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BUSINESS Good week THE EURO Despite many predictions to the contrary, Europe’s single currency not only remains in business but appears to be thriving. From a low point of barely $1.20 in July 2012, the euro has climbed steadily to its current level, solidly in the $1.30s. That strength is a welcome sign that while European economies remain mired in debt and slow- or nogrowth, the European Central Bank has a grip on a crisis that a year ago looked existential. EUROPE Chaotic collapse of the euro may no longer be an urgent worry but Continental exporters may be excused for wishing their currency was just a little bit less robust. These are recessionary times, and a strong currency is hardly welcome – especially for European aerospace companies whose products are so often priced in US dollars. We are a long way from the painful days of $1.50 to the euro, but the European Central Bank is getting worried at $1.30-plus. Bad week 22 | Flight International | 19-25 February 2013 Rex Features Rex Features Aircraft finance is among the sectors covered by our premium news and data service Flightglobal Pro: flightglobal.com/pro FINANCES DAN THISDELL LONDON Fruits of freedom for EADS The failed BAE merger has left a legacy – an unshackling from government interference Airbus parent EADS is poised to reveal a dramatic rise in profitability, having netted more than €2.1 billion ($2.8 billion) for shareholders last year, up from little more than €1 billion in 2011 and only €533 million in 2010. The figures, to be revealed on 27 February, look to be at the high end of EADS guidance. Results issued by key shareholder Daimler show its approximately 15% share of the 2012 net profit of EADS amounted to €307 million, more than twice the €143 million it received in 2011. EADS is unable to comment yet on 2012 performance, but revenue has risen steadily for several years to €49.1 billion in 2011, and Airbus in 2012 delivered a record 588 aircraft. However, profitability has been low and Louis Gallois, who retired in 2012 as chief executive, had made improvement a priority. Although the group’s “Vision 2020” bid to reduce its reliance on Airbus – historically accounting for some two-thirds of sales – has been thwarted by a booming civil aircraft market, analysts have praised cost reduction efforts. Astrium and Eurocopter are stars, too, and both have been in the ascendancy for several years. The Cassidian defence unit, however, is another story – which Gallois’ successor, former Airbus boss Tom Enders, will be pressed to address when he takes to the stage for the first time as chief executive to detail 2012’s results. Since taking office, Enders has made two strategic thrusts – one failed and one spectacularly successful – that have placed him at the focal point of the global defence aerospace industry, a position that would have seemed fanciful even six months ago. His bold September bid to merge EADS with the UK’s BAE Systems and create the world’s biggest aerospace group failed to find favour with many investors. It was thwarted by the German government which, alongside Paris, effectively controls EADS. Listen carefully Berlin is believed to have feared its national defence industry interests would lose out to a Franco-British axis in an EADS-BAE combination. However, like a judo master Enders quickly exploited Berlin’s momentum to achieve a strategic victory – by pushing the shareholding governments out of the EADS management loop. NEW DEAL As Daimler’s 2012 results reveal, this new EADS governance deal – arising from astonishment that politicians could so blatantly thwart the will of management and investors – is already shifting the European industrial landscape. In the first week of December, only hours after the French and German governments agreed to cede control of the European aerospace champion, the auto maker behind the Mercedes-Benz brand realised €709 million from the €1.66 billion sale of a 7.5% stake – half of its remaining holding in EADS – to institutional investors and German banks. Daimler has long made clear it wants to end its days as proxy holder of Germany’s EADS stake to focus on its core business. The new deal frees it to do that – as it does Daimler’s equally-reluctant French counterpart, Lagardère. EADS itself is unlikely to pursue another mega-merger soon, but its dalliance with BAE has surely focused minds in other European boardrooms; transformative deals involving big players Safran, Thales and Finmeccanica have been discussed for years and may now look timely. Reaction in the USA may be equally disruptive. As consultancy PwC concluded earlier in February in its 2012 aerospace mergers and acquisitions report, uncertainty surrounding the US government’s ongoing political battle over spending cuts is holding back a wave of defence industry consolidation. PwC’s US aerospace lead Scott Thompson told Flight International that while the Department of Defense has made clear it does not support further mergers between US prime contractors, that position predates the financial crisis. If US defence spending is cut drastically in any eventual resolution of the federal budget sequestration stand-off, then some companies will surely be prepared to explore the prospect of changing that DoD position in a new economic environment, says Thompson. The fact that one of those primes – BAE – was prepared to enter a transformative deal will have got its rivals thinking about their strategic options. Managers itching to cut loose that wave of deal-making will be tuned to Tom Enders’ handling of questions about EADS’s defence sector strategy – which, ironically, he will field in Berlin. � flightglobal.com Rex Features
