Grenfell Tower fire disaster combined with terrorist action, post-election concerns and the unclear path to Brexit have done little to improve confidence and industry morale but provided you look hard there is some good news to be found.
Jaguar Land Rover (JLR) kicked the week off to a very good start by announcing that another 500 people will be employed at its sites mainly in Britain comprising a range of specialist software, technical and manufacturing jobs. This is great news for the UK and it shows that one of the most important auto manufacturing companies in the UK to retain a high level supply chain here is not only doing well but expanding fast.
Another very sector in the UK is the aerospace and defence manufacturing industry and here, with the opening of the week-long bi-annual Paris Airshow at Le Bourget Airport today, interested parties will be keen to observe announcements of future plans, new technology and events.
Over the past twenty years airshow events such as Paris, Dubai, Singapore and Farnborough have, provided airline customers are content, become ‘the’ place to announce new aircraft orders. Most though not all industry players store up order announcements for big airshow event and this year would in normal circumstances have been no exception. The trouble is that this year there is likely to be a dearth of large civil aircraft order announcements and those that do come are unlikely to be particularly large. That is of course unless one or other of the two big players, Boeing or Airbus, has kept a surprise up its sleeve.
I am not attending Paris this year but just because I will miss the razzmatazz of the 52nd Paris Air Show at Le Bourget this year does not mean that I believe that it has diminished in importance. Far from that, Paris remains a very important airshow and one in which new ideas, relationships and partnerships are forged.
Dominated as they are by the commercial aerospace industry, while the level of order announcements this year is expected to be much thinner than recent shows, there should be enough to provide a reasonable enough level of cheer. Both the two leading aircraft makers have warned that aircraft orders will be down this year. However, while commercial aircraft orders may well be down and in short supply does not mean that this industry should be considered as being in anything other than very good health.
Following such a long period of orders rising year-on-year and that peaked in 2014 a further downturn in aircraft orders during 2017 had been widely predicted. My own view is that this downturn in orders will probably stretch into 2019 before the position turns into a more positive direction. Frankly, given the huge order backlogs carried by the two main industry players, I am not really that concerned.
Military aircraft are also an important if smaller part of airshow events such as Paris. Amongst the highlights at Le Bourget this year will be the first demonstration at a Continental European airshow event of the Lockheed Martin F-35 Joint Strike Fighter amongst which Britain, Italy, the Netherlands, Norway and others are buying and in which British companies have a 15% manufacturing share.
The importance of the F-35 to the UK economy and to our aerospace and defence industry cannot be ignored. I have no specific detail to hand but many other military aircraft be they fast jets, transport or ISTAR related will no doubt either be taking take part in the displays or be on display for visitors to see. This is a highly competitive industry in which aircraft such as Eurofighter Typhoon and the Lockheed Martin F-35 Joint Strike Fighter slog it out in international campaigns fighting against Saab Gripen, Boeing F/A-18e/F Super Hornet, Dassault Rafale, Boeing F-15 Strike Eagle and Lockheed Martin F-16V competitors.
As military aircraft order announcements at airshow events such as Paris are extremely rare I will not dwell on the defence related arena here other than to remind that BAE Systems is engaged in several large Typhoon sales campaigns in Continental Europe right now including Finland and Belgium and also that where it is up against a number of competitors and also, that within the top 1,000 companies in the UK 43 are aerospace and defence related. Rolls-Royce, BAE Systems and Airbus account for 65% of total R&D investment made by UK aerospace and defence companies.
As important that aircraft order announcements may be so too are those that relate to technical and technology advancement and plans from the commercial aircraft sector for future investment in new aircraft and new technologies.
If you are surprised as to my own lack of attendance at Paris this year please don’t be! In reality, apart from the odd quick trip over for specific meetings or dinner events held in the centre of Paris during the show week, it is eight years since I last visited a show at Le Bourget. The same is not true of Farnborough of course and having been to each and every Farnborough (held on alternative years to the Paris Air Show) since 1968 I am not about to drop that one yet. The real point though is that important though the Paris Air Show is to all parts of the UK aerospace industry sector, given that I am fortunate enough to have close contact with those that I need to see in this industry outside of events such as these, better that I let those that matter in the industry use their time more wisely talking to others including customers as opposed to me!
