Aerospace Top 100 shrug off high raw material prices to report stable outlooks, but skills shortage is a problem
The Flight International/PricewaterhouseCoopers quarterly Aerospace Trends Survey once again paints a picture of stability and optimism.
Respondents, worldwide and across the supply chain, may not be as bullish about their prospects as they have been in recent years, when the contrast between the years of downturn and the budding recovery were more marked, but the mood remains one of optimism, says Neil Hampson, a partner at PricewaterhouseCoopers, whose team compiles the survey. And for the second consecutive survey, no respondents recorded negative responses to any of the three questions asked (see chart below).
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While only nine of the 40 companies surveyed said they were more confident than they were three months before about their business’s prospects, the remaining 31 said they felt the same level of confidence, giving a net figure of 23% – lower than the previous quarter’s total of 38%. But this does not reflect a shift towards a negative mood, as most companies surveyed still expect continuity.
“The latest survey confirms a picture that not a great deal is changing,” Hampson says. “People are not getting any more optimistic.” Companies are shrugging off significant obstacles, including high raw material prices, and in some cases currency fluctuations, to report stable outlooks.
The companies that diverged from the overwhelming view, reporting increased confidence, were mostly in North America: seven out of 17 North American companies – a services provider, a tier one player and several component manufacturers – reported brighter prospects than the previous quarter. Two of these companies work mostly in the civil sector, one mostly in the military sector, and four were evenly split.
Elsewhere, levels of confidence have flattened out more noticeably: just two European players out of 18 noted an increased level of confidence – a tier one player operating mostly in the civil sector, and a component manufacturer spanning both sectors. Last time the survey was carried out, the industry seemed poised on the cusp of a further wave of consolidation among tier two and three players and this is still expected to take place.
“Everyone keeps saying that consolidation of that part of the supply chain will happen,” says Hampson, predicting that it could take place over the next two to three years. “People want to build better positions for when the cycle reaches its peak.”
Responses were more upbeat when it came to the second question on order backlogs. Just over half of the companies noted an increase in orders compared with the same period a year earlier. Of the 23, eight came from Europe – five component manufacturers, two tier one players and one service provider. Record order backlogs for Airbus and Boeing, and in particular the growing strength and importance of the Indian and Chinese markets, account for the optimism. The remaining 17 companies reported stable performance compared with the first quarter of 2005, with none seeing a dip in contracts, giving a net figure of 58%, compared with 75% the previous quarter.
The last quarterly survey saw forecasts of rising employee numbers, with companies expecting to expand their workforces to track rising demand. Many jobs had been cut during the leaner years, and the fact that companies expected to take on more staff pointed to a recovery in full swing, with a time lag between increased orders and the rise in employee numbers needed to cope.
However, the latest survey suggests that this trend has tailed off. Twelve out of the 40 companies polled expected an increase in employee numbers over the next year, while 28 predicted that their workforce would be unchanged. No participants expected to cut jobs, however. The net employment figure for the first quarter of 2006 is 30%, compared with 55% when the last survey was carried out in January.
The skills shortage the industry is experiencing could also be a factor, Hampson says: “Not only are companies experiencing problems with the supply chain, but they are also experiencing problems with their ability to find the next generation of programme leaders in their organisation.”
The impact of the skills shortage is likely to grow, in particular in the USA and the UK. With the changing age profile of engineers in the industry following the downturn, “companies are facing difficulties with their ability to recruit the right people at the right point in the cycle,” Hampson says.
n The Flight International/ PricewaterhouseCoopers Aerospace Trends Survey questions the same 40 companies each quarter.All ranked among the industry’s biggest 100 businesses by turnover, they represent prime contractors or airframers and component and system suppliers.
Eighteen are from Europe, 17 from North America and five from the rest of the world. Figures are reached by subtracting negative responses from positive responses and expressing the number as a percentage.
HELEN MASSY-BERESFORD / LONDON
Source: Flight International
