This is marketing research on the Aviation or Aerospace - Germany industry and can include information on the background, market structure, definitions, competitors, trends and developments of aviation or aerospace - Germany and is related to other topics such as airlines and defense.

[edit] Background

This report examines the German aerospace industry and related aspects, such as air traffic. The aerospace industry is one of the key sectors in Germany that is characterized by sustainable growth. Due to its technological know-how and its strong innovative capacity, it also has an effect on other industrial sectors. More than 88,000 people, about 50 percent of whom are university graduates, are directly employed in the German aerospace industry. Another 250,000 people are employed in the air transport sector. Moreover, some 850,000 jobs are supported throughout the supply chain of the aerospace industry. With its strategic importance and its large contribution to added value, the aerospace industry creates and safeguards highly skilled jobs in Germany.

Research spending is significantly higher than in any other industry. In 2007, the German aerospace industry maintained its growth course despite substantial challenges in a difficult environment. Revenues in the aerospace sector increased by 3.7% to EUR 20.2 billion from EUR 19.5 billion in the previous year. The commercial aviation industry grew by 6%. The defense and space sectors remained stable. Some of the main challenges are the weakness of the U.S. dollar and the consolidation among German aerospace suppliers. German aerospace manufacturers say that the lack of qualified engineers posts a threat to their long-term planning.

[edit] Metrics

German & European Aerospace Industry

The German Aerospace industry continued its ascent in 2007. Revenues in the aerospace sector increased by 3.8% to EUR 20.2 billion, up 700 million from 2006. That’s the second all time high in a row. This positive development is also reflected in the increasing number of employees. It grew by 3.2% to 88,200 translating into 2,700 additional jobs in the industry. The German Aerospace Association (BDLI) reported that the export share of its 160 member companies grew once again by 1.7% thereby surpassing the 75% mark for the first time ever. German aerospace leaders agree that further efforts in research and development will be essential to hold the export share at this level. Correspondingly, the investment volume climbed to 16% of the overall revenues in the aerospace sector.

Commercial Aviation

Revenues in the commercial aviation industry grew by 6.3% to 13.03 billion in 2007 from EUR 12.27 billion in the previous year. As the strongest revenue generator of the German aerospace industry, commercial aviation holds a 64.4% share of all revenues. The number of employees grew by 2,400 to 57,400, an increase of 4.4%.

A strong market potential and a high demand for new airplanes support the commercial aviation industry in Germany. Power8, the restructuring program for Airbus, is showing first successful results but there seems to be no alternative to reduce the company’s dependency from the U.S. dollar. Airbus foresees a worldwide demand for almost 20,000 new aircraft of the 100-plus-seat category over the next 12 years.

The German aerospace supply industry is still fragmented and dominated by small- and medium-sized enterprises. It has to push for a rigid consolidation course in order to stay competitive with the large international suppliers.

Buyers throughout the industry are looking for U.S. products to benefit from lower prices. German firms can oppose this trend by moving at least a part of their production to the dollar zone. In return, this might open joint venture opportunities for U.S. aerospace suppliers who could offer their production facilities or enter into project partnerships.

Defense & Security

Defense and security accounts for 28.4% of the German aerospace market. Revenues in this segment stagnated at EUR 5.75 billion in 2007. This reflects a limited growth potential of the German defense market. At the same time, the number of employees rose by 4.2% to 20,000, proving a high utilization across all military programs.

The industry claims to offer systems and products that meet customers demands around the globe, for example, the Airbus A400M. Despite the revision of the procurement totals from 212 aircraft in May 2003 to currently 180 aircraft, the first flight is still scheduled for June 2008 and delivery will begin in the first half of 2009. The A400M will be acquired by France (50), Germany (60), Spain (27), the United Kingdom (25), Turkey (10), Belgium (7), Luxembourg (1), South Africa (8) and Malaysia (4). The latest deal with at least some German pre-participation stirred up controversial reactions in the United States. In February 2008, the U.S. Air Force announced that an American-assembled variant of the Airbus A330 Multi Role Tanker Transport (MRTT) aircraft, now designated Northrop Grumman KC-45A, had been selected to replace the Boeing KC-135 Stratotanker. The overall value of the deal is USD 35 billion. Whether it can be upheld despite heavy opposition from competitor Boeing and from high-ranking U.S. politicians remains to be seen.

