RichardAboulafia.com 

:: August 2006 Letter ::

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Dear Fellow Farnborough Endurers,

Hot tarmac. Miserable sweat soaked wool suit. Blazing sun. Futile air conditioning. Laughable transportation. If you aren’t in someone’s chalet, tepid ice-free drinks cost Ł4 ($137.50). Yep, it’s Farnborough. All I could think about was strangling the malicious cretin who moved the show from September to July. Then, I had a sudden annoyed realization: “Why is the industry beholden to these guys? It’s not like Britain builds planes anymore.”

There I was, a heat-stricken recovering anglophile. Who told Britain they were a serious aviation player? UK aviation has had 100 years of quaint obsolescence and gifted amateurism, producing value destroyers like the Avro 146, a six or eight engine jet comfortably seating 100 hobbits in 3-3 configuration (that was Britain’s final civil jet, last delivered in 2003). The RAF just retired the last Canberra recon plane which I believe was coal-powered. Watching the Nimrod fly past produces knowing chuckles between people familiar with its cash-devouring history. And there, parked off in the distance is the crowning achievement: a Concorde. Mach 2, taxpayers zero, to steal someone else’s joke.

I’m neglecting BAE’s Hawk trainer, still alive after 30 improbable years, and a few curiosities like the twice-a-year Islander line. And I understand the emotional pride that goes with national aircraft. Arguably all of Britain’s aviation horrors of the last century are justified by the almighty Spitfire and Hurricane, which basically saved liberal democracy and Western Civilization. And watching US-invented V-22s fly past Big Ben felt like watching a cheesy sci-fi film about an alternative Britain, conquered by a barbaric but technologically advanced alien race.

But Farnborough chugs along. This is because Britain’s aviation industry is doing great today, and that’s largely because they don’t build aircraft. By the metrics that matter—revenue, profit, and employment, UK industry is prospering. Whether it’s for Airbus, AgustaWestland, Eurofighter, Lockheed Martin, or Raytheon, UK numbers are strong and rising. Rolls-Royce is doing great too. The only thing missing is the pride that comes with a national aircraft. They’re also missing the risk and grievous losses that come with a national aircraft.

That’s the big takeaway lesson from UK aviation. Play globally. Don’t start or protect your own national plane industry. Remember my favorite fact: since 1960, only one new company and one new country has entered this industry: Brazil’s Embraer. Look at Japan, which resisted the temptation to build a national plane (and only stumbled when it went down the F-2 path). For a disaster in the making look at China, which combines miserly levels of government and private funding with a bad idea for a national jet. China’s aviation industry will likely grow one day, but not on the path it’s on now.

Back to Farnborough. It was dominated by Airbus’s new A350XWB. We’re cautiously optimistic about this. Going after the 777 is way smarter than going after the heart of the 787 market, although a successful 787-10 could present serious problems. By 2012, the 777 will be vulnerable. Creating the ambitious new Airbus plane will seriously tax Airbus/EADS’s resources, particularly with the ongoing A380 monster cash suck (and considering that the original A350 contract prices likely won’t be revised upwards). That 2012 service entry looks aggressive and perhaps a tad unrealistic, but this announcement was a good start. There’s only one way to eat a rhinoceros—one bite at a time.

There’s also a new spirit of contrition and openness among Airbus leadership. The new XWB represents a willingness to listen to the market. Nothing focuses the mind like the sight of the gallows, as Samuel Johnson said. Look for the old one-sided market debate about super jumbo planes versus smaller widebodies to be replaced by a more meaningful debate—250-seats versus 350-seats. I wouldn’t confuse this defensive Airbus strategy with the visionary leadership we’ve seen out of Seattle in recent years, but history shows us that industry leadership is a fickle thing.

Reaction from Boeing was predictably swift. And swiftly predictable. They correctly pointed out that the new Airbus design stood little chance against the 787-3/-8/-9. They also maintained that while the new plane might be a good competitor in the 777 segment, by the time it arrived Boeing would be ready to start a 777 replacement, presumably with composites. Maybe so, but a lot can happen in 6-10 years, and Boeing has lost its focus before. And with the right engines, the XWB might be a strong 350-seat performer, no matter what Boeing introduces. Besides, competition is good for this industry, especially in this growing segment.

But most of all, Airbus doesn’t have a choice. They could wait a few years until they get the right mix of new enabling technologies and leapfrog the 787, but that would mean spending 2009-2016 or beyond as a niche player, with just narrowbodies and the low volume A380. Without the new plane, Airbus would have nothing to sell between 200 and 500 seats. So Airbus is doing the right thing, an impression endorsed by the XWB’s first blue chip airline order from Singapore, announced at the show’s end.

Thus endeth another wretched Farnborough, the show people love to hate. By mid-Monday, attendees resembled the zombies in Shaun Of The Dead, a brilliant film I strongly recommend (while a horror-comedy, it does a remarkable job of illustrating British society in under two hours). But the show was worth it. Interesting things happened. And again, UK industry provides a good role model for the rest of the world.

Back in my nice, cool air-conditioned office, we’re updating the Commercial Jet and Rotorcraft overviews (if CSAR is announced), along with the F-22, F-117, Il-96, Tu-204, SJ30, and AB.139. Enjoy your summer.

Yours, ‘Til Farnborough Moves To The Isle Of Skye,

Richard Aboulafia

 

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  ~  Last updated on January 08, 2006