Q: The European aerospace and defense corporation The Airbus Group is reportedly cutting 815 million euros through a three-year restructuring plan; most of the cost savings (574 million euros) target its space business while the remaining 241 will hit its defense division. How will this affect the US space and defense industries?
A: The reorganization of the Airbus Group is somewhat overdue. They have long been trying to become the most significant presence in each of their market areas. This has been met with some success and some disappointment. Airbus expected the space business to be more robust than it is–and also to have fewer competitors than are present today. The defense business has always been a challenge. With the economic conditions in North America and Europe, the available market has declined.
Airbus is effectively eliminating excess capacity. This will have two effects in the US. Price pressure in the space business will lessen somewhat as Airbus becomes less aggressive in its bidding. A second effect is that the defense industry in the US may have better market opportunities for foreign sales, but that is dependent on relaxation of International Traffic in Arms Regulations rules. The most probable outcome is better opportunities for Russia in both areas.
—Wayne Plucker is Aerospace and Defense Industry Research Manager at Frost & Sullivan, a global growth consulting company headquartered in Mountain View, CA.
