FLUG REVUE May 2006: Thomas Enders on the challenges for the German aerospace industry

May 2006

DR. THOMAS ENDERS, PRESIDENT OF THE BDLI

“Success should not be taken for granted”

Every success brings with it a risk, the risk of complacency, inertia and smugness. In every success there lurks the danger of stagnation.

Over the last few years the German aerospace industry has enjoyed great success. Last year we attained an all-time high in sales and created a large number of new jobs. Sadly, this is the exception rather than the rule in Germany.

We can thus be proud of what has been accomplished. Within only a few years Airbus has been transformed from a political project into the highly profitable world market leader in civil passenger aircraft. In military aircraft construction, we have on the market in the Eurofighter a fighter aircraft that is at least the equal of the leading American products. Meanwhile Eurocopter is the leading supplier in the global markets for civil helicopters. In MTU and Rolls-Royce Deutschland we have engine manufacturers which are extremely well positioned, while companies like Liebherr, Diehl and Autoflug, to name but a few, supply customers all round the world.

But we need to watch out, we must not take success for granted. We have no guarantee of remaining the market leader. A leading position believed to be secure can quickly be lost if one underestimates the competition.

This is a mistake that we in Germany and Europe cannot afford to make. Right now we are benefiting particularly from the growth of Asian markets. Of the over 1,100 Airbus orders received last year, 507 came from India and China alone. But these growth countries do not want simply to be markets, they want to be partners as well. They want to play a steadily more important role in our value added chain.

How can we maintain our international lead? What is the basis of our success?

Firstly, in civil aircraft construction we were for many years the challenger – and this applies not just to Airbus but also to the many equipment manufacturers and component suppliers which shared in the success. In future the challenge will be to preserve this attitude and this motivation. We must want to be better than anyone else, we must be prepared to constantly scrutinise our positions and ideas. Thus, for example, at Airbus and EADS we have set up teams of full-time lateral thinkers whose job is to review our solutions on important issues of model strategy and/or process organisation.

Secondly, we must be faster and better than anyone else, we must invest in innovation, research and development, we must continuously further develop our technologies in cooperation with universities and other scientific establishments and we must be a yardstick for technical progress. For years companies in the aerospace industry have spent between 15 and 20 percent of their turnover on research and development – amounts rivalled only by the specialist machine construction and research-intensive pharmaceutical industries. We must take it upon ourselves to maintain this level of investment in the future if we are to defend our success.

Our efforts have already paid off. Compared with the car or chemical industries, we may be a relatively small industrial sector, but since the year 2000 we have twice won the innovation award of German industry with laser welding technology and MTU's high-pressure compressor.

Airbus is the best example of how research successes can be translated into products and ultimately into market share: when it introduced the two-man cockpit, Airbus economised on the flight engineer, since their introduction on the A320 fly-by-wire controls have enabled aircraft to be controlled entirely electronically, and now with the A380 we have created the first three-litre aircraft, measured in terms of fuel consumption per passenger over 100 kilometres. These developments have only been possible thanks to the use of new materials and new technologies, such as thermoplastic synthetic materials, the high-pressure hydraulic system and the new cockpit with its optimised human-machine interface.

In the coming years bids will be invited for over 50 percent of the civil aircraft with 100 seats or more. If the German aerospace industry wants to sustain its market success and to be in a position to produce aircraft for the next 20 to 30 years in a few years' time, then we need to invest in new technologies today.

Again, there are certain basic conditions that we have to consider if we are to maintain our present lead. Over the next few years the volume of air traffic is set to grow dramatically. IATA is forecasting annual growth of 5 percent, China has grown at twice that rate since 2000, and India is assuming an annual increase of 25% over the next decade. To contain the impact on environment and oil reserves, we will therefore have to offer more fuel-efficient aircraft and work on alternative propulsion concepts. Only then will we be in a position to support the mobility of a globalised society.

Today, it is not merely people and goods that are transported around the world; know-how is also disseminated across the globe. We must therefore not only apply knowledge and technology more quickly than, for example, the competition is able to do, but we must also make use of the capabilities of our competitors, for example, of the 350,000 Chinese engineers who pour onto the market every year. EADS, for example, has established research alliances with global partners, and in the USA, Peking, Singapore and Moscow it has set up its own research and engineering centres.

On top of this, the framework conditions between companies are changing nationally and internationally: system manufacturers such as Airbus and Boeing are working with steadily fewer equipment manufacturing companies and are awarding contracts for entire subsystems to financially strong equipment manufacturing concerns able to take on a significant share of the entrepreneurial risk. This is putting pressure on German equipment manufacturers, which tend to be medium-sized companies, to consolidate in the global competition.

In parallel to this, totally new requirements are developing as regards security policy and the military aerospace industry, which needs to adjust to the new conditions of transformation, to network centric operations and the challenges of asymmetric warfare. Industry will in the future need to be able to supply not just individual products or platforms, but complete, complex systems – for reconnaissance or air defence, for example.

To sustain our successes, we plan and we need to enter into partnership with the government, both in the civil and also the military area. We hope that the new coalition government's programme for the funding of innovation in Germany will provide opportunities to further expand this partnership and, for example, to strengthen the federal government's aerospace research programmes. But we also need state support and dialogue with government in the areas of spaceflight and military research and procurement projects. The European Defence Agency must be strengthened.

Public resources are in short supply and will remain so for the foreseeable future. This makes it all the more imperative to use these resources correctly and effectively. To achieve the most success possible, we in Germany must not only promote innovation but also develop our existing strengths still further – this is definitely something that applies to the aerospace industry!

We will be demonstrating our strengths at the Berlin Air Show this May, where we will present our products and capabilities to the German and international public and show that we are not resting on our laurels but are working hard to continue along our path of success.

From FLUG REVUE 5/2006

Last updated 10 April 2006

FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany