GLOOM-MONGERS aside, Asia's aerospace sector is strong enough to host Asian Aerospace '98, but this show does represent a watershed. It comes at a time when economic turbulence has spelled the end of many old assumptions about the shape of the aerospace world, and the position of the players in it.
Neither Asian air travel nor Asian aircraft manufacturing will collapse in the near future, but the leaders of both sectors will have to do some serious rethinking about their roles. So will their Western counterparts, as the cosy growth assumptions which buoyed them all are seen for the dreams that they were.
The effect of recession on the regional aerospace companies is the chief concern. Their aspirations are being dented as much as their present businesses. Every recession, however, is cyclical in nature, and the recessionary spiral in Asia is expected to be shortlived. Currencies are already rallying and Thailand and South Korea are singlemindedly going all out to escape from the downturn. The recovery in the short term, however, is not likely to allow those companies to soar to previously expected levels.
Many local manufacturers are loss-makers, subsidised by governments now targeted by the International Monetary Fund (IMF) for improved financial housekeeping as the price for life-saving assistance. There can now be no doubt that industry in the region, which so recently was seen as an increasingly ferocious tiger able to join, if not threaten, its Western counterparts, is now staring at the same consolidations, downsizing and layoffs as have hit the West.
The evidence is everywhere in Asia. South Korean chaebols are looking to their cash-strapped Government for money and the country's desire to build a national aircraft programme is on hold. Japan's banks, which have financed the country's aerospace industry's move into risk-sharing partnerships in the West (as well as many of the aircraft built under those partnerships) are reining in their activities.
It is all a sign that, while air transport in Asia still has a long way to go to match the penetration and maturity of major markets in the West, the region's aerospace industry has come up against maturity with a bump. It can no longer regard itself as a newcomer to be indulged by established competitors as it tries to get its act together.
Nor can it be regarded as deserving special rights as an emerging service provider to the global market. It has to be an equal player and accept the benefits and risks that Western suppliers experience.
The argument is not one-sided: both East and West need to be realistic and to re-align their aspirations in Asia. Eastern manufacturers cannot assume that they can build whole new industries using Western technology on the back of offset deals, and then expect to compete with those technology suppliers.
Nor can they assume that any one country can create an aircraft industry solely on the basis of potential exports . A domestic market, across one or more participating countries, willing to buy its products, is critical to any new project.
By the same token, Western companies can no longer assume that the untapped travel markets of Asia will automatically be satisfied by imports of their airliners. They also may just have to face the fact that they simply cannot build smaller aircraft as cheaply (or profitably) as in Asia. Many constructors of aircraft of 100 seats or fewer still rely on direct or indirect subsidies to sell at below the real manufacturing price. In this case, the West perhaps needs to stop being precious about its unique abilities, and to transfer more of its activities in this sector to Asian risk-sharing partners. Fairchild Dornier is trying to do this with Japan, South Korea and Taiwan on the 728JET project, as is Airbus with its AE316/7. Boeing already has strong ties in the region. Such moves need cultural adjustments - but better to have to make a cultural adjustment than a financial one.
The cold which has swept Asia may be forcing the region's aerospace industry to get realistic about its capabilities and future potential, but so, too, is it forcing Western aerospace players to rethink. Think long term, however, and don't desert Asia just yet. At Asian Aerospace, the absentees will be noted as much as those who are present, and the absences now will not serve well in the future recovered market.
Source: Flight International
