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POLITICAL INFLUENCE SHAPES AEROSPACE INDUSTRY

Aerospace continues to be an industry that is deeply influenced by political pressures. This applies not only to the military sector, which in most countries has to be subordinate to national security interests and (contracting) budgets, and to spaceflight, which is heavily dependent on handouts from the state to fund research, but also to the civilian sector. This is illustrated by several spectacular events that have occurred in recent weeks.

Thus, for example, Canada and Brazil have cheerfully resumed their dispute over subsidies for exports of regional passenger aircraft which has been going on for years. The decision by Northwest Airlines to place a $1.68 billion order with Bombardier was due in no small part to the fact that the Canadian government is providing low-rate financing to Northwest to the tune of 80% of the contract value. Canadian International Trade Minister Pierre Pettigrew justified the aid on the grounds that it was necessary "to protect Canadian jobs against illegal practices". Prime Minister Jean Chretien recently expressed it in even more drastic terms. "We will fight fire with fire," he said in a reference to the similar Pro-ex export promotion programme operated by the Brazilian government. The Brazilians feel quite innocent at the moment: according to Embraer, all the World Trade Organisationís rulings have been implemented.

US industry giant General Electric also had occasion to be angry over a political decision, when the EU Commission announced on 3 July it could not accept the merger with Honeywell. According to EU Competition Commissioner Mario Monti it would have ìcreated or reinforced dominant positions in different market segmentsî and as a result ìconsiderably reduced competition in the aerospace industry, ultimately [resulting in] higher prices for customers, especially the airlinesî.

General Electric had declined to make all the concessions requested by the EU, which included selling some parts of its business and greater independence for the leasing company GECAS. Perhaps Jack Welch underestimated the determination of the Europeans, for the US Department of Justice approved the merger of the giants with only a few minor conditions.

The GE/Honeywell case immediately triggered fears of a worsening in the climate between the USA and Europe on aerospace matters. These the EU Commission attempted to allay by saying that the fact that the US and European competition authorities had reached different decisions in this instance was just an isolated exception.

But under the surface the old problems continue to lurk. Rainer Hertrich, in his capacity as President of the European Association of Aerospace Industries (AECMA), took the opportunity to bemoan the consistently low level of public funding of research in Europe on the occasion of presentation of the excellent annual financial data for the European aerospace industry. The sixth EU Framework Programme may be a step in the right direction, but the resources to be made available (1 billion euros over a period of five years) were even less, he argued, than the level of the previous programme. If things continued like this, Europe would never attain the ìlevel playing fieldî with the US competition for which the industry has been pleading.
Meanwhile the Americans are complaining no less loudly about cutbacks in government-sponsored research budgets in recent years.

It seems that even the self-styled global players which have emerged from the wave of consolidation of the last few years are more than happy to go hat in hand to the state for support. Governments should indeed take a stronger interest in the aerospace industry. However, what is needed even more urgently than simply providing the funds companies are asking for is the creation of ground rules that apply throughout the world in what is a global industry and can then actually be enforced. But experience shows that advances are never easy. Probably the only way to move forwards is if the subject is dealt with at the highest level.

From FLUG REVUE 09/2001, page 4