EADS is pushing to increase its military aircraft activities to reduce its dependence on Airbus
STEWART PENNEY / MUNICH
With 80% of its 2000 sales from the civil sector, a significant element of EADS revenues and profits depend on the company's shareholding in Airbus (59% of total sales) and other commercial aircraft activities. A key EADS aim is to drive up its defence activities to become a much larger element of its business as well as to forge a greater global defence presence in such areas as maintenance and support.
EADS defence activities are contained within its Defence and Civil Systems (11% of income) and Military Transport Aircraft (1%) units as well as the Military Aircraft unit within Aeronautics (19%). The former two were loss-making in 2000. Aeronautics also contains ATR, Elbe Flugzeugwerke, Eurocopter, Socata and Sogerma.
While the other pieces of Aeronautics are much the same as pre-merger, Military Aircraft has seen significant changes following the merger of France's Aerospatiale, Spain's Casa and Germany's Daimler-Chrysler Aerospace (Dasa) into EADS. The changes are set to continue with the imminent formation of EMAC, which will amalgamate EADS Military Aircraft with Alenia Aerospazio. EMAC will have the lion's share of the Eurofighter programme while EADS is a part owner, along with Dassault Aviation, of the competing Rafale. Also rolled into the new group will be EADS Germany's Mako advanced trainer/light attack aircraft, while the Italian partner will roll in its participation in the light attack Alenia/Embraer AMX and its holding in Italian trainer specialist Aermacchi. Alenia hopes to include 100% of Aermacchi in EMAC.
The combined entity will also provide a home for the Alenia/Lockheed Martin C-27J, leaving the EADS Casa transports - the Military Transport Aircraft business - outside the new group. Alenia and EADS also have significant military aircraft maintenance and support operations that will provide a core element of EMAC.
Dr Rolf Wirtz, director of business development-external affairs for EADS Military Aircraft, says: "It is definitely a strategic goal" to strengthen the defence business. He adds: "Military aircraft is an area, due to the consolidation in Europe, where we need to go forward." The company has not yet "fully exploited the synergies between Casa and Dasa," he says.
Having driven consolidation forward within Europe with EADS, he points out, the joint venture with Alenia further develops the European aerospace industry. The Panavia Tornado and Eurofighter are seen as models for European co-operation, but the formation of EADS and EMAC have removed many of the hurdles that have faced these organisations, says Wirtz. Previously four companies were demanding workshare in key technology areas to establish or maintain a competency. Now, he says, there is only one company that needs to maintain its capabilities, and working across national boundaries is second nature within EADS. Workshare disputes between national governments have typically been triggered by companies, but there is no longer a need to do this as the company will distribute the work internally. "There will no longer be a 'slice and dice' of components," says Wirtz.
Areas where outsiders believe co-operation falls down include the on-going competitions between Eurofighter and Rafale. Once EMAC is formed, it will control 67% of the former programme and 46% of the latter through EADS France's holding in Dassault. Questions have been repeatedly raised over the cost of offering two similar aircraft in competition. Eurofighter sources also complain about Dassault's attempts to convince Greece to drop a Typhoon order in favour of the Rafale, which raised the cost of the four-nation consortium's bid. "I don't see an issue," Wirtz says, as both aircraft are nearing the end of the development phase, and the Rafale is available as a navalised version, opening markets not available to the Eurofighter. He adds: "I believe an agreement can be reached. We have two aircraft to offer and the customer can select the one they want."
Another area of potential overlap is advanced jet trainers/light strike aircraft. EADS Military Aircraft continues to work on the Mako, buoyed by the signing of a further development memorandum of understanding with the United Arab Emirates in March, and agreements with a number of key equipment suppliers. Alenia continues to offer the AMX with Brazil's Embraer and is a shareholder in Aermacchi, producer of the MB339 and developer of the M346. "This is a grey area," Wirtz says, "and we need to sort out the portfolio."
Compromises such as using the M346 cockpit development are at work in the Mako programme. He acknowledges, however, "there is no place for aircraft that are built in small numbers".
In many areas, says Wirtz, EMAC boosts the new company. Alenia and EADS have complementary capabilities on the Euro-fighter, Tornado, maritime patrol aircraft (Germany and Italy operate the Dassault Atlantic and have a joint competition to replace the type) and Boeing E-3 Sentry. "These complement each other and, therefore, strengthen the company and widen the portfolio. It gives us more solutions to the customer's needs, and an in-house 'system of systems' approach," he says.
In-service support
Military aircraft support - including repair overhaul, modification and upgrade work - is one such area. EADS' German arm provides in-service support for most German air force in-service platforms, including the RSK MiG-29 Fulcrum, Tornado, Atlantic and McDonnell Douglas F-4F Phantom as well as performing some work on the NATO E-3 fleet. The position is similar in Spain; the company supports Spanish air force Boeing F/A-18 Hornets and Northrop F-5s.
Alenia has similar activities in Italy. "We want to build on this, strengthening the service business," Wirtz says. The advantages are obvious, for both moving work around to maintain steady throughput and concentrating work on one type in a single location.
Servicing and support now account for around 40% of EADS Military Aircraft revenue, and Wirtz says this figure is likely to grow with new types such as Eurofighter as more customers turn to industry for support rather than creating national capabilities within the air force. Industry can consolidate work on the four Eurofighter partner nations' aircraft in one place which increases efficiency, while a national capability will support only a handful of aircraft. Training provision is similar, says Wirtz. He says it is possible to change the system because of the shift in the nature of military operations. In the last 20 years, many European air forces have participated in conflicts, but the 'homeland' has not been threatened so industry has continued to function normally.
The market outside EMAC's four home nations presents "a big challenge and a big opportunity", says Wirtz. Sales of aircraft such as Eurofighter and Mako will allow this business to grow. He adds that the EMAC/EADS size is such that it can now compete against the US foreign military sales process, which packages support and training with equipment sales.
Exports are only successful if a company has a local presence, such as ownership of local industry or joint ventures, he suggests. EADS has followed this strategy recently with a bid to buy part of Patria Industries in Finland - where NH Industries, a joint venture between Eurocopter, Agusta and Fokker is competing to supply the NH90 helicopter - and the acquisition of Hawker Pacific in Australia. The country has a raft of competitions under way, including Air 87 for attack helicopters for which the Eurocopter Tiger is being bid.
Aerostructures will continue to be a significant part of EADS' Military Aircraft business, as such work provides a stable foundation, evening out fluctuations from systems-based businesses, says Wirtz. It also allows the swapping of production techniques and technology between the military and commercial sectors. Military Aircraft provides aerostructures for EADS Airbus and vice versa. Combining work for military and commercial programmes allows better use of expensive machinery and keeps factories operating at efficient levels, which reduces costs for both sides, Wirtz says. "EMAC's aerostructures volume worldwide as a tier-one supplier will be number one or two globally. We will compete for work from all commercial aircraft manufacturers," he says. As well as Airbus and Boeing, regional jet manufacturers such as Embraer and Fairchild Dornier are also seeking competitive suppliers.
Source: Flight International
