Kevin O'Toole/LONDON
Boeing has begun to pull away from its nearest competitors in the league table of USaerospace manufacturers over the first half of 1997.
Even without the McDonnell Douglas (MDC)merger, Boeing's sales have leapt by close to 60%due to soaring civil-aircraft sales, and the Rockwell defence and space acquisitions, completed at the end of 1996, are expected to contribute $2.5 billion to sales. On present standing, Boeing could expect to end the year with sales of $34 billion, a rise of more than $10 billion over the 1996 total. With the MDC merger, which has been cleared to go ahead at the start of this month, the combined group would achieve annual sales of $48 billion, putting it clear at the top of the US and world rankings.
Lockheed Martin, with its existing acquisitions, should again turn in full-year sales of around $27 billion, as some growth among continuing businesses is offset by the stripping out of ten non-core systems and instrumentation units. These businesses, representing close to $700 million in sales, were formed into L-3 Communications, launched at the start of May.
By the end of the year, however, Lockheed Martin should have completed the absorption of Northrop Grumman, giving the combined group annual sales of around $37 billion. Earlier in May, Northrop Grumman had also signed up a deal to absorb Logicon which is still pending approval, but could bring another $560 million of defence-information business.
The third emerging giant is Raytheon, although its acquisition of the Texas Instruments defence-electronics business was completed in July - too late to have an impact on the half-year results - while the acquisition of the Hughes aircraft business is not due until towards the end of the year. When these deals are complete, the enlarged Raytheon group should be looking at annual sales of just over $17 billion.
The first-half figures also reflect the underlying buoyancy across aerospace markets. At the half-way stage, Boeing expects to turn out a total of 340-350 aircraft this year, compared with 220 in 1996. This build-up in production has carried penalties, however, reflected by a slight dip in the half-year profit margin. Chairman Phil Condit says that parts and skills shortages at Boeing and its suppliers have meant that work is being completed "out of sequence" and overtime is at "high levels", resulting in a "near-term decline in productivity".
The research-and-development budget has grown by close to one-quarter, representing an extra $138 million, including full launch of the 767-400ER and 757-300 projects. Condit adds that margins tend to be lower on new-aircraft programmes and warns that the ramp-up of deliveries of the 777 (doubled to 31 in the first half) and the next-generation 737 (with first deliveries in the second half) will keep pressure on operating profits.
New partner MDC continued with its record levels of profitability, although exclusively from the military-aircraft business, with growing work on the F-15, C-17 and "classified programmes" offsetting lower F-18C/D production, which was down from 32 to 18 over the six months. The commercial business narrowly hung on to profitability, despite higher revenues.
The impact of market recovery has had an effect throughout the industry. Growing Boeing 747 production helped major supplier Northrop Grumman offset the continued decline of B-2 work - now accounting of less than 20%of its sales or around the same as its work for Boeing/MDC.
A booming aftermarket also helped United Technologies' Pratt &Whitney to push up sales by nearly one-quarter and, although General Electric does not give separate figures for its engines business, growth has been in double digits. Elsewhere, AlliedSignal has continued steady growth, placing itself as the top of the industry's second-tier suppliers, while the TRW defence-electronics business, named as a key operation for the group, overtook Textron. Although Textron's Cessna and Bell Helicopters businesses grew, its overall position has slipped because of the gradual divestments from its non-core components operation.
Source: Flight International
