UK Industry Calls on Government for Urgent Increase in Support

 - July 20, 2020, 7:36 AM
Airbus's wing factory at Broughton in the UK is one of many operations affected by the Covid-led decline in orders for new airliners. (Photo: Airbus)

Aerospace and defense industry leaders on Monday called on the UK government to urgently increase support for companies to survive the Covid-19 crisis. Speaking during the opening ceremony for the online FIA Connect event being held in place of the Farnborough International Airshow, senior executives from Airbus, Rolls-Royce, Leonardo, BAE Systems, Meggitt, and Safran made the case for an alliance between industry and government to keep up levels of investment in key areas of research and development and to ensure that the supply chain remains viable to support a recovery many now expect to take until around the middle of this decade.

Meggitt CEO Tony Wood, who is also president of UK industry association ADS, spelled out four ways he would like to see government working more closely with companies to pull through what he called “the gravest crisis we have ever felt in the commercial aviation industry.” He spoke after several speakers pointed out that the French and German governments have already committed much larger amounts of financial support for their national aerospace sectors, while the UK response has so far centered on short-term relief to protect jobs.

Wood called for a doubling of government support for the UK’s Aerospace Technology Institute (ATI) to support the advancement of technology to make aviation environmentally sustainable. ATI, which brings together 100 experts from across industry and academia, is leading the FlyZero program to develop zero-carbon air travel.

Earlier on July 20, Alok Sharma, the UK minister for business, energy, and industrial strategy, committed £15 million ($19 million) for the program as part of a wider £400 million package previously announced, which includes £200 million in government grants. He said that his department and the Department for Transport will jointly oversee the so-called JetZero project, which is aimed at bringing a zero-carbon long-range airliner into commercial service by 2050.

By way of comparison, Wood pointed out the French government recently committed around €1.5 billion ($1.7 billion) specifically to support the development of emissions-free aircraft. The German government also has pledged significantly higher levels of support than its UK counterparts.

Asked whether the UK government is doing enough to support a key industry that currently supports around 375,000 jobs, Woods responded: “This is a key question for the UK and there is no doubt that the UK industry is under severe strain. This is a big opportunity for government and industry to come together and accelerate funding for a sustainable future.”

This week, ADS is set to hold talks with the government and it hopes to conclude further agreements on the sort of partnership it seeks. “This is one sector that can deliver strongly for the country in terms of intellectual property from research and development and high-value jobs for the future,” he argued. “And we want to be able to get the UK back to its number-two position on the global [aerospace] stage.”

Wood also urged the government to accelerate public spending on defense, space, and security programs to provide financial support to key suppliers who are suffering from a steep decline in the commercial side of their businesses. To further alleviate financial pressures as short-term relief for furloughed workers comes to an end in the coming weeks, he urged the government to work with the British Business Bank to offer additional funding means.

Acknowledging recent government support to incentivize companies to continue apprenticeship schemes, Wood said that apprentices on current training programs will need support to complete them and secure continued employment. “It is the younger and less experienced end of the workforce that is hard for companies to support in the current situation, and so we would like the government to further enhance its support for this effort,” he stated.

Airbus CEO Guillaume Faury said that “the gravest crisis in our history” is not one that even the company’s worst-case risk scenario planning had considered. “It went quickly from something that we treated as a short-term situation to something that we think will last for between three and five years, if not longer,” he commented. Airbus’s initial response has been to stabilize the European aerospace group for the possible start of a ramp-up in operations from 2022, but Faury warned that he can’t rule out having to deal with another crisis at that point in terms of longer-term effects from the pandemic or some other global problem.

According to Faury, Airbus accepts that it might emerge from Covid-19 with the company at around the same size as it was 10 or 15 years ago. “What matters is that we can get back in the race and be able to invest again,” he said. “Decarbonized flight is vital and it is probably even more important now to make the right investment in this so, paradoxically, we have fewer means but more need to invest now. But I think we are on the right path, facing up to reality and not in denial about what Covid has done.”

BAE Systems CEO Charles Woodburn told the FIA Connect audience that even though as much as 90 percent of the group’s business is defense-related, it has not been immune to the steep decline in commercial aerospace. He pointed out that many of BAE’s key suppliers are heavily exposed to a loss of civil market revenues.

In his view, the defense industry could potentially play a role in bolstering struggling companies to preserve the long-term capability of the supply chain. He said that the UK government’s current review of the defense and security requirements should also consider how the industry can support economic prosperity by maintaining jobs and the industrial base.

Woodburn said that the Tempest future combat aircraft program could provide a part of the foundation for economic recovery. “It could benefit companies facing exposure to civil aerospace [losses] so we must make a case for this [to the government], but since the budget is stretched we must demonstrate value for money,” he concluded. He confirmed that BAE has recommitted to hiring a record number of 800 young apprentices.

Safran Seats GB, the UK division of the cabin interiors business of French group Safran, is a prime example of a company that has felt the fallout from Covid-19. CEO Victoria Foy said that the it first felt the effects as early as late February, when airline customers started reducing orders and that there had then been a second dip in demand from around April as OEM customers Airbus and Boeing cut back production. The company is in the process of cutting around 300 of its 1,200 jobs in the UK.

However, Foy added that OEMs have shown a willingness to work closely with their suppliers to provide help in the wake of the rescheduling of orders for airliner seats. “We have worked very closely with them throughout the crisis and we will come out of this together,” she concluded.

Leonardo CEO Alessandro Profumo said that the Italian group has stepped up its Leap 2020 long-term planning project with key suppliers. Explaining that 80 percent of Leonardo’s procurement resides with 20 percent of its suppliers, he said that the group aims for further rationalization of its supply chain over the next 10 years.

“We want to reduce the capital needed to support the supply chain and we have created a training system for SMEs,” he said. “We need more large suppliers and we are measuring key performance indicators to achieve this target, involving more than 1,300 site visits.” To address short term concerns, Leonardo has created what it calls “a control tower” to assess on a daily basis the effects of Covid and what help specific suppliers might need.