of much concern to those within the industry. As with all things, the hope is that a solution bound through common sense negotiation between all parties with vested interest in maintaining the industry in a competitive state will be found.
For companies involved in the UK aerospace manufacturing sector including Airbus which manufacturers all the wings for Airbus planes at Broughton in North Wales, Rolls-Royce which produces most of the wide bodied aircraft engines and other large companies such as GKN and many small and medium sized enterprises involved in the supply chain are being forced to live with doubt and uncertainty and that this could well damage the UK industry.
Individual companies, the Royal Aeronautical Society and the trade association ADS are amongst many that are on the case. They are talking with government and putting forward all of their respective concerns. House of Commons Select Committees have also expressed concern and no doubt they will continue to be keen observers. Our aerospace and defence industries just as are our security and space industries very important to the UK economy. Service industries may hold sway of 80% of the UK economic output but it is industries such as all the above together with pharmaceutical, engineering and automotive that provide important skills and a permanent route to the future. Let us hope that in its industrial policy the Government really does embrace that message.
In the case of operating in a world outside of the customs union, no decision about the future is better than a bad decision! Actions speak louder than words. Clarity is needed though and it is needed fast if we are not to begin to lose out. I don’t doubt that there are those that will remain in the EU that are right now champing at the bit to see whether and what advantages are in prospect for them of Britain leaving the EU and while I am confident that common sense will in the end prevail and that a solution and compromise for the UK aerospace and defence industry will be found, I am not stupid enough to be complacent.
Enough, there is quite enough bad news around without my adding to it. Let’s look back awhile and ask ourselves can it really be 50 years since 1967? What an exciting year that was in the aerospace world – an important years in terms of industry consolidation as well not forgetting a significant year in the development of the first Airbus airliner, the A300.
My, how time flies? Remember when the US had three manufacturing companies all fighting it out in the commercial passenger jet market. Perhaps you are too young to remember but the fact is that fifty years ago Boeing shared the commercial aircraft passenger market with not just one competitor but two – Lockheed Corporation and Douglas Aircraft.
So why do I bring the subject of looking back fifty years on a day when I could have chosen to write on worrying affairs in the US and on a Brexit bill that will today start its passage through Parliament? It is because remembering the past is tome important in terms of how we see things for the future. And it is because fifty year ago (on January 13th 1967 to be precise) the fourth largest company in the US aerospace industry, the Douglas Aircraft Company merged with the McDonnell Company, whose primary business then by the way was manufacturing military jets and space vehicles, to form McDonnell Douglas.
As most of us who follow or engage in the world of aerospace and defence know, the final act of consolidation in the US commercial aircraft industry took place on December 1996 when McDonnell Douglas merged with Boeing. For the record, Lockheed pulled out of the commercial aircraft market in 1983 following delivery of the 249th L1011 TriStar aircraft.
Just as the Lockheed L-1011 TriStar, brilliant aircraft though it was, had a troubled and much delayed entry into service – this caused by engine delays and other serious internal economic factors – so too was the Douglas Aircraft Company ‘forced’ to merge with the McDonnell Company, primarily due to serious delays in the delivery of jet engines from Pratt & Whitney for its highly successful four-engine DC-8 and twin engine DC-9 airliners. Interestingly, the problem over delay wasn’t about technical issues as far as I know, moreover it was about skills shortage combined with the volume of business having outstripped the capacity to deliver. Lessons for all of us today then!
Later in 1967, on June 6th to be precise, Boeing delivered its 1,000th commercial jet airliner, a 707 model (not sure whether this was a 323 or 120B variant) produced in the Seattle plant. Perhaps more importantly, during April 1967, Boeing began the flight test program of the 737 jet, an airliner that to this day remains the world’s best-selling aircraft with, at the end of last year, no fewer than 13,787 737’s having been ordered during the fifty-one years since the first order was taken in 1966. To complete the circle, a total of 9,335 737 models of all types have been delivered so far. Order backlog for the 737 program at the end of 2016 stood at 4,452 of which 3,605 are attributable to the 737Max and the remainder 737-800 /900ER variants.
Something else occurred in 1967 that in terms of the global commercial aircraft manufacturing industry would be very significant. In Paris in September of that year the governments of France, Britain and what was then, West Germany signed a Memorandum of Understanding (MOU) for development of the A300 wide-bodied jet airliner of which the then proposed seating capacity was 300. The MOU provided the authority for design studies and project definition.
The respective national development aerospace companies involved in the Airbus project at the time of the signing of the one-year MOU in 1967 were Sud-Aviation of France, Hawker-Siddeley in the UK, and Deutsche Airbus of West Germany, with engine development led by Rolls-Royce, SNECMA and MAN-Turbo. Although much would change before the programme got underway, it was originally envisaged that airframe costs would be shares as to 37.5% each by France and the UK and 25% by West Germany. The UK was expected to pick up 75% of engine costs and France and Germany 12.5% each.
So, what else occurred in the very interesting aerospace year of 1967? In December, Toulouse based Sud-Aviation rolled out the very first Anglo-French Concord, No 001. Concorde 002, built by the British Aircraft Company (BAC) at Filton, Bristol would not be rolled out until September 1968. The first flight of Concorde 001 took place on the 2nd March 1969 and that of Concorde 002 a month later on the 9th April 1969.
Other notable first flights in 1967 were the Fokker F28 Fellowship twin jet airliner in May and also the stretched BAC 1-11 (500) version.
1967 was also the year that the first Lockheed Martin C130K Hercules aircraft was delivered to 36 Squadron of the Royal Air Force based at Lyneham and that one of France’s oldest airplane manufacturers, Breguet was taken over by Dassault.
Enough nostalgia for now but I am sure you get the point.
CHW (London – 31st January 2017)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785