Our fifth quarterly poll of the Top 100 companies finds a surge in confidence and orders as the recovery gathers pace
The world's biggest aerospace companies have reported a surge in confidence and orders in the first quarter, adding to evidence that recovery in the industry is gathering pace.
The latest Aerospace Trends Survey - carried out by Flight International and strategy consultancy Roland Berger - finds manufacturers in all sectors in their most buoyant mood since we began the quarterly survey early last year.
As usual, Roland Berger asked 40 companies randomly selected from our Aerospace Top 100 three questions: were they more or less confident than in the previous quarter; were orders better or worse than a year previously; and did they expect employee numbers to rise or fall over the next 12 months.
Only three companies said they were less confident, with 24 reporting that they were more confident. This gives a positive balance of 21 or 53%, more than double the total in the last quarterly survey (don't knows, or no change responses count as neutral). Confidence has been growing since our first survey in the first quarter of 2003, the only time the figure has been negative.
The industry is also picking up orders: 17 out of the 40 companies said orders had improved over the previous 12 months, with only two saying that sales had fallen during the period.
The only wobble on the survey is on the employment prospects question, with a negative balance for the first time in a year. Ten respondents expected employee numbers to fall; six of them expected them to rise and 24 said that they would remain flat, which gives a balance of minus four or negative 10%.
Neil Hampson, associate partner at Roland Berger, attributes the possible anomaly to the fact that some companies may be taking advantage of the stronger market to sell non-core businesses, although he points out that the majority of respondents expect employment levels to remain the same over the year.
The recession has also forced manufacturers to become much leaner and more efficient, meaning there is some capacity in the system to expand without increasing employment. As with the automotive industry, there is also a long-term trend to automation and replacing or farming out low-value "metal-bashing" jobs by the industry's biggest players.
While a reasonably robust defence market protected at least parts of the industry from the collapse in civil orders immediately after 11 September 2001, it now appears that a civil aerospace recovery is under way. Of the 12 businesses in our survey which describe themselves as "majority civil", six said they were more confident and only one less confident. Six of those same companies say orders have improved (not quite the same six), with none saying orders have fallen.
The sector has "turned around", says Hampson. "Aircraft prices have firmed up and lead times are extending, especially on Boeing 737 and Airbus A320-sized aircraft. Everyone is talking up the 70- to 100-seat market as well. The A380 is really coming on stream, and now that people have seen the fuselage and the wing being produced, their confidence is going up."
However, confidence among defence manufacturers also seems to be holding up, despite a number of recent high-profile programme hitches and cancellations. Says Hampson: "Many of them had already written off the [Boeing/Sikorsky RAH-66] Comanche. Cancelling the [Lockheed Martin/Boeing] F/A-22 would drive confidence right downÉbut there are a lot of new projects coming out of the post-Iraq situation, to do with homeland security, C4I [command, computers, control, communications and intelligence] and land warfare. The confidence isn't to do with aircraft orders, but these new areas."
The buoyant mood is fairly consistent across the world's regions, unlike in some previous surveys where there has been a sharp divide in confidence levels between North America and Europe.
Of the 18 European manufacturers, 11 are more confident and none less confident, while seven report increasing orders with only one saying sales have fallen. Of the 17 North American respondents, 13 are more confident and one less confident; nine have increased orders and none have seen orders fall. Rest of the world companies are less bullish: none are more confident and two are less confident; one has seen orders grow and one seen them fall.
The overall picture, however, is of a continuing - if jobless - recovery for the aerospace industry. "I don't think that the industry will be employing more people in 12 months," Hampson says. "Maybe it will happen after two years more of growth, but not at the moment."
This might be good news for boardrooms and shareholders; but less so for the hundreds of thousands of former aerospace workers laid off after 9/11.
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?
ALEXANDER CAMPBELL / LONDON
Source: Flight International
