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The European E-Business Report 2005 2.7 The Aeronautics Industry The e-Business W@tch sector study on the aeronautics industry was contributed by DIW Berlin German Institute for Economic Research (contact: dnepelski@diw.de). The full report can be downloaded from the website (www.ebusinesswatch.org) at the 'resources' section. Despite the considerable differences in e-business adoption between firms of different sizes, the aeronautics industry emerges as one of the e-business leaders, compared to other sectors covered in the e-Business Survey 2005. Evidence confirms the strategic importance of ICT in the sector: ICT is a potential source of competitive advantage, as an enabler and driver of innovation; ICT-enabled process innovations are positively associated with increasing turnover among firms in the industry. Yet, innovative firms are not more profitable than other firms, suggesting either that profits triggered by innovations take more time to materialise in this sector than in other sectors, or that firms in the aeronautics industry have some particular problems in appropriating gains from innovative activities. 2.7.1 Sector definition and background Sector definition According to the NACE Rev. 1.1 classification of business activities 78 , the aerospace industry includes the following activities: Exhibit 2.7-1: Business activities covered by the aeronautics industry (NACE Rev. 1.1) NACE Rev. 1.1 DM 35 Business Activity Manufacture of other transport equipment 35.3 Manufacture of aircraft and spacecraft The emphasis of the analysis is on e-business issues in the aeronautics industry. The sub-sectors spacecraft and military transport equipment produce primarily for government agencies and differ substantially from the aeronautics industry. It must be noted, however, that the composition of the available databases does not allow the exclusion of the spacecraft sector and the data presented in the full sector report covers companies active in the space industry as well. Since this sub-sector accounts for less than 5% of the industry turnover 79 , neglecting it in the following analysis should not have any negative impact on the quality of the analysis. Industry background In 2001, the aeronautics industry contributed a value of about €100 billion to production in the EU countries. More than 373,000 people were employed in about 2,200 enterprises across the EU-25. 80 The aeronautics industry can be divided into three sub-sectors: 78 79 80 NACE revised version 1.1 – final draft 2002. See glossary for explanation. ASD (2004). 2003 facts and figures. Civil and defence aerospace. Aerospace and Defence Industries Association of Europe. http://www.asd-europe.org/ (May 2005). Source: Eurostat New Cronos / DIW Berlin 2005. See full sector report (September 2005), chapter 6.2. 125
The European E-Business Report 2005 • The systems and frames sub-sector manufacturers complete systems and/or frames for aeroplanes, helicopters, gliders and ground installations. It accounts for 60% of the industry consolidated turnover. • The engines sub-sector produces piston engines, turboprops, turbojets and jet engines. It accounts for 20% of the industry consolidated turnover. • The equipment sub-sector is producing finished products, subsystems and parts to be installed in aircraft systems. It accounts for 20% of the total sector turnover. The European aeronautics sector is characterised by a complex network of companies, joint ventures, international consortia and partnership agreements. Furthermore, European firms gradually increase their presence in the global aeronautics industry and create linkages with companies from other parts of the world at all levels of the value chain. Although the contribution of SMEs to the industry’s turnover and employment is relatively small, they play an important role in the industry supply chain due to their creativity and flexibility. 2.7.2 ICT and e-business adoption in 2005 ICT infrastructure and outsourcing According to results of the e-Business Survey 2005 81 , the availability of internet access has reached saturation level in the aeronautics industry. Advanced computer networks are, however, still far from being generally used and significant discrepancies in their use between companies of different sizes exist. Wide Areas Networks (WAN) and Virtual Private Networks (VPN) are predominantly deployed by larger firms and are virtually non-existent in smaller companies. Similarly, there are significant differences between small and large enterprises in the quality of internet connections: only 13% of interviewed companies in the aeronautics sector reported using an internet connection with transmission capacity of more than 2 Mbit/s. More than a half of the surveyed companies said that they have an internet connection with transmission capacity of less than 2 Mbit/s. Moreover, 13% of firms still access the internet via analogue dial-up modems. The survey results confirm the importance of outsourcing for aeronautics companies throughout Europe. A relatively large share of firms, compared to the weighted average for the 10 sectors studied by e-Business W@tch in 2005, reported employing external organisations to perform ICT activities: about 60% of the surveyed companies said that they outsourced some ICT services to external firms. Internal business processes and collaboration with business partners Companies from the aeronautics industry are far ahead of their counterparts in other sectors studied in using ICT solutions to support business processes. The wide usage of knowledge management and e-learning tools is in line with the knowledge-intensive characteristics of the aeronautics industry. Furthermore, despite their complexity and costs, medium-sized companies frequently use ERP systems as well. The importance of the value chain integration is clearly illustrated by the intensive use of applications supporting inter-organisational processes such as product design, demand forecasting and capacity management. The most frequently reported standards for document exchange in the sector are proprietary and XML-based standards. Micro and small firms, in particular, pay attention to standards when making ICT investments, but little to interoperability, which is more important for larger companies. 81 Due to the small population of enterprises in the aeronautics industry, only 163 interviews could be realised in the seven EU countries in which the survey was carried out. Thus, survey results must be used cautiously, as the confidence interval is larger than in other sectors. 126
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