Jens Flottau Frankfurt

Germany's aerospace industry has been growing, driven by civil air transport demand. But it is facing difficult changes as its defense-related business contracts.

When the ILA Berlin Air Show opens this month, the sector can look at strong order books and growth rates. “I see no other industry sector that has a similar backlog,” says Dietmar Schrick, managing director of BDLI, Germany's aerospace industry association. Capacity has increased by 40% in the past three years. And with aircraft production rate increases ahead and new programs like the Airbus A350 around the corner, Schrick speaks of “pleasant challenges” in the commercial field. But on the defense side, they are not so pleasant.

In spite of growth and relatively good financial performance, the commercial sector has seen significant consolidation, creating larger units focusing on two core competencies: cabin interiors and aerostructures. So what the industry is afraid of losing on the military side—the ability to build and integrate complex aircraft—it lost long ago on the commercial side.

The consolidation trend has seen the growth of Diehl's aerospace unit, which has taken over the Airbus plant in Laupheim, focusing on cabin interiors. Diehl has also acquired Muehlenberg, a Hamburg-based galley manufacturer. Diehl Aircabin, at the Laupheim site, is currently a joint venture with Thales. But the French aerospace firm has not been an active shareholder in the business and has publicly stated that it is looking at selling its stake. That presents an opportunity for Diehl to fully take over the Aircabin affiliate.

Diehl Aircabin also provides an example of the problems that the German commercial aerospace industry is facing. How can it ramp up quickly enough to keep pace with the planned production rate increases and new development programs such as the A350? Diehl's approach to manufacturing most of the A350 cabin for Airbus has proven to be a major challenge, particularly with the activity still in the early stages of its development and many corporate functions not yet fully crisis-proven. Industry sources told Aviation Week earlier this year that development of the A350 cabin has fallen significantly behind schedule, although Diehl has never confirmed that. However, the company conceded that A350 cabin work has become substantially more expensive and challenging than it had anticipated, as the number of changes needed have been underestimated.

The initial A350 schedule is not affected, as complete cabins are only due to be installed by the end of 2013 at the earliest. But one senior industry official says that development on several A350 versions will be a major strain for the industry in 2013. He concedes it is hard to see how the suppliers can assemble the resources necessary to deal with the initial A350-900 and the frequent design changes required, as well as the preliminary design work on the A350-1000, due in 2017.