European Aviation Industry
As a union founded to enhance political, economic and social cooperation among 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.
The aeronautics sector represents around 50% of Europe’s defence, with a turnover of €46.7 billion in 2010 (43% of this is generated from exports), and employs around 200,000 people. The sector has considerable experience of international collaborative projects, which involves the sharing of total Research and Development4 (R&D) costs and the pooling of production orders between partner countries. Some of these collaborative programmes have led to the formation of European companies such as MBDA and Eurocopter. The degree of collaboration reflects the high, and rising, costs of modern aerospace projects.
The sector has the capability to produce world class products in most categories of aircraft and helicopters. Europe currently builds three types of advanced fighter jets: Rafale (France), Gripen (Sweden) & EuroFighter (Germany, Italy, Spain & UK) with a number of countries also taking part in the Joint Strike Fighter programme of the US. These programs are characterised by high R&D intensity and many technology spin-offs. However, recent cuts in Member States’ R&D investments are putting some important industrial capabilities and technologies at risk especially in the area of future combat aircraft and attack helicopters. Air power is an important element of national and European defence and Europe may rapidly reach the point where it will be dependent on other countries for critical technologies and capabilities in this respect.
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.
European aerospace companies produce 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 as well as competitors for US firms. The European Union (EU) is the largest regional export market for the United States aerospace industry (although Japan is the largest individual country market). Combined exports of the U.S. aerospace industry to France, the United Kingdom, and Germany account for 20.9 percent of total U.S aerospace exports.
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. The European Aeronautic Defense and Space Company (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 is the case with the U.S. aerospace industry, the global economic downturn after 2008 affected the EU aerospace industry. However, economic fundamentals are in place for continued long-term growth.
On June 30, 2010, a World Trade Organization (WTO) dispute settlement panel publicly released a decision finding that EU member state governments’ provision of launch aid, and certain other kinds of financial support to Airbus (a subsidiary of EADS), was at odds with WTO subsidies rules. The panel found that the launch aid had the effect of displacing U.S. aircraft sales in Europe and certain third country markets and contributed to significant lost sales of U.S. aircraft in the U.S. market. In addition, the panel found that UK, German and French launch aid provided in connection with the Airbus A380 is a prohibited subsidy, in as much as it was contingent on export performance. The EU and the U.S. each filed appeals, seeking a reversal of certain aspects of the panel’s decision (in the case of the U.S., it argued, among other things, that the panel erred in finding certain launch aid not be to de facto export contingent). In a separate WTO dispute, the EU charged the U.S. with providing subsidies to Boeing that are inconsistent with WTO rules. A WTO panel was expected to issue a confidential ruling by mid-September 2010 on EU claims leveled against $20 billion in aid to Boeing.
The French aerospace industry is the largest in Europe, with 2009 exports of over $44.7 billion (in 2009 dollars) [2007 exports were of over $46.7 billion (in 2007 dollars)]. The French aerospace industry employed approximately 134,000 people in 2009, up from approximately 132,000 people in 2007. Despite the 2009 economic crisis, the long-term 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 A350XWB, Falcon SMS, and Falcon 2000 LX programs were launched. There was also a significant rise in telecommunications satellite orders. For a time, the decreasing value of the dollar was seen as a major issue of concern despite the continued growth of export orders, but by 2010 this was no longer a concern.
The German aerospace industry is the second largest in Europe, with 2009 exports of $40.1 billion8 and 2009 employment of 93,000, compared with 2006 exports of $27.7 billion and 2007 employment in aeronautics at 70,500. In 2008, civil aviation made up 67.2% of all German aerospace industry revenue (62,011 employees), defense and security accounted for 25.4% of revenues (20,267 employees) and the space industry accounted for 7.4% of revenues (6,136 employees). Major challenges include the lack of consolidation among German aerospace suppliers, and the need for more qualified engineers to fill manufacturing jobs.
Germany accounted for well over one-fifth of the total revenue generated by the European aerospace industry. In general, the outlook for the German aerospace industry remained 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. In the military aviation sector, increased production of the Eurofighter and the Tiger and NH90 military helicopters are driving export sales growth. 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 2009 exports of $26.4 (in 2009 dollars) [2007 exports were $27.7 billion (in 2007 dollars)]. The UK aerospace sector grew by approximately 8 percent annually from 2003 to 2007, due primarily to growth in the maintenance, repair and overhaul (MRO) market, which was driven by increasing demands for air travel. According to the Society of British Aerospace Companies (SBAC), in 2009 UK aerospace companies directly employed 112,585 people, plus 40,091 people located in the United States. According to the SBAC, in 2007 UK aerospace companies had directly employed over 124,000 people, and over 30,000 people in the United States.
The UK is home to several of the world‘s leading aerospace companies, including BAE Systems PLC and Rolls-Royce PLC. In addition, U.S. aerospace companies such as Boeing, Honeywell, Raytheon, Rockwell Collins, and Lockheed Martin also maintain a presence in the UK. One of the primary challenges facing the UK aerospace industry as recently as 2010 was the impact of an appreciating British currency against the U.S. dollar which has compelled some UK aerospace producers, such as Rolls-Royce, to move production and other activities abroad to dollar-denominated locations. Further appreciation of the British pound will likely expand and accelerate the trend of outward mobilization across the UK aerospace industry. Other challenges facing the UK aerospace industry include consolidation of SME manufacturers in order to enable them to better compete globally.
The Italian aerospace industry is the fourth largest in Europe, with 2009 worldwide exports of $8.2 billion [in 2006 worldwide exports were $4.4 billion]. The Italian aerospace industry, which employed approximately 38,000 people as of 2008 [the same number as in 2005], is generally open to cooperation with the U.S. aerospace industry. Major players in the Italian aerospace industry include Finmeccanica, which is 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 2009 exports of $4.1 billion and 2009 employment of over 40,000 workers [in 2006 exports were $3.0 billion and 2007 employment was 25,700 workers, which has declined from 28,099 workers in 2005]. The Spanish aerospace industry is dominated by three manufacturers. Airbus Military (formerly called EADS CASA) is Spain‘s largest aerospace company and is a world leader in light and medium-sized military aircraft. Airbus Military is also a supplier of aerodynamic surface components for the Boeing 737, 757 and 777. Aeronova (formerly called 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. The outlook for Spain‘s aerospace industry remains positive in the long term, as continued sales growth by EADS-affiliated aerospace companies carries over to the industry in general.
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