So far, the transition process appears to have worked with the usual hiccups, and the first A350 fuselage destined for fatigue tests has already been completed in Toulouse. But the real challenge will hit in 2013 and 2014, when serial production will be ramped up further. The first A350-900 is to enter service in the second half of 2014, with first flight scheduled for the end of the first half of 2013.
With Diehl Aircabin and Premium Aerotec representing the core competencies and centers of the German aerospace sector, BDLI does not expect further consolidation to happen in a massive way. German companies are active either in fields that are hard to combine with others, given that they are very specialized, or are too big to be sensibly folded into another entity.
Recaro Aircraft Seating is in the latter category. The company is one of a handful building aircraft seats. Recaro has lately seen unprecedented growth as a result of large-scale aircraft orders and pent-up demand from airlines that have not replaced interiors for many years. While that has long been seen as a cabin quality factor, the sharp rise in fuel costs has added another dimension. The installation of lightweight and sleeker seats can easily take a ton out of the weight of an Airbus or Boeing narrowbody and increase earning capacity. Lufthansa has added several extra rows in each of its narrowbody aircraft types (Boeing 737-300, Airbus A319, A320 and A321), because slimmer seats use less space.
Recaro is on the way to doubling its production capacity within the next three years. It is opening facilities in Poland, the U.S. and China to serve markets locally and keep up with demand. At the same time, new products particularly for business class, are under development.
Financing has, with some exceptions, not been a major issue for most suppliers lately. Some parts of the supply chain had been hit hard by delays in the A350 and 787 programs, but given the low-interest policies of key central banks, particularly in Europe, “financing is currently available at favorable terms,” says Recaro’s chief sales officer Andreas Lindemann. “The market is flooded with money.” Lindemann also notes that while banks are taking a close look at company metrics and financial performance, they are generally open to working with aerospace suppliers.
One requirement that suppliers are still struggling with is Airbus’s drive to reduce the number of companies it works with directly. BDLI has already set up a roundtable for tier 1 Airbus suppliers like Diehl or Liebherr Aerospace to tackle joint issues and find new processes where needed. But the association is also convening another roundtable for tier 2 and 3 suppliers that have lost direct contact with Airbus and are now working on programs through the entire chain. Schrick also sees a need to harmonize reporting systems for production milestones and change management so that visibility throughout the supply chain is maintained.
Airbus and parent EADS more generally have been pushing for more global sourcing in key markets, but that has not led to contract losses for the German suppliers. According to a recent study, that part of the industry grew by 9% annually in the 2005-10 timeframe. “We did not suffer as a result of globalization,” Schrick says, although he concedes that the sector may have seen some reduction in growth rates, which could have been higher without the new competitors.
On the defense side, this fall BDLI and the German defense ministry are to enter talks about what a national defense strategy could look like and what it would mean for the industry. Germany has put a strategy in place in the space segment and it is taking an increasingly active role on the commercial side with the country’s Aerospace Coordinator, Peter Hintze, watching workshare allocation closely within Airbus, particularly between French and German sites.
However, “the dialogue is missing where it would be most important,” Schrick warns. The problem is, Germany’s exact defense requirements are not clear yet. The reform of its armed forces is a work in progress and while the defense budget has been essentially flat for a number of years and has not been reduced, there are still no future programs in sight that would be big enough for the industry to continue in its current form.
“We are faced with a slow death of competencies that we have built up over decades,” Schrick says. He points out that it took the German defense industry around 30 years to develop the full range of capabilities needed, based on an initial phase of license production. “But it is now that the future path is decided,” he believes. “We need a military aviation strategy. Without one, even future technology upgrades for existing programs could be endangered if capabilities are disappearing.”