With commercial aircraft orders having more than halved since the peak of cycle in 2014 you could be forgiven for thinking that the industry was in downturn conditions. Whilst in respect of actual orders this may be true but in respect of activity and working through massive order backlogs the industry continues at record levels of activity.
Despite an anticipated dearth of order announcements at Paris this year indications from manufacturers of longer term plans and intentions are unlikely to be in short supply. Airbus has already confirmed a plan to create greater operating efficiencies in its A380 super jumbo including fitting winglets to further aid lower fuel consumption and in the hope of attracting increased sales. The new Airbus A320 NEO aircraft is entering service with airline customers and Boeing delivered the first 737 MAX to Malaysia based Malindo Air just a month ago. These twin aisle Boeing 737 and Airbus A320 families are bread and butter of the short haul airline industry market and their respective continued success to both industry players is hugely important.
Worth noting that since production of the 737 family started in the late 1960’s Boeing has sold around 14,000 of these aircraft. In respect of its 737 MAX family, Boeing is currently sitting on orders for no fewer than 3,700 of these aircraft along with over 800 of the tradition NG variants. For the A329 family of aircraft Airbus has so far received orders for 13,111 aircraft of which 7,610 have so far been delivered. In respect of A320neo family of aircraft, latest figures ahead of the Paris Air Show that I have are that the has so far received orders for 5,053 of the aircraft in its A319/320.321neo form of which approximately 116 have now been delivered. Each and every wing fitted to an Airbus aircraft is made in the United Kingdom as are many other components.
But while short-haul aircraft dominate in respect of numbers twin-aisle long haul aircraft are where the real money is to be made in this industry. Boeing have achieved significant strength in this particular market with its range of 777 variants (powered with General Electric GE9X) and more recently with the 787 ‘Dreamliner’ aircraft which has been very well received by airlines and passengers alike. Airbus meanwhile has enjoyed terrific success with the A330 family of long-haul aircraft over many years and for which the company has received a combined total of 1,683 aircraft orders for both CEO (Rolls-Royce Trent 700 powered) and NEO (Rolls-Royce Trent 7000 powered) versions of the aircraft of which according to my records 210 are for the 330-NEO. So far, a total of 1,347 A330 family aircraft have been delivered to airline customers.
While the world’s two leading aerospace manufacturers face new challenges against their respective dominance from China, Russia and Canada, the latter in the form of Bombardier’s challenger to the dominance of the Boeing 737 and Airbus A320 market in the form of the C Series and China’s huge investment through the state owned COMAC in the development of the C919 I take the view that while there can be no room for complacency by maintaining the technological lead and the ability to produce aircraft at a competitive price and maintain year on year levels of improved efficiency, Boeing and Airbus will at the very least maintain their lead positions.
There are of course other challenges to face and the long running WTO dispute between the US and the EU remains an ongoing concern. I intend to write on this subject separately and all that I will say here is that while there does appear to have been some positive momentum in the US in respect of approach and acknowledgement to what the WTO has so far declared there appears to have been little progress toward settling the issue in the EU. My fear is that unless this unsatisfactory situation is settled soon serious and possibly permanent damage is possible.
I am also bound to be concerned at the impact of BREXIT and in respect of this, the future attitude and approach by Airbus to continuing investment in wing production in the UK. Britain may not manufacture commercial aircraft these days but it remains lead in a number of design and manufacturing positions such as wings, engines and landing gear. Given the weakness of the current UK Government as it approaches the start of BREXIT talks in Brussels today I live in hope that the respected Brexit Secretary, David Davies will be determined to fight hard to ensure that valuable UK aerospace industry interests and that support 300,000 jobs across the supply chain and allied industries, providing huge benefits to the economy and that there are many including the Aerospace Growth Partnership that are committed to growing rather than overseeing contraction are committed to achieving.
CHW (London – 19th June 2017)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
Mobile: +44 7710 779785