Three developments at last week's air show in Singapore suggest that centres of gravity may be shifting in the global aerospace industry
There was a sense of tectonic plates starting to slide at last week’s Asian Aerospace, which more complacent corners of the industry should ignore at their peril.
First there was the announcement that a Dubai consortium is pumping $15 billion into creating from scratch a global aviation services super-group, involved in aircraft leasing, maintenance, repair and overhaul (MRO), engineering training, component assembly, and airport construction and management. Dubai Aerospace Enterprise’s (DAE) intention is to become a top three player in most of these sectors within 10 years.
Ambitious, yes, but doubters should remember that there was a time just over a decade ago when Emirates Airline was seen as an aviation-mad billionaire sheik’s equivalent of a model train set and the emirate itself as a modest Gulf trading hub with few oil resources. Thanks to the rising oil price, there is now so much cash flowing around the Arabian penninsula, and with Dubai’s proven track record in creating successful global businesses, there is little doubt that that liquidity will be put to good use.
Yet there are plenty that still do not get it. Look at the embarrassing row – for those politicians indulging in it – over Dubai Ports World’s takeover of the UK company that manages a number of US sea ports, including New York. Now, it is understandable that Americans are ultra-nervous about security after 9/11, but, to judge by some of the language about the “Arab threat”, you would assume Bin Laden himself was planning to set up shop in Lower Manhattan, not one of the world’s most respected ports operators, based in a country with an unblemished record in resisting Islamic extremist terrorism.
DAE is not targeting the USA, not so much for the reasons above, but because there are few opportunities in any of these sectors in what is, at best, a mature and, at worst, a sclerotic domestic aviation market. Instead, it is looking east, to China and India, as well as Russia and the rest of Asia, where there is the promise of unfettered demand for aircraft leasing, maintenance, trained staff and new airports. Many US businesses, of course, also recognise that these are the areas where the action will be over the next 20 years and are making huge efforts to win friends and establish a footprint. But for others, it will be too late and they will be entering the race as also-rans.
The second major development during Singapore was Russia’s move – finally – to haul its Soviet-era aerospace sector into the 21st century with President Putin’s decree to establish a national aerospace company and consolidate the jumble of different projects into a handful of viable programmes. Although the state will still own three-quarters of OAC, the plan is to cut that to half by selling more shares.
Whether Russian aerospace – which has a head start over China and India thanks to its remarkable skills base and heritage – can transform itself from its inward-looking mentality into a partner with Western industry to design and build products for the global market remains to be seen.
Finally, after a quarter century in Singapore, Asian Aerospace said farewell to the island state and turned its sights north to its new home, from September 2007, at Hong Kong. Its owner, Reed Exhibitions (sister company to Flight International), says the growth in Chinese civil aviation over the next two decades makes the territory the logical location for suppliers targeting that market. The lack of a major military element – China being out of bounds to Western defence companies – and the fact that Singapore will continue to market a more defence-oriented biennial show, will be issues for those hoping for one consolidated event for the whole of Asia. But – despite the continuing importance to the industry of Singapore Airlines and the country’s military procurement budget – it is north Asia that will be, along with the Middle East, the powerhouse of expansion in the global aviation market between now and 2025.
The tectonic plates last moved in the early 1990s as the shift from the Cold War to the emphasis on rogue states and terrorism changed the defence sector. At the same time the opening up of China’s economy, and the growing influence of non-legacy airlines, from Emirates and Virgin Atlantic to low-cost carriers, began to shift aviation’s centre of gravity.
This time the revolution may be more gradual. But, if anything, its eventual impact will be further reaching.
Source: Flight International
