Experts from Boyden’s Global Aerospace & Defence Practice assess COVID19 shifts within the evolving sector.
Members from Boyden’s global Aerospace & Defence Practice across Europe, the Americas and APAC connected to assess how COVID19 is shifting in the global market from early 2020 where we discussed how 2019 ambitions were coming to fruition. Naturally, times have rapidly changed and new common themes across Aerospace and Deference sector are being detected.
Hear directly from our experts on the shifts to date:
Paul Marshall, Partner of Boyden Canada, and Global Co-Leader of Aerospace & Defence, felt some concern in the local Canadian Defence Market as public money is being used to prop up the economy and naturally wonders whether defence spending will be impacted.
Craig Hemer, Managing Partner in Canada built on Paul’s outlook on the Aerospace & Aviation side. At the end of 2019 and leading into 2020 there was a concerted focus on growth and the feeling of a bit of an Aviation golden age with more people flying than ever before. Since March 15th, 2020 however this has naturally come to an abrupt end, with redundancies being made, projects put on hold and concern on the recovery programme for the industry.
There is some hope for optimism that the industry can hold tough through this and come out the other side, however that’s very cautious at the moment.
Guy Herbertson, Partner in the UK and Global Co-Leader for the Aerospace & Defence Practice has seen two different pictures across the industries. Following a recent Aerospace & Defence Lunch with UK executives the feeling is that Aerospace will emerge from this in a very different state, and it will potentially accelerate the sustainability and environmental question on the industry, which faced growing pressure pre-COVID.
Defence in the UK for now is robust as the industry is mid-cycle. However, new programmes may well be more challenging. Defence organisations willing to adapt and pivot could seize the opportunity to utilise their skills in creation of highly complex engineering solutions and broaden their sector expertise, which we have already seen with ventilators and PPE.
Private Equity may also be gearing up for a busy end of 2020. Defence has been less attractive historically for private equity but with consistent returns in the short term and some cheap deals on the table, it may be lucrative.
Craig Stevens, the US Defence & Aerospace Practice Leader, has seen the pandemic impact the industry in two key areas. First, even though employees with companies in the aerospace supply chain are considered essential, there have been shortages and glitches that have slowed deliveries, revealing the vulnerabilities of the global supply chain. Second, preserving capital is a priority with even the largest companies in the industry. This has resulted in cuts in R&D spending. This will delay the rollout of leading-edge technologies for the near future.
Elizabeth Garforth, Principal in France has naturally seen a huge shock to the Aerospace Industry in France. Airbus and the surrounding region have for the last 20 years been focused on development and now this is the largest recession and shock for them in that time.
The positive story from this, and it’s mirrored on the Defence side of the country, is that the government is leading a saving plan for both sectors. The biggest companies such as Safran, Airbus & Dassault Systemes are coming together to work on the recovery plan and support the small yet critical supply chain organisations and not lose the special companies to Chinese competition. Both French & German Aerospace Industry bodies have called for a strong recovery plan and are pulling together to do this.
Regina Harms, Partner in Germany has a feeling of cautious optimism. The sector seems quite calm, although there is a hesitation to invest in growth right now. Aerospace, in particular large engine production in Germany, has naturally stalled but following a transformation of various organisations prior to 2020 there may well be a more solid foundation once the picture becomes clearer.
Given the French and German government and Aerospace collaboration there is likely to be some collaboration with our French & German offices too.
Kong To, Partner in China & Singapore rejoined Boyden on 1st April this year, which could be an interesting time from an Aerospace & Defence Practice with an 80% drop in flights in China meaning 500,000 individual flights being cancelled.
However, with the Chinese market looking to disrupt the existing Aviation sector with their single aisle aircraft there will be a continued focus for the market on gaining certification and this may have slowed but is highly unlikely to stop.
Overall, as with all industries right now, the Aerospace & Defence market is working in a tough market. Civil Aerospace is particularly hard hit but there are pockets of cautious optimism and hope for the growth mindset at the start of 2020 to gradually return.
If you would like a conversation with a local expert from Boyden's Aerospace & Defense Practice then please don’t hesitate to get in touch.