flightglobal.com Rolls-Royce aims to prove maturity of A350’s Trent XWB COVER STORY P24 PEOPLE MOVES Ball Aerospace, Engine Alliance, NASA, Pratt & Whitney Strain: heading Ball Dean Athans has been named president of the 50-50 GE-Pratt & Whitney joint venture Engine Alliance, succeeding Mary Ellen Jones who returns to a senior leadership position at P&W. Athans has led GE’s LMS100 power turbine programme since 2010, following 25 years with GE Aviation. Engine Alliance makes the GP7200 Airbus A380 option powerplant. At Ball Aerospace, chief operating officer Robert Strain will succeed the retiring David Taylor as president and chief executive from the end of March. Strain joined Ball in 2012; he has served as director of NASA’s Goddard Spaceflight QUOTE OF THE WEEK “Our business model works, even in the strong recession we experienced in Ireland” Aer Lingus chief CHRISTOPH MUELLER says its run of three profitable years should keep the airline independent as the EC apparently scuppered a Ryanair takeover bid Ball Aerospace Center and held leadership roles at The Johns Hopkins University Applied Physics Laboratory, Orbital Sciences and Fairchild Space and Defense. Astronaut Brent Jett has left NASA; the retired US Navy captain flew on four Shuttle flights, headed the Flight Crew Operations Directorate and most recently served as deputy manager of the Commercial Crew Program. Separately, NASA astronaut Clayton Anderson has retired after a 30-year career including two space flights, as a flight engineer aboard the International Space Station in 2007, and as a mission specialist on STS-131 in 2010. Jett: NASA departure NASA BillyPix BUSINESS BUSINESS BRIEFS RECARO EXPANDS IN TEXAS SEATS German seat maker Recaro has opened an extension to its Fort Worth, Texas facility as part of plans to grow revenue by about 65% during the next five years, from €304 million ($407 million) in 2011 to around €500 million in 2017. The Texas plant, which opened in 1998 and employs about 350 staff, has more than doubled in size to 23,000m 2 (250,000ft 2 ) during the past year. The bulk of 2013 production of about 29,000 seats will be coach-class units for customers in North and South America. The site plays a central role in Recaro’s growth plans because of its proximity to Boeing final assembly lines, Airbus’s planned A320 assembly line in Mobile, Alabama, and some of the world’s largest airlines, says aircraft seating division chief executive Mark Hillier. In 2012, Recaro expanded in Poland and will open a factory in Qingdao, China later this year. KONGSBERG THRIVES ON F-35 DEFENCE At the aerospace and defence systems division of Norwegian high-technology group Kongsberg, EBITA rose 45% to NKr381 million ($69 million) for the full year 2012, on revenue up 19% to Nkr4.65 billion. Revenue was up across the operation, with Lockheed Martin confirming Kongsberg’s Joint Strike Missile will be integrated on to the F-35 standing out as a highlight of the year, with potential for “significant long-term contract opportunities for Kongsberg as well as other Norwegian subcontractors”. SAAB CREATES RADAR VENTURE IN UAE ELECTRONICS Saab is to enter a 49-51 joint venture to create the first United Arab Emirates-based radar systems maker with Tawazun, a UAE investment company focusing on defence and “strategic manufacturing”. Abu Dhabi Advanced Radar Systems claims to be the first radar development, manufacture, assembly and integration company in the Middle East for development of next-generation systems as well as support services. WIPRO TO MAKE ACTUATORS IN BENGALURU HYDRAULICS Wipro Infrastructure Engineering will begin aerospace hydraulic actuators manufacture by mid-year at a new facility in the special economic zone near Bengaluru International airport. Initial production plans are for 2,000 actuators per year. RBC BEARINGS ON A ROLL COMPONENTS In its third quarter to 29 December, RBC Bearings enjoyed “momentum” in aerospace sales, with a near 16% rise in revenue on the back of commercial aircraft build rates and aftermarket, although these gains were largely offset by declining sales in mining and military markets, leaving the company up barely 1% for the quarter, to $96.3 million. For the nine-month period, the Connecticut-headquartered bearings maker posted sales up 5% to $300 million, while pre-tax profits rose 23% to $64.6 million. IBERIA UNIONS TO WALK OUT OVER JOB CUTS PLAN AIRLINES Unions representing Iberia ground staff and cabin crew have announced 15 days of strikes in February and March in protest at parent company International Airlines Group’s plans to cut Iberia’s fleet by 15%, axe 4,500 jobs and reduce salaries by up to 35% in a bid to restore profitability. IAG, which owns British Airways and Iberia, had imposed an end-January deadline for agreement with unions, and intends to go ahead with the cuts with or without a union deal. IAG boss Willie Walsh says the company remains ready to negotiate, but insists: “We are determined and united to implement the necessary changes.” 19-25 February 2013 | Flight International | 23
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