TOP 100 SPECIAL REPORT YEAR OF LIVING DANGEROUSLY 30 | Flight International | 14-20 September 2010 flightglobal.com TOP 100 SPECIAL REPORT Boeing has bounced back to the summit of our Top 100 ranking of aerospace manufacturers after a year of boosted fortunes for its commercial aircraft division, but the wider experience for the industry was one of dramatically reduced profitability and minimal sales growth NIALL O’KEEFFE LONDON schedule will cause the airframer to incur penalty charges. The last programme delay ast year Boeing leapfrogged EADS to caused the first delivery of the Dreamliner to regain the title of world’s largest aero- launch customer All Nippon Airways to slip space manufacturer, as rising sales of from the last quarter of this year to the middle its commercial and military aircraft of 2011’s first quarter. Lcoincided with declines in both areas for its In 2009 Airbus delivered a record 483 com- European rival. mercial aircraft, 15 more than in 2008. The In dollar terms, the overall picture for the two major airframers’ combined delivery total Top 100 manufacturers was one of stable rev- similarly scaled new heights, exceeding by enues but sharply declining profits, as the fall- 7% the previous record of 914 shipments, set out from global economic and financial chaos in 1999. filtered through. Boeing’s defence, space and security divi- That is according to the latest Flight Inter- sion meanwhile pulled in some $10 billion national Top 100 survey, compiled in associa- more than EADS’s equivalent businesses tion with PricewaterhouseCoopers and which could muster while coping with delays to the is based on company returns for the previous Airbus A400M military transport and the at- financial year. tendant contractual wrangle. The 17.3% drop in collective profits com- pares with growth of 7.8% in 2008 and 26% Boeing delivered 481 aircraft in 2007. Where sales edged up only 0.6% last last year, a big rise on 2008’s year, they had grown by 7.1% in 2008 and by 13% in 2007. strike-hit figure of 375 SALES BY SECTOR The rivals’ fortunes in commercial aircraft There were tough times for regional jet manufacture were a major factor in Boeing’s manufacturers. Bombardier Aerospace’s rev- eclipse of EADS. In 2008, Boeing’s haul from enues shrank 6.1%, while Embraer’s were this sector was $10.5 billion less than that of down a whopping 20.5%. The performance of its EADS-owned rival Airbus, but 2009 business jet manufacturers contrasted sharply brought a narrowing of the gap to $2.6 billion and unflatteringly with that of 2008. Sales at (see table). Dassault’s Falcon executive jet division grew Boeing delivered 481 aircraft, a steep in- just 0.2%, compared with 31.4% the previous crease on 2008’s figure of 375, which was year. Gulfstream swung from 14.2% growth to heavily affected by the 52-day machinists’ a 6.2% decline. Cessna’s reversal in fortunes strike of that year. “It’s not so much that EADS was even more dramatic, as it followed 13.2% won last time; Boeing lost,” comments Anna growth with a 41.4% decline. Hawker Beech- Sargeant, assistant director, strategy at craft also slipped into decline, with revenues PricewaterhouseCoopers. falling 10%. “This time round, we’re seeing a rebalanc- The scale of declines among business jet ing. While EADS hasn’t been doing particu- manufacturers means that major restructuring larly well in defence, I wouldn’t say this has is inevitable in that sector, in Sargeant’s view. been the fundamental driver for that change The defence aerospace sector fared better. in position,” she says. Its growth was well above that of the Top 100 Sargeant makes the case that the machin- as a whole. This represents a change from ists’ strike in some ways helped Boeing. “We 2008, when defence aerospace growth was were all expecting to see a massive fall-off in slightly below that of the Top 100. production last year – and it never really “This points to declines hitting civil aero- IN ASSOCIATION WITH came, which was impressive.” space more strongly,” says Pricewaterhouse- ❯❯ Gareth Burgess/Flightglobal Gareth However, delays to Boeing’s 787 delivery Coopers, which also notes “lower volatility” flightglobal.com 14-20 September 2010 | Flight International | 31 TOP 100 SPECIAL REPORT ❯❯ in defence air systems procurement. PROFILE CHEMRING ALAN DRON In 2009, the top 14 defence aerospace divi- FLARES BUSINESS BURNS BRIGHTLY sions or companies grew 4%, compared with CHEMRING Group has contin- and development centre will 0.6% of growth for the Top 100. In 2008, the ued its steady progress up also be established. Similarly, top 15 defence players achieved growth of the Top 100 table this year the countermeasures division 6%, while the Top 100 was up 7%. through a mixture of organic is constructing a manufactur- Growth at the major US defence companies growth and acquisitions. ing