Apart from Airbus’s highly visible presence in defense and commercial aircraft, Europe also has successful capabilities in helicopters, business jets, and aero engines, and in all these areas their global market share is growing.

Talk of further consolidation within Europe’s dynamic aerospace sector has been on the lips of industry watchers for several years, but although the major European-based global players have not progressed toward further mergers, the continent’s biggest aerospace company, the former EADS, has achieved a very significant business restructuring, sweeping all its diverse companies into one giant, three-division entity, and adopting the new corporate identity of the Airbus Group.

The Airbus Helicopter Tiger attack helicopter.

At one stage it looked as if a proposed merger between EADS and BAE Systems might create the world’s largest combined aerospace and defense company, but a German political veto put an end to this plan, largely because of sensitivity over the defense aspects of such a deal.

The French Rafale fighter represents the best in today's European military aviation portfolio with a powerful and flexible multi-role supersonic performance. (Dassault)
BAE Systems has a key role in the U.K.’s nuclear weapons program, and while Germans are enthusiastic on commercial aviation, the subject of nuclear defense is one that its politicians and public are happy to leave to the British, French, and U.S. The general reluctance of many NATO nations to maintain their defense budgets has caused a serious knock-on effect rippling through much of the European defense sector.

Legacy air defense programs, such as the Dassault Rafale, SAAB Gripen, and Eurofighter Typhoon, are today still providing plenty of production work, and upgraded versions are on the way, but beyond 2020 these programs are dependent on winning more export orders to avoid serious implications for existing assembly plants.

There are today relatively few new European military air programs, but one of the largest, the Airbus A400M transport, should generate new export sales and will extend production out well into the next decade, but other market sectors, such as jet trainers and surveillance aircraft, are proving very slow to mature into large-scale production.

The need to take a long-term strategic view on aerospace is recognized at the political and technical European Union level. Investment in highly innovative technologies and manufacturing methods is underway in an effort to retain a broad-based leadership role and to stay competitive with upcoming developments and production capacity in the BRIC countries (Brazil, Russia, India, and China). Heavy investment by European companies in overseas assembly plants has seen Airbus setting up factories in the U.S. (civil aircraft and helicopters) and Brazil (helicopters); Rolls-Royce expanding R&D facilities as well as production in the U.S. and Singapore; BAE Systems becoming well established in the U.S. and Australia; and Italy’s Finmeccanica Group expanding in the U.S.

A New Airbus Is Born

The restructuring of EADS into the new Airbus Group is far more than just a commercial re-branding operation. After decades of transatlantic criticism that Airbus is too political, and regarded by European leaders as a high-profile status symbol that must be subsidized—a claim always denied in Europe—the changes within the new Airbus finally create the accountable and transparent company structure that brings it into line with other global corporations.

Of course, financial assistance will still be willingly given by European governments to help invest in new programs and longer-term research and development, as is the case in the U.S. and elsewhere, but in business terms Airbus is now seen as a highly profitable independent enterprise that has broken free of its state controls.

In re-paying government loans through the generation of profits from its civil airliners, it has produced an extremely good deal for European taxpayers. For example, the best-selling A320 family was originally forecast to break even if 200 were sold. Today, the sales total for these single-aisle jetliners is a staggering 10,200, with a backlog of 4200 aircraft yet to be delivered. European governments that have supported Airbus financially collect a royalty on every one sold, so while it will be some time before they see a return from sales of the giant but slow-selling A380, the A320 has become a commercial success on a grand scale.

Because the delivery timescales have now become so extended, Airbus has recently announced that it is raising the A320 production rate to 46 a month in 2016. Final assembly plants in Germany, France, and China will be joined by a new Airbus factory in Mobile, AL, next year. Just six years ago production was cut because of the financial crisis and falling demand, but since 2010 the demand has returned and monthly flow has gradually increased from 36 to the current rate of 42. By 2018 it could reach a monthly total output of 50 aircraft.

Since the decision to go ahead with the A320neo, with a potential 15% reduction in operating costs, sales have surged, and this has created a real challenge, as well as welcome news, for everyone across the global supply chain. Airbus Group CEO Tom Enders has played a key role in steering the new Airbus through a complex, multinational transition, and he has insisted on developing a close partnership with his supply chain in what he describes as an “extended enterprise.” He firmly believes that taking the suppliers into a closer, rather than confrontational, relationship is an important strategy if production costs are to be kept down.