Consolidation, Consolidation: Market Makes It Inevitable

"This industry has been transformed," says Richard Aboulafia, "by growth"-and now it's being hit by a recession.

That's why the Fairfax, Va.-based Teal Group aerospace analyst, who was forecasting a market fall-off well prior to September 11, is more than ever predicting a consolidation, with Raytheon the most likely to be absorbed. "We are going to see some industrial restructuring," Aboulafia says. "Market forces are nipping at the heels of the runners and number five will be the first to fall by the wayside," he predicts.

"The lasting market repercussions of September 11 are as nothing compared to the impact of a recession," Aboulafia says.

"You're going to a mass market. This is not the chummy, $3 billion industry it once was-it's now an $11 billion to $12 billion industry, with more competition on price and hence more pressure on margins."