Around the world, more new frontiers are being drawn and protectionism is gaining ground. Europe’s aerospace group is moving in the opposite direction. The best example is the recent alliance with Canadian aircraft manufacturer Bombardier.
Convincing aircraft, promising market
Airbus is acquiring a 50.01% stake in the C Series aircraft programme from Bombardier. The agreement should be finalised in the second half of 2018. This transatlantic partnership holds enormous potential for both parties: with its A320 family, Airbus offers aircraft starting from 150 seats. In contrast, the Bombardier C Series, which have been officially renamed the A220 Family in July 2018, seats 100 to 150 passengers, making the programme an ideal addition to Airbus’ product range. At the same time, Bombardier gains access to Airbus’ global sales and maintenance network. For aircraft of this size, global demand is expected to reach 6,000 aircraft in the next 20 years. Until now, the limited possibilities of the Canadian manufacturer have prevented what is technically-speaking a first-class aircraft from being a commercial success. The project end was looming, and development costs reaching into the billions would have been irretrievably lost.
And the winners are: Europe and Canada
It is generally unknown in this country that 4,800 Bombardier employees work on the A220 Family in Belfast in Northern Ireland. In this economically underdeveloped region, the Canadians are the largest industrial employer. Thanks to the involvement of Airbus, these jobs can now be secured in the long term. This is also true for suppliers based in Germany. And not only Europe, but Canada benefits too: the A220 Family headquarters will remain in Quebec, as will 2,000 jobs, and the Quebec aerospace cluster will be durably strengthened.
And the USA can be happy too
For the A220 Family, Airbus wants to expand its site in Alabama and do the final assembly of the A220 Family aircraft for the US market on American soil. This step will ensure commercial success in the USA. At the instigation of US group Boeing, the US government imposed punitive tariffs of around 300% on the aircraft from its Canadian neighbours. As a “made in USA” product, it will no longer be possible to apply this tariff. Victory for all those who wish to develop and provide the best and most efficient products through global collaboration.
Competition is continuing to pick up
The alliance between Bombardier and Airbus must not lead us to lose sight of the fact that the intensity of competition on the aircraft market is set to pick up significantly in coming years. New aircraft manufacturers with tremendous ambitions and substantial support from their public owners, such as Irkut and Sukhoi in Russia, and Comac in China, are pushing their way onto the market. Airbus is confidently standing up to its competitors – and scoring points thanks to innovative partnerships in particular.
Status: July 2018
No other sector in Germany has as much innovative strength and pioneering spirit as aerospace. Industrial aerospace companies spend 11 percent of their revenue on research and development (R&D). This is the top figure by a long way: the electronics, automotive and mechanical engineering industries all lag far behind, at 5 to 7 percent. And at the same time, all around the globe, aviation is an Eldorado for start-ups. It is no accident that the Federal Ministry for Economic Affairs and Energy chose aerospace to launch its series of “StartUp Night!” events two years ago. The centre of gravity of this German innovation industry is Airbus.
Airbus operates at 27 sites in 13 of the 16 federal states. Here are some key figures on the company’s home location, Germany:
Employees: Since the year 2000, the number of Airbus employees at German sites has increased by 30 percent to 47,000. This means that the Group employs close to half of the 108,000 employees in the German aerospace industry. With highly skilled employees accounting for almost 30 percent of the total workforce, the sector takes top position in Germany. On average, the proportion of academics is only around 11 percent.
Suppliers: Airbus’ global order book is growing. This sustains German suppliers such as Premium AEROTEC, with its 10,000 employers. As Airbus partners, suppliers contribute up to 80 percent added value depending on the aircraft model. In total, Airbus works with close to 11,000 external partners in Germany and buys goods and services representing a value of just over €5 billion per year in this country.
R&D: In 2016, Airbus spent €3 billion on research and development. Compared to the year 2000, this amount has more than doubled. Environmentally-friendly technologies such as alternative propulsion systems, lightweight engineering and 3D printing are at the heart of this. In this respect, Airbus cooperates closely with partners in research and SMEs. This broad approach also benefits Germany as an aerospace location overall. The key R&D sites are the Ludwig Bölkow Campus in Ottobrunn, the Center of Applied Aeronautical Research in Hamburg (ZAL) and the CFK Valley carbon-fibre reinforced plastics network in Stade.
Start-ups: Airbus extensively promotes innovation beyond the Group's borders. The merging with the start-up scene already present in Germany is a strategic focus. Consequently, in Hamburg, Airbus operates one of the three BizLabs set up around the globe: here, entrepreneurs receive advice from experts and support for market entry and prototyping.
Together with France, Great Britain and Spain, Germany is the home of Airbus. 90 percent of the approximately 134,000 people it employs worldwide work here. However, in 2016, only 12 percent of orders came from the four Airbus home countries. Airbus’ goal is to tap into the important growth markets in Asia and America more than ever, and thus ensure employment in the home countries. The keys to this are: internationalisation, proximity to the customer and digitisation.
Airbus sites and products
Employees per business area:
Stand: Dez 2017
Currently, revenue from the federal air passenger tax introduced in Germany in 2011 amounts to approximately €1 billion per year. The majority of countries in the EU impose only a low-rate ticket tax or none at all. Austria has halved its tax for example, and the Netherlands and Ireland have abolished it completely – with considerable effects on their national economies.
In a recent study, PricewaterhouseCoopers (PwC) simulated the positive effects that would be obtained by completely abolishing the air passenger duty in Germany. The key results are:
And the tax authorities would benefit too
The question remains as to what consequences this step would have on the federal budget. According to the PwC analyses, the loss of revenue from this tax would be more than compensated for by considerable increases in revenue in other areas, for example higher revenue from income tax, VAT and social security contributions. In concrete terms: in 2020, the abolishment of the air passenger tax would represent a loss of €1.19 billion, compared to additional revenue of €1.29 billion.
Thus, from an economic point of view, there are also very convincing arguments in favour of abolishing the air passenger tax. Last but not least, a significant burden would be lifted from airlines, enabling them to invest even more in environmentally-friendly and quieter aircraft. Indeed, the most effective approach to reducing fuel consumption and noise emissions is to invest in new aircraft technologies and continually modernise aircraft. Three particularly important areas here are propulsion, aerodynamics and weight. New ideas and materials enable fuel consumption to be reduced with each new aircraft generation. For example, the Airbus A320neo consumes 20% less fuel per seat compared to previous-generation aircraft.
The Airbus A350 XWB boasts 25% less fuel consumption than rival long-range aircraft. The industry has thus shown that it can contribute significantly to greater sustainability and energy efficiency in aviation: a win-win situation.
Status: Nov 2017