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Home News Archive Lessons of the Top 100 Aerospace/Defense Companies

Lessons of the Top 100 Aerospace/Defense Companies

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On August 9, 2009 Flight International published its analysis of the Top 100 A&D companies in the world. The article contains some interesting lessons from which other companies may be able to learn.

1. EADS vs. Boeing. As we previously noted, EADS has supplanted Boeing as the Number One Aerospace/Defense company in the world, aided by (a) a seven percent strengthening of the Euro vs. the U.S. Dollar, and (b) a top-line revenue growth of U.S. $9.8 Billion (contrasted to Boeing's 8.3% revenue decline of $5.5 Billion versus last year's sales). Obviously, Boeing's sales were impacted by the 57-day machinists strike, which Flight International (and its PricewaterhouseCoopers compliation team) estimate cost Boeing about $4.3 Billion in lost business. Looking only at the commercial aircraft businesses, Boeing delivered 375 aircraft in 2008 versus Airbus' record year of 483 deliveries. As a result Boeing Commercial Aircraft (BCA) suffered a sales drop of 15.3% while Airbus' sales rose 18.9% (or 11.2% after currency adjustment). After looking at those numbers, it's no wonder the BCA President decided to retire. On the defense side of the house, EADS' defense business grew 47.2% to $17.8 Billion (after currency adjustment), even after its well-reported troubles with its A400M military transport aircraft. In contrast, Boeing's Integrated Defense Systems (IDS) business reported flat revenue growth.

2. Companies connected to the Boeing supply chain did not fare well either. For instance, Spirit Aerosystems, Kawasaki Heavy Industries, Curtiss-Wright, and Fuji Heavy Industries each underperformed against their peers. In contrast, some Airbus suppliers Zodiac Aerospace, Latécoère, and Moog outperformed their peers.

3. The past decade has been the time of the big defense primes, with sales per head and inventory turns and ROIC increasing at the largest of the defense companies. However, the Flight International analysis revealed that the historical trend might be changing. The article reported that "Boeing's Integrated Defence Systems unit failed to grow and Lockheed Martin's aeronautics and electronics business shrank 1.5%. Northrop Grumman, meanwhile, managed only modest growth, of 2.4%, in its defence aerospace business." These results are compared to the defense industry as a whole, "Overall, the defence aerospace industry maintained its momentum, with the top 15 companies or divisions growing 6%, against a comparable figure of 7% for 2007." In other words, the rest of the industry outperformed the largest companies, in contrast to what has been experienced over the past decade.

RAF - A400M
 

Newsflash

Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.