Jul 07
Where is the world aviation?
How did the aircraft through the crisis?
Experts cabinet Alixpartner highlight the "resilience" rather remarkable aerospace facing a crisis which has "devastated most industries, in the words of Eric Bernardini, Associate Director. After three years of strong growth (+15 to +17%), the slowdown has been severe but the activity remained positive with an increase of 2% in the world. This, in an environment where credit was becoming scarce and expensive.
This resilience reflects the fact that the aviation industry is a long cycle that "smooth" dips and rebounds of activity.When the crisis broke out, the order books are well filled – they are between 6 and 7 years of work with Airbus and Boeing, for example – the U.S. defense budget remains high at over 600 billion dollars and companies will react quickly launching plans for reorganization to optimize their cost base. But the overall increase in activity concealed differences: the regional airline and business aviation have suffered more from the crisis in commercial aviation (aircraft above 110 seats).
What about 2010?
"Do not expect to find pre-crisis levels," warns Eric Bernardini. The first quarter of the year was marked by a 9% drop in shipments compared to the same period of 2009 with 261 aircraft confondues.Cela all categories, while new orders taken are not strong after the fall of 70% of last year.
Several negative factors do not advocate a resumption free. First, the defense budget at best stagnant in the West with a likely decline in the U.S. and cuts already adopted in France, Germany and Great Britain. This marks a break with the period 1999-2009. In ten years, this budget has increased by 167% in the USA, 104% in France, but 181% in Saudi Arabia, Russia 272% and 294% in China. "But in real terms, the EU budget has stagnated, it has instead increased in the rest of the world," the study said.
Then, weak clients in commercial aviation. "With 0.5% margin forecast by 2010, the airline business model is not profitable in the long term," said Thierry Down, Alixpartner partner in the firm.Majors are also increasingly threatened by the rise of new players from the Asia-Pacific region and Middle East policies that lead to acquisitions of new equipment and aggressive pricing as well as the installation in the landscape of low cost.
And in the longer term?
The aviation industry is expected, according Alixpartner remain a growth industry. Thanks to the strength of emerging markets in Asia Pacific and Middle East in the years to come. The study of new aircraft deliveries projected to increase 15% per year by 2028, three times faster than air traffic.
The contract will be subject to strong pressure on prices with the arrival of new competitors in particular on the lucrative segment of the short and medium haul routes.The C-Series from Canada's Bombardier and Mitsubishi MRJ Japanese between 2013 and 2015 and the C-919 Chinese Comac to 2017 (and perhaps also a future large-derived Embraer E-190) will break the duopoly of Airbus Boeing and their A 320 and B 737. The arrival of his new players posed with even more accuité the issue of repowering existing Airbus and Boeing or the launch of new devices.
The pressure on prices will be high on the international defense market, U.S. groups seek growth from outside their borders. And taking probably the way of acquisitions.
What lessons did from the crisis?
Aerospace has been facing the worst crisis of his violent history at a time when she changed her business model.Boeing led the way, followed by Airbus, opting for the outsourcing of whole aircraft to major partners who share the financial risk and industry (risk-sharing partners). The model is not fixed so far, but already he designed a new deal between manufacturers and suppliers of rank 1. "It is evolving towards a model where not only the charges and development will be shared but also the earnings. Some vendors provide penalties for delay if the programs of manufacturers are backlogged. This can be a risky gamble for the supplier but overall, the balance of power balances gradually ", explains Thierry down.
Result: 8.6% in 2009, the profitability of major equipment has become for the first time higher than that of manufacturers that spring to 6.2%.Overall, manufacturers have been penalized by delays in recovery of their new programs (B 787, A 380 and A 400M), which has cost them billions of euros and has weighed on their accounts. Mais ces chiffres globaux cachent à nouveau de grandes disparités et mettent en lumière la faiblesse des acteurs européens par rapports aux géants américains. "In our study, few major European suppliers are well placed. the winners are those who realize a significant part of their business in the United States as the British Cobham, "said Eric Bernardini. The French equipment already handicapped by a structure of costs in euros on a market where the reference currency is the dollar, are particularly poorly placed with margin levels that are almost the double.
It is therefore urgent to organize and optimize its cost structure.Some have understood like a Zodiac, which has returned to acquisitions and has balanced its business conducted in dollars and one conducted in euro. French SMEs are particularly vulnerable because they are too small and no financial base. "Some have understood that they must join forces and others not," note the experts at AlixPartners. In Aerostructures (elements that when assembled form the fuselage of the plane) there is urgency with four players in France (15 in Europe) against the giant American Spirit and subsidiaries of major Japanese companies Mitsubishi and Kawasaki.
Mergers and acquisitions will they return?
Yes, says the study. Especially since they have not stopped but simply slowed during the crisis operations from 238 to 156 between 2008 and 2009. In the first quarter of 2010, we are 51.The Americans who were most active on this front between 2005 and 2009 with 484 operations should continue to play outposts. If Europeans have been rather discreet in number of transactions in the period with the notable exception of Thales, they have been very active if we take the size criteria for acquisitions. Leader in this category, Italy's Finmeccanica. But in none of the categories cited by the study is EADS, the European giant who nevertheless want to ensure complete acquisitions in order to realign its business in the defense and security.
The Aerostructures segment very crumbled, electrical systems and maintenance and repair should experience the largest wave of consolidation, particularly in Europe. In total, the five main players in these three activities controlled only 40%, 40% and 27% market share.
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