ADS chairman Ian Godden has been lobbying doubly hard on behalf of the UK's aerospace, defence and security industries since ADS was formed through the merger of DMA and Farnborough air show organiser SBAC in October. Here he outlines the changes we can expect to see at this year's show and the challenges facing the UK aerospace industry
What impact has the industry downturn had on this year's show?
First of all, the show is a sell-out in terms of exhibition space and chalets. From that point of view, we're very pleasantly surprised versus where we thought we'd be 18 months ago.
Having said that, there is an expectation that budgetary pressure on companies and institutions means we are anticipating a slightly lower attendance of trade visitors to the show. We had a record 180,000 in 2008 and I would be surprised if we matched that in 2010 because a number of companies have told us they are putting pressure on themselves to reduce operating costs for the show.
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There's no clear indication that companies are not coming, it's just that they're being quite prudent with the number of people coming on their behalf.
So the outlook is quite surprisingly bullish and we are expecting 2010 in terms of levels of show activity to be quite similar to the levels of activity in 2008, but maybe slightly down on trade visitors.
What steps have you taken to ensure the format of the show remains relevant to the needs of the industry?
We've made three fairly major changes that will be visible at this show. One is that we've introduced a significant conference programme for Monday, Tuesday, Wednesday and Thursday mornings. The first conference is for aerospace, the second will be defence, the third is space and the fourth will be security. This is to encourage specific debate and attendance of senior leaders and politicians to discuss the importance of these sectors both for the UK and internationally.
The second thing is that we have rapidly and substantially expanded what we're calling Futures Day, which is the last day of the trade show. We're going to have over 2,000, possibly 3,000, supervised children and teachers from schools all around the country who are going to be given a complete package of activities that will introduce them to the industry. The average age in our industry is 54, which is unacceptable for it to sustain itself, and we are having to appeal in a way that we've never done before to future recruits.
The third thing we've done is to encourage and gain commitment from our own UK Ministry of Defence to be more visible this year than in 2008, and we've designed an actual area for them to meet and congregate.
Do you expect a similar amount of deals to be signed this year as in 2008?
The straight answer is I do not expect it to match 2008. I would love to be proved wrong, but I cannot see we'll be getting orders of $88 billion like last time, versus 2006 when it was in the small forties. That $88 billion was slightly false in the sense that it was at the tail end of the boom.
We have been in a period since 2007 of an order bust. The delightful thing is it looks like this year will be the trough and the orderbooks are beginning to rebuild, mainly off the back of growth in the Far East, but also because oil prices have recovered and the oil economies are sponsoring substantial increases in aircraft purchases. The net result is I'm definitely not bullish in matching 2008, but I've no idea where it's going to end up.
No guesses as to what you think the total value of orders will be at this year's show?
If you were pushing me into a guess, it would be closer to the 2006 level, which was in the forties, but I'd love to be wrong on that. I'd love it if it was higher, but I can't see it at this stage.
Do you expect supply chain consolidation to impact the number of exhibitors?
Behind the scenes, there's been quite a bit of consolidation at a smaller company level, and we would expect over time in the traditional world of the USA and Europe, that there will be fewer companies. When I say fewer companies, we're talking about an industry that has a supply chain of thousands. In the UK, for example, we have well over 2,600 in pure aerospace. If you include security, defence and space, then you get up to more like 6,000, or even 9,000.
So do I expect consolidation? Yes, and therefore that will affect exhibitions, but for every consolidation that's taking place in the USA and North America there are either new companies or expanding companies in India, China, Russia and Brazil. One of the reasons why we are sold out at Farnborough is that there is sufficient world interest and the expanded interest in newer countries to exhibit at Farnborough is taking up the slack.
What kind of shape is the UK aerospace industry in as we head into the show?
The good news is that this recession - and it was a recession for aerospace, although not as hard as for other sectors - has left us with few failures in the supply chain. Just to give you rough numbers, of the 3,000 companies in the traditional aerospace supply chain, we're talking about perhaps 20-30 companies having either failed or been really in trouble. So a 1% shakeout is remarkable and I think even some of the larger companies are surprised at the resilience of the supply chain in the UK to this pressure.
All of them have had severe pain. Most have had to take 10-15% of their employees out - painful forced redundancies, not voluntary. They've had to push the boundary with their people and that's been sad and difficult, but they've done it and, as a result of that, productivity went up by 6% in 2009.
However, behind the scenes it's a little different. Investment in technology is slipping. It's actually been cut in the last two years and it's been cut by both government and industry. The commitment to technology is one of my biggest worries, and we will suffer for that in three to five years' time.
Are you concerned about looming defence cuts, and what impact will this have on the industry?
Yes, I am very worried. My worry is at two levels: it's about the capabilities that will remain in this country, and the technology underpinning them. There is no doubt we need to be as efficient as possible, and there are all sorts of ways in which that can be done. We're impressed with the pace with which the new government is acting and deciding. The worry with that pace is the strategic issues relating to capabilities and future industrial export potential. There's a risk that if we race against this and make hasty decisions, we'll regret it in 10 years' time.
Secondly, I worry that our technological base will reach the point where it's subscale and we'll not be able to bilaterally deal with the two big nations in the world that are important for us in terms of defence: the USA and France. I worry our technological base will reach a point where we are no longer partners of equal in technological terms and, as a result, we will slip into a second league.
I think it's true to say the new coalition government has understood that danger, but I worry still that traditional budget pressures will inadvertently lead to those tragic losses of capabilities in this country.
Do you think the industry is doing enough to persuade undergraduates to pursue careers in engineering?
No. Although we pay 30% above the average in terms of manufacturing and 40% in terms of skilled jobs, the industry needs to consider its remuneration for engineering. We need to examine whether we are being competitive with our entry offers in terms of technology design and high skill.
Secondly, in the 1980s and 1990s people were excited about this industry, but we've lost that relative to the consumer- and media-driven glamorous jobs. I think we've got to convince a new generation that the back office of advertising and media companies is one of the most boring places in the world to be.
We've got to reignite the interest in the cleverness of our industry, the innovation, design, the excitement and the lack of boredom. We haven't done a good enough job in that and we're taking actions. What we haven't done is collect all the initiatives and turn them into something more powerful. That's something the industry has to work on quite hard over the next five years.
Source: Flight Daily News