Top 100 companies feel good about future and orderbooks, but on the downside do not plan to recruit new staff yet
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?
The industry's jobless recovery is continuing apace, with the Top 100 companies again reporting rising confidence and orders during the second quarter, but few are planning to take on new staff yet.
In our latest quarterly Aerospace Trends Survey - compiled with strategy consultancy Roland Berger - 19 out of the sample of 40 Top 100 firms we contacted said optimism about their business's prospects grew during the three-month period. This compared with just one - a "rest of the world" component manufacturer - who was less optimistic and 20 who said they felt the same as they did the previous quarter: a positive balance of 18 companies, or 45%. Although this figure was lower than the massive jump of 53% in our previous survey, the trend is still clearly upwards.
On orders, the picture is almost identical, with half of the 40 respondents taking more business during this quarter than the corresponding three months last year. Again, only one respondent - this time a European civil aftermarket/services provider - reported a falling orderbook: a balance of 48%.
Only when asked whether they expect employee numbers to rise or fall over the next 12 months do respondents take a different tack, with the majority - 73% - predicting their workforces would remain stable and only six (15%) planning to take on more staff. The balance of "positives" over "negatives" of just 3% means this is the fifth quarter in succession the graph has been more or less flat.
Roland Berger partner Neil Hampson says it reinforces the impression of a recovery that is not yet creating jobs. Part of this is due to companies - particularly in North America and western Europe - becoming leaner and more efficient as they fight off competition from lower-wage economies in Asia, South America and the former Communist countries of eastern Europe. However, much of it is because of the traditional 18- to 24-month lag between the upturn in orders and manufacturing ramping up. "Although work is coming in thick and fast, we have yet to see a lot of programmes enter the labour-intensive delivery phase, so we're not seeing any movement on employment," says Hampson. "However, with serious work on the A380, as well as Joint Strike Fighter, A400M and 7E7, starting to kick in from the end of 2005 and into 2006, companies will need to do something in about a year's time in order to avoid the squeeze."
So far, the recovery from the 11 September aftershocks has been led by the defence sector, but, for the second month running, there are signs that fortunes in the civil sector are becoming more robust too. Of the 12 companies in our survey that describe their businesses as "majority civil" (more than 70% of revenues), four said they were more confident about their prospects than they had been in the first quarter. That compares with six in the previous survey. However, seven of the 12 said orders had improved compared with the same period last year. This was against six last time.
"Companies in the civil sector are clearly seeing orders coming through and build rates are going up again," says Hampson. "The end of last year was the end of the trough."
On defence, the picture again is positive, with three out of the five companies that describe themselves as "majority military" more confident, and four of the five saying orders improved. According to Hampson, continuing strong defence budgets in the USA and UK - if not in the rest of Europe - and an improved outlook for previously troubled programmes such as the A400M and the Lockheed Martin/Boeing F/A-22 mean that prospects for the sector look good. "Everyone feels there is a new doctrine appearing after the end of the Gulf War, which will drive another set of demands; it may not be for large platforms, but there is a healthy interest in defence ministries for what they will do differently," he says.
There is little to split Europe and North America in the survey. Of the 17 North American respondents, nine are more confident; ten of the 18 European companies give the same answer, although of the five representatives of the rest of the world, four say their levels of confidence are unchanged, while one is less confident.
The picture is almost identical on orders, with nine North Americans and 10 Europeans increasing their orderbook over 2003 (although individual companies do not necessarily give the same response on both questions). For the rest of the world, one had a stronger orderbook, while orders stayed the same for the other four.
This week's Farnborough International air show will be another gauge of how strong the recovery is, with all eyes on order and programme announcements and various "state of the nation" pronouncements by chief executives.
Signs of strong airline interest in the A380 and 7E7 and progress on programmes such as the A400M, F/A-22 and Bombardier's planned 100-seat airliner are all likely to be reflected in increasing optimism among respondents when the next quarterly survey reports in mid-October.
MURDO MORRISON / LONDON
Source: Flight International
