EU aerospace industry told to combine or face collapse

Date: 25/09/1997

By Chris Johnstone

A STARK warning to the aerospace sector to restructure or suffer a lingering death has been issued by the European Commission in a communication aimed at setting out a flight plan for survival and success.

The report says integration of the many European companies in the sector into single firms or groupings capable of facing up to big US rivals is vital for the sector's future.

“The nature of the aerospace market is such that in many, though not all sectors it will only be possible for one entity to remain viable in Europe,” it declares, adding that this need not necessarily give rise to competition problems if there is enough global competition.

The best short-term scenario identified for one of Europe's biggest export earning sectors is one of faster progress towards multi-sectoral groupings of companies across borders, with governments accepting that their past insistence on retaining national champions is out of date.

Multi-sectoral groupings would allow companies to share the spin-off benefits of research projects in related fields, following the logic of US mega-mergers which have produced three main suppliers, Boeing, Lockheed Martin and Raytheon.

A model for helping European companies combine has been found in the form of the proposed European Company Statute.

But the Commission says the EU can give further impetus to the sector by creating a European Aviation Safety Authority capable of challenging the overriding influence of the US Federal Aviation Authority (FAA) in setting standards. The communication also stresses the need to do more to prevent US standards becoming the de facto norms for the industry world-wide.

In addition, it gives a clear warning to the US that the Union is still concerned that the current agreement to discipline each side's civil aviation subsidies is not working. A review of the accord has been prolonged to take into account the Boeing-McDonnell Douglas merger.