Expressions of optimism about the future prospects of high-profile industries are rarely well-received, and the aerospace sector has established itself as a market leader in delivering overly bleak assessments of its own prospects. But it is hard to maintain the frown in the face of a healthy set of balance sheets - and Flight International's survey of the world's 100 biggest aerospace companies suggests that much of the gloom-mongering is unfounded.
Yet if the aerospace industry is doing so well, some might rightly ask, then why are companies finding it so difficult to attract and keep the new, younger, generation of aerospace professionals required to carry them into the future?
If it is a question of perception, then there is no doubt that the aerospace industry has more than its fair share of ups and downs. The industry is notorious for its boom/bust cycles.
The decade-long stream of mergers, sell-offs, closures and mass redundancies which have torn the industry apart and rerouted it in seemingly incomprehensible directions does not help either in generating interest from career-hungry graduates.
But the fact is that the industry has been outperforming beyond all expectations - and with a slump supposedly just around the corner. Moreover, the Top 100 report shows that the merger mania now sweeping across all sectors of the industry is bearing the desired fruit in the form of genuine growth in the business, so providing a hedge against any oncoming slump.
The industry appears to be establishing a mechanism to cushion itself from the cyclicity of its business, meaning a potentially softer landing when boom finally turns to bust. Consolidation and the creation of critical mass at both the prime contracting and supplier levels is the chief reason and there are plenty across the industry who are wiping their brows in relief rather than cracking open the champagne bottles to celebrate.
The industry has known for almost two decades the benefits which critical mass would have for such a capital-intensive area. In both the civil and military sectors, consolidation reduces technological duplication and permits the amortisation of costs for new projects. More significantly, perhaps, it leads to productivity efficiencies necessary for making operating gains against ever-tighter margins. In Europe, overcoming national rivalries and embracing privatisation and cross-border consolidation as the key to the aerospace industry's future competitiveness is finally being addressed and is delivering results.
Our Top 100 figures show that operating margins for Europe's aerospace companies are keeping pace with their US counterparts while they are overtaking their US rivals when compared in terms of return on capital employed (ROCE).
The good news does not just concern the fact that the industry's biggest players have collectively increased in size by almost a third in just two years from a relatively unchanged capital base, with most of that growth derived from real sales success rather than via acquisitions. The industry, both military and civil, is also evolving - and extending its reach into the newer high-tech sectors such as IT, communications and space, promising fresh opportunities for existing aerospace players and those younger businesses wishing to enter the aerospace sector.
A shift in focus towards new high growth markets, and productivity gains captured through consolidation of existing aerospace interests have combined with more careful production capacity planning by the commercial airliner manufacturers to point to a more stable industry for the future.
Even with some way to go to completing its transformation, the aerospace industry's current performance in a climate of constant change should at least generate a spirit of relative optimism. Making themselves - and the industry at large - attractive to the next generation of aerospace professional is what will secure today's Top 100 a place on the list in a decade's time. If there is a time to stake the industry's claim to new talent, it is now.
Source: Flight International
