June 12, 2013
Credit: Photo: Boeing
Having turned its focus 180 degrees from military to civil platforms, GKN Aerospace is banking on a slew of new aircraft projects to keep boosting its ever-rising bottom line.
GKN Aerospace is a bellwether for the aerospace market, thanks to its almost unmatched diversification. Across the commercial and military aircraft sectors there are few major platform sectors that the company does not touch. GKN’s billion-dollar acquisition of Volvo Aero (now GKN Aerospace Engine Systems) last year expanded its reach even further, so the company’s views on the outlook for aerospace hold some weight.
Not surprisingly, GKN Aerospace CEO Marcus Bryson says that defense business is soft while commercial aviation remains strong. Bryson is bullish on civil prospects, saying that the industry is in the middle of a “super-cycle” guaranteed by huge order backlogs.
“If you go back to 2003, GKN Aerospace was a $700 or $800 million business, heavily based in the U.S. around defense,“ says Bryson. “Roll forward to 2013 and we are a $3.5 billion business – that’s huge compound growth, a lot of which has come on the back of acquisitions but also on program investment which is now beginning to come through. We are all pleased that the [Boeing] 787 is back in the air. We’ve got sizeable content on the 787, on the [Airbus] A350, on the A400M, on the F-35 – so when these new products come to market we’ll see further growth.”
Although it has been pressured, GKN’s military business remains valuable. The company is a key supplier to several stable, long-term U.S. acquisition programs such as the C-130J Hercules, F-15 Eagle, F/A-18E/F Super Hornet, H-60 Blackhawk and V-22 Osprey. GKN Aerospace also sees several next-generation military platform opportunities in the U.S., such as the CH-53K heavylift helicopter, the T-X advanced trainer, the Navy’s UCLASS unmanned platform, the Army’s Joint Multi-Role Helicopter and Air Force Long Range Strike programs.
“Even if there are cutbacks we are on the right platforms,” says Bryson. “Other than the F-35 they are all quite mature and backed up with multi-year contracts for the primes. So if you had to ask, where do I want to be in the U.S. defense market, this is as good a place as you can be in today’s environment.”
However, the last few years have seen a large and deliberate shift from military work to a situation where the majority of GKN Aerospace’s business is in commercial aircraft. “Our strategic aim was to move away from being predominantly military and we’ve completely flipped the business around,” says Bryson. “Now we are nearly 70% civil – and with what’s going on in the civil business right now that’s not a bad place to be.
“Boeing and Airbus are forecasting between 28,000 and 34,000 aircraft deliveries over the next 20 years – 40% is supported by fleet replacement, 60% is growth. They’ve both got massive backlogs of nearly 8,500 aircraft, which represents about $1 trillion value. I firmly believe that we really are right in the middle of a huge super-cycle of civil aerospace.”
Bryson points to the dollar value that GKN Aerospace earns from each aircraft sale. Every F-35 is worth “just over $2.5 million” to the company, while each A400M sale brings in “just over $3 million.”