If there is one thing at which the aerospace industry excels, it is devising elaborate job creation schemes. The same goes for many of the customers it serves.
There is nothing wrong with the principle of job creation as an economic driver, so long as it is the product of coherent and rational policy making. There is good reason to question whether either criterion is being met in the wake of the craze for consolidation of the aerospace industry.
In the USA, consolidation has progressed to the point where the customer - in this case, the US Department of Defense - is concerned about the survival of the industrial base on which it depends. This is driving buying decisions that seem to be oriented more towards keeping companies viable than acquiring the best equipment at the best price.
In continental Europe, where consolidation is accelerating, decisions on the structure of emerging aerospace and defence "super-companies" seem driven more by the need to protect national interests - including jobs - than on achieving efficiencies of scale to allow its industry to compete on equal terms with the USA.
Take the Joint Strike Fighter (JSF), a programme that has elevated affordability above all other requirements, and one that has made a "winner takes all" competition an integral part of achieving its aggressive cost goals. Now the DoD is looking at alternative approaches that would allow two fighter manufacturers to survive after selection of the winning JSF.
Take the US Air Force's airlifter strategy: after trumpeting the cost savings achieved by negotiating a multiyear C-17 procurement contract with Boeing, the service wants to buy fewer this year so it can afford to bring forward the purchase of Lockheed Martin C-130Js - and prevent the line from shutting down prematurely.
Take the newly announced structure for the giant European Aeronautic, Defense and Space (EADS), which will result from the merger of Aerospatiale Matra, DaimlerChrysler Aerospace and CASA. Management has pledged to preserve the national industries within a "devolved" structure, relying on growth, rather than rationalisation, for cost benefits.
The rationale for these decisions is easy to understand. In the case of the JSF contest, and a "C-17 or C-130J" decision, the consequence could be the losing company's exit from the fighter or airlifter arena. For EADS, a devolved structure avoids tackling Europe's disparate cultural differences, labour laws, pay scales and tax rates head on.
The roots of such decisions lie in a desire to maintain national capabilities and so protect jobs. The USA is worried about being reduced to one fighter or airlifter maker because it wants to maintain competition, but does not want to open its market to foreign contenders. EADS aims to avoid breaking down nationalistic barriers that would accompany an attempt at true integration and rationalisation. The aerospace industry does not exist in isolation. Like other sectors the industry is struggling to retain experienced employees and draw new talent in the face of a challenge from the "dot.com" sector.
Any corporate structure or acquisition strategy that places national interests ahead of industrial efficiency could sentence the industry to slow strangulation, as tightening job markets lead to declining experience levels and a diminishing ability to innovate.
In the USA, some of the most protectionist labour sectors realise that barriers to an open job market could constrain economic growth. Aerospace is no exception. An open market requires an atmosphere of mutual security, and the USA will not open its job market until it is convinced its technology will not be compromised. In Europe issues of security and the national interest inhibit consolidation and the free movement of jobs and technology.
Industry has shown it is willing to consolidate on a scale once considered impossible. But the full benefits will be difficult to realise unless governments are prepared to create an environment in which an open, international, aerospace labour market can flourish.
Source: Flight International
