The search for new growth areas and flexibility is top priority in the military and civil aviation industry

• Survey among 100 top managers from four countries
• 90% of those surveyed assume that the crisis will last at least another one to two years
• Business jets, as well as commercial and regional aircrafts (to a lesser extent), are the segments most affected by the crisis
• In 2009, program management, market strategy and globalization remain on top of the agenda of most of aerospace & defense companies
• In a crisis context, flexibility and marketing & sales are now also considered top priorities

The worldwide crisis has hit the civil aviation in Europe. Business jets, as well as commercial and regional aircraft (to a lesser extent) are the segments most affected. In 2009, program management, market strategy and globalization remain on top of the agenda of most aerospace & defense companies. In a crisis context, flexibility and marketing & sales are now also considered top priorities. This is the result of a study by Roland Berger Strategy Consultants, the leading strategy consultancy in the European aerospace & defense industry. Entitled "European Aerospace & Defense industry – Top-management Issues Radar 2009", the study surveyed 100 top managers to identify the industry's main issues for the future.

"In a crisis context, flexibility and marketing & sales have become a top priority for aerospace & defense companies," says Stephane Albernhe, Senior Partner and Head of Aerospace & Defence competence center at Roland Berger Strategy Consultants. "Flexibility is perceived as one of the key capabilities needed to succeed in the industry and especially to deal with the uncertainty and extensive changes in the corporate environment." With increasing postponements and order cancellations, the focus on marketing & sales is expected to increase significantly compared to previous years.
This is one of the key findings of the "European Aerospace & Defense industry – Top-management Issues Radar 2009" study. The study surveyed 100 top managers in France, Germany, Italy and the UK, representing all segments and several positions in the industry value chain, about their strategic priorities. One-third of the participants are CEOs of companies in the civil aviation, security and defense and space segments. The Roland Berger experts used the study's findings to identify the key issues for the industry's future.

Business jets, plus regional and commercial aircraft to a lesser extent, are the segments most affected

According to interviewees, business jets as well as regional and commercial aircraft (to a lesser extent) are the segments most affected by the crisis. Business jet OEMs in particular are facing a significant drop in incoming orders as well as cancellations of previous orders. One of the reasons for this development are companies' cost-cutting policies. For the moment, helicopter OEMs are less affected by the crisis thanks to a better balanced product portfolio (civil, military and services). Defense and space segments are currently largely unaffected, but may be at risk in the future, e.g. defense may suffer from cuts in military spending.
According to the interviewees, most companies are concerned primarily about the impact of the crisis on their "top line". So far, 52% have felt a limited impact of the crisis on their incoming orders, which were between -5% and +5% during the last 3 months compared to the year before. 35% have experienced a 5% to 20% decrease, 8% a drop even worse than 20%.
Half of the interviewees were able to anticipate the crisis thanks to global economic warnings and accurate analyses and forecasts.
According to the study participants, the crisis will speed up industry consolidation and the long-term trend toward offshoring production.

Most companies have so far opted for operational initiatives (vs. strategic or financing actions) to counter the crisis

Most companies have so far opted for operational initiatives to counter the crisis: performance improvement, overheads reduction, supplier risk assessment and mitigation.
Companies have by and large not stopped the strategic actions initiated before the crisis, except for acquisitions.
The interviewees also see certain opportunities resulting from the crisis, such as downsizing support functions, realizing favorable acquisitions, hiring highly talented people and renegotiating contracts. "Finally, the crisis is also perceived as an ideal opportunity for leading organizations to become more customer-oriented," says Manfred Hader, Partner in the European Aerospace & Defense Competence Center at Roland Berger Strategy Consultants.

Companies expect the crisis to last for at least one to two years and anticipate a moderate recovery

The crisis is not over yet: Interviewees expect the crisis to last for at least one to two years and anticipate only moderate recovery. The growth rate of incoming orders after the crisis will not exceed 10% compared to the previous year.
As mid-term evolution of most market drivers is still highly uncertain, "manufacturing & supply chain flexibility" is being stressed as a key capability both during the crisis and when the market recovers. In addition, an innovative products and services portfolio will be essential to recovery as well as having a leading cost position. As a result, "most of the companies interviewed have considered or launched cost reduction plans addressing direct or indirect costs," says Stephane Albernhe.