Space Industry

The space industry saw a slightly positive development in 2007. Revenues increased by 0.5% to EUR 1.46 billion, representing a share of 7.2% share of the German aerospace market. The number of employees also rose by 0.5% to 5,600. These numbers emphasize how the German space industry is strengthened through contributing to projects of the European Space Agency (ESA). Last year was marked by several milestones, such as the successful integration of ESA’s Columbus research and the attachment of Europe's first Automated Transfer Vehicle (ATV), Jules Vernes, to the International Space Station (ISS) as well as the implementation of the Synthetic Aperture Radar (SAR) system by the German Federal Armed Forces.

[edit] Air Traffic

The latest statistics on the development of air traffic at Germany’s 19 international airports were published by the German Airports Association, ADV, in October 2007. The number of aircraft movements rose by 14% from 2 million in 2005 to 2.3 million in 2006, whereas air passenger traffic grew by 5%. The overall traffic at 102 European airports, which increased by 5.7%, slightly outpaced the German growth figures. Munich Airport recorded an impressive growth of 10.9% and ranked third among the airports that experienced the highest increase in passenger traffic per group, just behind Barcelona (+13.0%), Madrid (+12.9%).

This demonstrates that air traffic in Germany grew in line with the European trend showing healthy signs for a further growth of the commercial aviation sector.

[edit] Major Players

European Aeronautic, Defence and Space Company (EADS) – Ottobrunn, Germany (http://www.eads.com) EADS is the largest aerospace company in Europe and the second largest worldwide. The company is active in the fields of civil and military aircraft, space technology, defense systems and services. In 2007, EADS generated revenues of EUR 39.1 billion compared to 39.4 billion in 2006. EADS group includes the commercial aircraft manufacturer, Airbus, the world’s largest helicopter supplier, Eurocopter, and the space company Astrium. The defense-related divisions include military air systems, military transport aircraft, and defense and security. EADS holds a 37.5% share in MBDA, the second largest guided manufacturer of guided missiles worldwide.

Rolls-Royce Aero Engines – Dahlewitz, Germany http://www.rolls-royce.com/deutschland) Rolls-Royce Aero Engines is the major aircraft engine manufacturer in Germany. The company designs, develops and manufactures gas turbine engines for commercial, corporate and military airplanes. In 1990, BMW and Rolls-Royce established a joint venture to produce engines for regional and corporate jets. London-based Rolls-Royce plc then took full control of the joint venture under the name Rolls-Royce Deutschland in 2000. Rolls-Royce Deutschland currently employs some 3,000 people (10,000 worldwide) generating revenues of approximately. EUR 900 million (EUR 10.6 billion worldwide), more than 50% comes from long- term maintenance contracts.

MTU Aero Engines – Munich, Germany (http://www.mtu.de/en) The second largest engine manufacturer in Germany is MTU Aero Engines. The company produces engine modules, components and complete aero engines for civil and military aircraft and provides repair and overhaul services for a large array of aircraft engines. MTU also cooperates closely with other major jet engine makers such as Pratt & Whitney, General Electric and Rolls-Royce. MTU’s revenues in 2007 improved by 6 % from EUR 2,416 million to EUR 2,575 million. Adjusted earnings grew at a rate of 24% to EUR 392.9 million.

Diehl Aerospace – Ueberlingen, Germany (http://www.diehl-aerospace.de) Diehl Aerospace is a joint venture between Diehl Foundation (51%) and Thales (49%), specializing in the area of avionics. The company was founded in 2006 as result of the merger of Diehl Avionik Systeme and Diehl Luftfahrt Elektronik. Diehl Aerospace provides a wide array of equipment and components, including display systems, flight control systems, engine power control systems, secondary power systems, processing equipment and cabin lighting. It is the largest avionics supplier in Germany and is involved in all major European aircraft programs, including Airbus and Eurofighter. As of 2007, Diehl Aerospace had about 1,200 employees and revenues of EUR 210 million.

Liebherr-Aerospace – Friedrichshafen, Germany (http://www.liebherr.com/ae) Another major supplier of equipment and components is Liebherr-Aerospace. The company manufactures flight control and actuation systems, hydraulic systems, landing gear and air management systems. Liebherr-Aerospace is closely involved in the production of flight control and air systems for the Airbus A380. In 2005, the company joined Diehl Aerospace, Thales, and Zodiac to form OEMServices, a company providing customer support for Airbus operators. Other customers include Boeing, Bombardier and Embraer. Liebherr-Aerospace has 3,500 employees.

