Farnborough Air Show

Victoria Drives Australia’s Bid For Aerospace Lift Off Down Under

 - July 9, 2012, 3:00 AM

Representatives from the Australian state of Victoria, which will host the Avalon Airshow in Melbourne next year (February 26 to March 3), are busy here at the Farnborough International Airshow trying to find new connections for companies “Down Under.” In particular, they are also trying to persuade UK firms that they could benefit from opening branches in Australia, despite the distance, current high cost of living and adverse effect of the exchange rate on exports.

Victoria’s aerospace sector already exports $800 million worth of products and services a year and the Australian government has set out plans (and started) to invest more than $150 billion in aerospace and defense between 2011 and 2020. Incentives for companies to set up in Victoria do not include tax concessions (apart from a research-and-development tax credit, which was revamped in July 2011 and is available via Innovation Australia), but do include assistance, for example, finding suitable sites, help with recruitment or promotion.

During a briefing at Australia House in London last month, Sally Capp, agent-general for Victoria, said that such assistance is “free of charge.” There are state subsidies available also to help offset costs and they are being increased to counter the effect of the strong currency.

Capp argued that Australia is “a unique place” as it is effectively a Western nation in the East, and “the hottest region in the world” for business–so it is ideal for accessing the booming Asia Pacific market. On particular advantage is that, from Australia, foreign companies can benefit from the free-trade agreements the country has with its fellow members of the Association of Southeast Asia Nations.

To boost its aerospace human resources, Capp said Australia needs to attract more skilled workers as the booming mining sector in Western Australia has drawn heavily on supply in areas such as engineering.

Phil Doyle, aerospace and defense for Invest Victoria, said some companies could find an opportunity to move into aerospace. He gave the example of Marand Precision Engineering, which is an automotive supplier but made a “big shift” into aerospace, and is now a second-source supplier for vertical tails on Lockheed Martin F-35 Joint Strike Fighter program in Australia.

The Australian government is committed to investing in aerospace. “They have invested millions into a new open-source composites facility that anyone can use for testing and prototyping materials and products,” explained Doyle. “We have had a huge amount of interest in this from Europe because many existing facilities are owned and, therefore, not accessible. It’s the only open-source research facility in the world on that scale.” He added that the facility is due to open later this year, and that Boeing, which already manufactures 787 trailing edge surfaces in Melbourne, is interested in using it.

“It’s an opportunity for them to break the stranglehold of the big suppliers [on this technology], as the suppliers keep their recipes secret,” said Doyle. The center will have close links with the new UK national composites center, although on a different basis as the UK center is not run on an open-source basis.

Aerospace Precinct

Meanwhile, Australia’s National Aviation Services Precinct (NASP) is pressing ahead with a project to create an “aerospace precinct” next to Melbourne’s Avalon Airport. A discussion paper has been published. “At the moment we’re asking industry in Europe for feedback, so it is a big focus of ours at Farnborough,” said Doyle. “We’re looking for input on what support is required to get MRO providers, training providers and possibly R&D providers too–all in one place.”

As a former automotive industry executive with Toyota in Australia, Doyle pointed out that Australian aerospace had adopted many “lean” manufacturing practices from that sector. “Lean was pioneered in Australia by the automotive sector and other sectors caught on quickly,” he said. “We’ve also had teams [in the UK] learning how to implement SC21 [the UK ADS-led 21st Century Supply Chains initiative] and Australia is a participant in SC21.”

According to Mike Maiden, former government relations director at BAE Systems and now a consultant to Victoria, Australia is very aware of how important aerospace is and in particular how it is projected to grow in the future, and the country wants to be a bigger part of it. “[The challenge is] how do we take the opportunity of that and build long-term, lasting relationships that span international boundaries,” he said. “My thesis is that [Victoria can] get a share of the market by cooperating [and] Farnborough is a great opportunity for this.”

UK-Australia cooperation already exists–what we’re most interested in is how we grow that,” Maiden continued. “There are more similarities than differences. For example, both countries have a ‘world view,’ so there’s a sound business baseline.” That said, he acknowledged, however, the distance between the two countries could make cooperation difficult, especially for small and medium-sized enterprises, but he argued that it could pay dividends over a long time frame.

Capp said that while Australia is targeting UK and European companies, specifically, at Farnborough, this is part of a wider effort to promote and expand the Australian aerospace industry and its ties with the rest of the world. For example, she reported that Victoria state premier Ted Baillieu recently led a delegation of 120 companies to India, looking for aerospace cooperation. This group included a number of UK firms already established in the state.

According to Capp, Victoria has been the fastest growing state in Australia for the past eight years, partly because it was less expensive than the Sydney area. Throughout Australia some 22,000 people are currently employed in the aerospace sector and, though productivity there has been criticized in the past, Capp said there is now a “real focus” on improving this performance. “The best I can say at the moment is that it is a high priority on the political and government agenda, and this could increase beyond the next election in 18 months’ time,” she concluded.