Chris Jasper/LONDON
Boeing is looking to its Space and Communications group, bolstered by the purchase of Hughes Electronics' space activities, to spearhead growth. President and chief operating officer Harry Stonecipher tells Flight International that revenues in the sector are set to soar.
Space and Communications had revenues of $6.8 billion last year, or 12% of the Seattle giant's $58 billion turnover. This year's sales should total $7.5-8 billion even without the Hughes purchase, which should add $3 billion.
Prospects for Boeing's Military Aircraft and Missile Systems division, which contributed $12.2 billion or 21% of sales last year, are "flat to down", Stonecipher says, although the sector already enjoys double-digit margins. Commercial Airplanes group, the company's largest element (contributing exactly two-thirds of revenues or $38 billion in 1999) does not expect to see growth of more than 4% a year either, although margins should be restored to double figures from last year's 5%.
"Space and Communications will be the growth part of the Boeing Company," Stonecipher says, dismissing recent failures in the sector as "lumps in the road". The company would have been happy to buy Iridium, he says, but could not "make the business case". He adds that Boeing's moves in space and e-commerce mean that the "big boys" are embracing the communications revolution.
Boeing agreed to buy Hughes after it was offered for private sale by the General Motors subsidiary. Further expansion of the division could come from more bolt-on buys, although organic growth will itself be double-digit. Margins will be low, however, as investment in the sector remains high. Stonecipher highlights Boeing's services business - from aircraft maintenance to financing deals - as the other likely growth driver, with anticipated growth rates of 25%.
On the question of transatlantic mergers, he says guidelines for tie-ups might best be established by presenting a done-deal to regulators, rather than waiting for advice from governments. He believes European national concerns will be a bigger stumbling block to mergers than those of the US Government.
Source: Flight International