Lufthansa Technik – Hamburg, Germany (http://www.lufthansa-technik.com) Lufthansa Technik (LHT Group) is the world’s largest provider of aircraft Maintenance, Repair and Overhaul (MRO) services with 28 operating subsidiaries and affiliates in Europe, Asia and the United States. Headquartered in Hamburg, the company’s activities range from the maintenance and overhaul of commercial aircraft, engines and components to the completion of business jets. LHT Group supports Airbus, Boeing, General Electric, Rolls-Royce and Pratt & Whitney equipment. It also performs specialized tasks, such as aircraft modifications and cockpit upgrades. Revenues in 2007 increased by 4.6% or EUR 156 million to EUR 3.571 million from EUR 3.415 million in the previous year. The number of employees grew to 18,089.

[edit] Consumers

Aircraft Manufacturers

The chief consumer of aircraft components and materials in Germany is Airbus Deutschland, headquartered in Hamburg. Airbus has seven production sites (Hamburg, Bremen, Nordenham, Stade, Varel, Buxtehude, Laupheim), all of which play a decisive role in the engineering of Airbus aircraft, including components production and final assembly. Moreover, the EADS group has around 20 manufacturing facilities in Germany where development and production in the areas of satellite systems, military fighter and transport aircraft, weapon systems and space launchers takes place. EADS procures more than 70% of the costs of a system externally, sourcing from suppliers who, in return for sharing some of the business risks can take key roles in the value chain.

Airlines

After a period of rapid consolidation, the German air travel market is served by two airlines: Deutsche Lufthansa AG (Lufthansa) and Air Berlin PLC. They are also the major aircraft buyers in Germany. Lufthansa is the largest passenger airline in Europe, the fifth largest worldwide and the second largest cargo airline worldwide. Total revenues of the Lufthansa Group amounted to EUR 22.4 billion in 2007, an increase of 13.4% over 2006 (EUR 19.8 billion). The airline carried nearly 63 million passengers in 2007. Traffic revenue increased by 14.4% to EUR 17.6 billion. On a consolidated basis, the operating profit reached EUR 1.4 billion, a profit margin of 6.2%. Lufthansa operates a fleet of 343 aircraft, including 158 Airbus and 93 Boeing aircraft. The remaining fleet consists of 55 Bombardier CRJs for domestic services and 19 Boeing MD11F cargo planes. Lufthansa’s total fleet size including subsidiaries is 529. The airline currently holds 145 orders and 30 options. As of December 2007, Lufthansa had 47,230 employees, an increase of 23% over 2006 (38,410), mainly through the consolidation of SWISS airlines. Lufthansa serves 209 destinations in 81 countries. Together with the 19 Star Alliance members and other codeshare partners, Lufthansa and SWISS serve 980 destinations in 103 countries.

Air Berlin has grown considerably through acquisitions and partnerships. In 2007, the airline took over Munich-based dba, Duesseldorf-based LTU and the Swiss airline Belair. Sales revenues climbed from EUR 1.58 billion to EUR 2.54 billion, an increase of 61%. Air Berlin operates one of the youngest fleets in Europe with 52 Airbus and 62 Boeing aircraft. The airline has ordered 60 Boeing 737-800s in 2007, which are due for delivery between 2008 and 2014. Moreover, it placed an order for 25 Boeing 787 long-haul aircraft, with an option on a further 25 planes. They are due to be delivered between 2013 and 2017.

Military

Germany’s armed forces are divided into five branches: Army (5 divisions), Navy (2 flotillas), Air Force (3 divisions), Joint Service Support Command, and the Central Medical Service. These branches are all characterized by a recent reduction in personnel and equipment (the Air Force alone has reduced its aircraft inventory from 700 to around 250). In light of these reductions, the German military has to procure select defense systems that focus less on conventional warfare and more on flexibility, maneuverability, deployability and most importantly, force protection capabilities. However, the German defense budget climbed from EUR 28.38 billion in 2007 to EUR 29.5 billion in 2008, an estimated EUR 2 billion of which will be used for aerospace projects. It is important to note that over 90% of Germany’s aerospace defense procurement spending is still going to companies within the EU and much of it is related to pan-European projects. Only 8% goes to non-European firms. While requests for tenders may be published in English, all tenders must be submitted in German. Schedules for tenders are particularly tight. Taking all these factors into consideration, it can be helpful to partner with a local company.

[edit] Sources

• Latest U.S. Gov't Data

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