A big question for European aerospace analysts is whether EADS and its business units can achieve the 10% EBIT target by the end of 2004.
Charles Burrows, aerospace analyst with HSBC Investment Bank in London, says that the events of 11 September and subsequent aviation crisis changed the landscape by forcing Airbus to cut its production projections. "Before then, it was highly likely that Airbus would have achieved profits above 10%. Now it's going to be harder to achieve."
Other EADS divisions, in Burrows's view, have "a very fair chance" of hitting the target. "Aeronautics can do it," Burrows says, and potential orders for the A400M military transport would boost Military Transport's chance of making the grade as well. Defence and Civil Systems is also potentially on the right track.
"However," he says, "space is one area with a big question mark. Look at the available market." The satellite business, driven by the telecommunications industry, is experiencing financing problems as well as a lower demand market.
The state of the launcher business is no cause for cheer either, Burrows says: "There is a lower level of business and high competition." This is pitting EADS against US industry - which receives launcher vehicle development money from the US government - and the Russians, whom Burrows says are "very much in that market".
The future success of EADS' plans, revealed last September, to explore advanced aircraft/airport security technology in the wake of the terrorist attacks on the USA will depend on what tools aviation authorities ultimately decide they want. Burrows predicts that the current heightened interest insecurity will manifest itself in greater security enhancements for military markets.
One such field, he suggests, is improved communication links between ground troops and ground attack aircraft.
A French analyst contends, on the other hand, that the "very aggressive, not realistic" 10% target has heavily stressed and demotivated EADS organisations and managers. Coupled with the target EBIT, the analyst says, management fees paid to corporate headquarters have EADS managers grumbling. "They wonder what are they getting in return."
For instance, he suggests, although the number of headquarters staff was set to be at least halved in 2001, the remaining430-530 figure is still too high. Inaddition, he alleges that political issues at the corporate level have prevented or delayed transversal synergies. "The business units are a bit fed up," he says.
"I think each business unit is realising synergies, but synergies which should have come from the corporate side are in danger," he adds.
Factional and individual relationships also play key roles in influencing the aerospace industry climate in which EADS and its business units operate, the analyst goeson to say.
A reported long-standing rivalry between Airbus chief executive Noel Forgeard and EADS co-chief executive Philippe Camus is one such factor, as is the muscle of the French unions and, he alleges, two other close-knit but informal networks. One is an "old boys" club of graduates of France's premier engineering universities. The other involves members of a French fraternal organisation, he says. "They are very powerful, and are quite important in French industry."
While the Franco-German core ignites the most heated political debate, CASA is, the analyst says, content to co-exist andoperate more quietly as theminority player for now.
"At CASA, the only agenda was to make sure that the 'new' CASA would not be destroyed. Some years ago, they decided, 'we are small, we cannot be a big player, but we can be profitable', and they optimised their production capabilities. They just wanted to remain integrated, and they managed that quite well."
The only threat, he says, is in the form of the 10% EBIT target. If by the end of 2004, CASA's financial picture is less than optimal, theanalyst warns, "it may undergo a wave of restructuring".
Source: Flight International
