Our latest Aerospace Trends Survey finds confidence, orderbooks and employment prospects continuing to increase
The industry's Top 100 companies finished 2004 on a high, their optimism soaring on the back of orderbooks stronger than in any quarter since we launched our Aerospace Trends Survey two years ago. Our eighth three-monthly snapshot of industry confidence and outlook also shows employment prospects looking healthy, with more companies seeking to increase their workforces than in any previous poll.
As before, Flight International - with new partner PricewaterhouseCoopers - asked the same three questions to 40 of the world's top 100 aerospace businesses by turnover: how did their confidence about their company's prospects compare with the previous quarter? How did orders compare with the same quarter 12 months previously? And what did they expect to happen to employee numbers during the next year? Polling took place in the last weeks of December and the figures have been worked out by subtracting negative answers from positive ones (ignoring neutrals) and expressing that as a percentage. So if 20 of our 40 respondents are positive, 10 negative and 10 neutral, that gives a balance of 10, or 25%.
Respondents are anonymous and identified only by region (North America, Europe or rest of world), market (majority civil, majority military or mixed) and position in supply chain (original equipment manufacturer, component manufacturer, tier one supplier or services/aftermarket supplier).
The confidence index has remained in the black since the second quarter of 2003. Any positive figure means confidence has risen from the previous three-month period, although the size of the quarterly increase had been dipping in recent surveys. This time, levels of optimism have rebounded strongly, with half the 40 companies who took part more confident about their businesses' prospects than they had been three months earlier. Only two - one a European component manufacturer, the other a European services/aftermarket provider - were less confident.
Orderbooks were filling fast in 2004, with more respondents reporting rising orders in each survey since the final quarter of 2003. In the last survey, this question resulted in a 55% positive balance. This time, the figure has nudged up to 58%, with 24 of the 40 taking more orders than in the same quarter a year before. Only one - a North American services/aftermarket supplier - reported fewer customers.
In terms of employment, the industry appears to have put its so-called jobless recovery behind it. Throughout 2003 and into 2004, predicted employment levels remained flat or negative. However, for the third quarter running, a positive balance of respondents expect to create more jobs than they lose. The figure has risen from 20% to 25%, with 13 out of 40 respondents saying employee numbers will rise in their company and only three that they will fall.
As ever, the regional breakdown throws up some interesting findings. On the confidence question, there is little to split Europeans and North Americans, with 10 out of the 18 European firms that took part reporting rising optimism (two are less confident). This compares with nine of 17 Americans. Companies outside the two main regions are less convinced about their prospects, with just one of the five polled more confident.
The regional difference is slightly more marked when it comes to orders, with two-thirds (12) of Europeans saying quarter four had been better than the same period in 2003. Nine of the 19 Americans are upbeat on this question. However, on jobs, five of the Europeans expect to increase workforces over the next year, compared with eight Americans. This perhaps reflects the "hire and fire" employment culture in the USA, where legislation allows companies to be more flexible in recruiting and firing workers.
PricewaterhouseCoopers' Neil Hampson, who conducted the research, says production ramp-ups at prime contractor level are filtering down the supply chain and driving confidence. High-profile programmes which have been axed or downsized, such as the Boeing/Sikorsky Comanche and Lockheed Martin/Boeing F/A-22 have been more than offset by the Airbus A380, Boeing 7E7, Eurofighter Typhoon and Lockheed Martin F-35 Joint Strike Fighter, as well as ongoing demand for existing civil and military programmes.
Some European suppliers - who buy in euros but sell in US dollars - are worried about the weak greenback and the increased volatility of energy and materials prices on their costs. "Most are hedged against currency changes for six to 12 months ahead and some longer, but others do not hedge to the same degree," says Hampson.
In employment terms, production increases at the top tier are also rippling down the chain. But Hampson sounds a note of caution. Although companies are inclined to say they will create jobs, there is no indication about how many will result. "Planned increases may be small in percentage terms," he says. "I can't say the jobless recovery has changed to a job-fuelling recovery just yet, despite a lack of skills in some disciplines."
The questions
1. Compared with the previous quarter, is your confidence about your business's prospects higher, lower or the same?
2. Compared with the same quarter last year, was this quarter better, worse or the same in terms of orders?
3. Do you expect employee numbers to fall, rise or stay the same over the next 12 months?
MURDO MORRISON / LONDON
Source: Flight International
