European Aviation Industry
The European Union (EU) is the largest regional export market for the United States aerospace industry. Although Japan was the largest single country export market for the U.S. aerospace industry in 2007, combined exports of the U.S. aerospace industry to France, the United Kingdom, and Germany, the EU‘s three largest aerospace markets, illustrate the importance of the region for both the U.S. and EU aerospace markets.128 In addition, European aerospace companies supply the full range of aerospace products and services, from large civil aircraft, to satellites, to subassemblies and components. As a result, European firms are both important partners and competitors for U.S .firms. There is significant variety in the ownership structure of European major suppliers. For example, unlike in the United States, several major suppliers still have significant government ownership. EADS, for example, benefits from partial French and Spanish state ownership, nearly 5 percent ownership by a Russian state-owned bank as well as other public shareholders. EADS emerged in 2000 from the link-up of the German–French Aerospatiale Matra and Spain‘s CASA. Additionally, Thales-Alenia is 27.2 percent owned by the French state.
As a union founded to enhance political, economic and social cooperation amongst member nations, the individual member states of the European Union are free to shape their own aerospace policies. Recognizing the advantage of a regional unified aerospace policy that would facilitate enhanced competition, particularly with the United States, the EU has taken steps to strengthen the coherence of its regional aerospace market. In the July 2002 "Strategic Aerospace Review for the 21st Century" (STAR 21) report, the European Advisory Group on Aerospace developed several recommendations. They included: (1) coordinated efforts to increase access to world aerospace markets, particularly through advocacy for changes to Buy America practices and convergence in export control policies; (2) mobilization of region-wide public and private research funds to launch a coordinated, long-term civil aerospace research strategy; (3) a shift from authority of individual member state specific aerospace policy makers to a more unified structure, including wider roles for the European Aviation Safety Agency and advocating for membership of the EU in the International Civil Aviation Organization (ICAO) alongside member states; and (4) consolidation of aerospace defense research and acquisition policies among member states. The EU and its member states are continuing to implement these recommendations today.
The French aerospace industry is the largest in Europe, with 2007 exports of over $46.7 billion (in 2007 dollars).129 The French aerospace industry employed approximately 132,000 people in 2007. The outlook for the French aerospace industry remains generally positive, characterized by continued revenue growth, record orders, and a stable industry workforce. In the civil aerospace sector, the Airbus A380 and Dassault Falcon 7X entered into service in 2007 and the A350, Falcon SMS, and Falcon 2000 LX programs were launched. There was also a significant rise in telecommunications satellite orders. However, the decreasing value of the dollar is seen as a major issue of concern despite the continued growth of export orders.
The German aerospace industry is the second largest in Europe, with 2006 exports of $27.7 billion1and 2007 employment in aeronautics at 70,500. Germany accounts for approximately one-fifth of the total revenue generated by the European aerospace industry. In general, the outlook for the German aerospace industry remains positive, with gains in the civil and military aviation sectors driving growth. Specifically, current Airbus A380 and Eurocopter helicopter production coupled with future production of the Airbus A350XWB are driving strong civil aviation sales. Similar to France, in the military aviation sector, production of the Airbus A400M tactical airlifter, increased production of the Eurofighter and the Tiger and NH90 military helicopters are driving export sales growth. By extension, aerospace revenue gains are sustained by Germany‘s continued emphasis on research and development expenditures, which are greater on a percentage of sales basis than in other EU member countries.
The UK aerospace industry is the third largest in Europe, with 2007 exports of $27.7 billion (in 2007 dollars). The UK aerospace sector continues to grow by approximately 8 percent annually from 2003 to 2007, due primarily to growth in the maintenance, repair and overhaul (MRO) market, which is driven by increasing demands for air travel. The UK is home to several of the world‘s leading aerospace companies, including BAE Systems PLC and Rolls-Royce PLC. In addition, US aerospace companies such as Boeing, Honeywell, Raytheon, Rockwell Collins, and Lockheed Martin also maintain a presence in the UK. According to the Society of British Aerospace Companies (SBAC), UK aerospace companies directly employ over 124,000 people, and over 30,000 people in the United States.
Probably the primary challenge facing the UK aerospace industry is the impact of an appreciating British currency against the U.S. dollar. A large portion of the global aerospace market is U.S. dollar denominated. As a result, the rapid appreciation of the British pound sterling to historic highs against the dollar has a direct impact on the costs of research, development, and production as well as sales for UK aerospace manufacturers. In fact, the dollar-to-pound exchange rate has compelled some UK aerospace producers to move production and other activities abroad to dollar-denominated locations.
One of the earliest and most aggressive adopters of this outward mobility strategy was Rolls-Royce. Beginning in 1995, Rolls-Royce acquired the Allison Engine Company, based in Indianapolis, Indiana and renamed it the Rolls-Royce Corporation. This acquisition gave Rolls-Royce a significant U.S. presence, allowing the company to offer engines in virtually all market segments from helicopters to large civil aircraft. Subsequent acquisitions of oil and gas ventures, engine repair and overhaul facilities, and marine engine manufacturer Vickers established Rolls-Royce as a major presence in the U.S. aerospace industry. As previously noted, Rolls-Royce is considering additional shifts in its industrial base away from the UK to lower-cost, dollar-denominated markets. Further appreciation of the British pound will likely expand and accelerate the trend of outward mobilization at Rolls-Royce and across the UK aerospace industry as a whole.
The Italian aerospace industry is the fourth largest in Europe, with 2006 worldwide exports of $4.4 billion.146 The Italian aerospace industry, which employed approximately 38,000 people in 2005, is generally open to cooperation with the U.S. aerospace industry. Major players in the Italian aerospace industry include Finmeccanica, the country‘s largest engineering and aerospace/defense group. Finmeccanica manufactures helicopters, military aircraft, defense systems, satellites, and is also an energy producer and builder of generation and transmission components, boilers, turbines, cogeneration plants, desalination plants, and nuclear power plants. Telespazio, a Finmeccanica joint venture, is involved in satellite management and navigation, and broadband multimedia telecommunications. Fiat Avio SpA is the country‘s major manufacturer of aircraft propulsion systems. Fiat Avio has partnerships with Pratt & Whitney, GE Aviation and Rolls-Royce for the production of aircraft engines.
Spain‘s aerospace industry is the fifth largest in Europe, with 2006 exports of $3.0 billion and 2007 employment of 25,700 workers. The Spanish aerospace industry, which has declined from 28,099 workers in 2005, is dominated by three manufacturers. EADS CASA is Spain‘s largest aerospace company and is a world leader in light- and medium-sized military aircraft. EADS CASA is also responsible for final assembly of the Airbus A400M and is a supplier of aerodynamic surface components for the Boeing 737, 757 and 777. Gamesa Aeronautica designs, develops, and manufactures major subassembly structures for a number of large civil aircraft. Indra Sistemas S.A. is Spain‘s leading producer of electronic defense equipment. Industria de Turbo Propulsores S.A. (ITP) designs, produces and provides maintenance repair and overhaul services for a variety of aircraft engines and gas turbine compressors. Again, similar to the other member countries of the EU, the outlook for Spain‘s aerospace industry remains positive, as continued sales growth by EADS affiliated aerospace companies carries over to the industry in general.