facility in Salisbury, UK. Boeing, Lockheed Martin and Northrop The Fareham, UK-based The group’s expansion over Grumman was around 5%. However, Euro- group’s countermeasures divi- the past five years has been pean defence behemoth EADS suffered a sion manufactures airborne off the back of this booming 13.1% decline as growth slowed at the Euro- infrared and chaff decoys for countermeasures business. copter rotorcraft division while both Airbus fixed- and rotary-wing plat- Group chairman Ken Scobie Military and the Defence and Security Sys- forms. Its pyrotechnics division ascribes its development to tems division suffered declines. In 2008, includes distress flare and Chemring “a clearly defined policy of EADS’s defence aerospace business had smoke marker production. Chemring chief David Price organic growth, a focused pro- grown by an extraordinary 47%. In spite of the recession, gramme of acquisitions... and the group passed three finan- subsequent investment in STRANGE CURRENCIES cial milestones in 2009: AT A GLANCE product and facilities to cover As usual, the figures in the Top 100 analysis group revenue exceeded future expansion”. have been “dollarised” on a fixed exchange £500 million ($750 million) ■ Top 100 rank 68 Chemring’s latest orders rate for the entire 12 months, to reflect the re- for the first time, underlying ■ HQ Fareham, UK include a four-year contract to ality that the US dollar is the prime currency pre-tax profit rose above £100 ■ Aero revenues $786m supply IR flares for the US Air of aerospace sales globally, notwithstanding million and the group’s mar- ■ Sales growth 42.3% Force’s Lockheed Martin F-22 some substantial defence business that is ket capitalisation breached ■ Operating margin Raptor fleet plus a similar two- transacted in local currency. the £1 billion mark. The year- 20.4% year deal to cover the serv- end orderbook was up 37%, ■ ROCE 21.2% ice’s Boeing B-52 EADS’s defence aerospace at £559 million. ■ Employees 3,349 Stratofortresses. business was down 13.1% as Chemring claims to hold ■ CEO David Price Among the group’s newer slightly more than 50% of the divisions is Chemring growth slowed at Eurocopter global market for counter- Energetics, whose products measure flares, its share hav- Flares division won a five-year chief executive David Price ing risen sharply as a result of “indefinite delivery, indefinite describes as “anything that Sterling’s weakening against the dollar, last decade’s Iraqi campaign. quantity” contract to produce goes bang, whizz or whoosh”. from £0.54 per dollar to £0.64, was such that Its UK countermeasures busi- decoys for the protection of Essentially, it offers controlled Rolls-Royce’s sales could rise by 10.5% in ness continued to operate at transport aircraft, while explosions, such as charges local currency but fall by 7.1% in dollar terms, “very high levels of produc- Chemring Australia was to blow off aircraft canopies in while the various effects of the euro’s fall in tion”, says the group, with awarded a long-term contract an ejection sequence. value, from €0.68 per dollar to €0.72, includ- demand for flares for the to provide countermeasures Last year Chemring took ed an amplified decline at EADS and con- Eurofighter Typhoon continu- and pyrotechnics for the over California-based Hi-Shear strained growth at Finmeccanica. ing to grow as the number of Australian armed forces. Technology, which produces Depreciation of the Swedish kroner and In- aircraft in service with custom- A state-of-the-art manufac- squibs, cartridges and gas dian rupee turned local currency sales growth ers steadily increases. turing plant is being built near generators for the military avi- of 3.6% at Saab and 10% at Hindustan Aero- In the USA, its Kilgore Melbourne, while a research ation and space sectors. ■ nautics into dollar declines of 10.8% and 1.3% respectively. However, foreign exchange effects brought some good news for Japanese manufacturers. Aerospace sales fell in yen terms, but increased in dollar terms at Ishikawajima-Harima, Kawa- saki Heavy Industries and Mitsubishi Heavy Industries. The strong yen also helped to boost Fuji Heavy Industries’ rise up the rankings (see profile). However, in considering currency effects one must bear in mind that, across different companies, there is a varying correlation be- tween the currency of a company’s main dom- icile, in which a high proportion of costs will be measured, and the currency in which the bulk of its sales contracts is denominated. Even within companies, there are varia- US Air Force/Senior Airman Julianne Showalter Julianne Airman Force/Senior Air US tions. In its military business, Rolls-Royce has Chemring’s countermeasures division manufactures airborne infrared and chaff decoys as a major customer the UK Ministry of De- fence; its civil contracts tend to be in dollars.