Current Market Trends
Subsector Focus: Helicopters
Population: 81.89 million
GDP USD: USD 3,428 billion
In 2012, the German aerospace industry reported revenues of EUR 28.4 billion, representing a growth of 10.5% over 2011 (EUR 25.7 billion). It was the first time in four years that the industry achieved double-digit growth. Since 2009, it had already seen solid growth rates between 4.1% (2011 over 2010) and 4.7% (2010 over 2009). Due to its technological know-how and its strong innovative capacity, the German aerospace industry also has a significant effect on other industrial sectors. The number of direct employees in the German aerospace industry currently stands at 100,700, up 3.4% to from 97,400 in the previous year. The share of university graduates is 50%. Another 900,000 jobs are supported throughout the supply chain of the aerospace industry. Some 250,000 people are working in the air transport sector. Research spending is significantly higher than in any other industry, amounting to EUR 4.4 billion or 15.7% of the overall revenues in 2012.
Market entry in the aerospace industry can be achieved through getting access to the suppliers of the Airbus Group and Boeing. Airbus expects to source 40% outside of Western Europe by 2020. Global sourcing is one of the group’s leading long-term objectives as part of its updated Vision 2020. An integrated Airbus Global Sourcing Network (GSN) has been created to foster the globalization of its sourcing footprint. The GSN central team is based in Toulouse and Ottobrunn and operates Country Sourcing Offices in three strategic countries (China, India, USA). Country Focal Points are Brazil, Japan, Korea, Malaysia, and Mexico. For U.S. aerospace manufacturers, the first point of contact is the joint U.S. Sourcing Office that was set up by Airbus North America in November 2010 to enhance the group’s procurement in the United States. The major German Tier I suppliers and systems integrators, such as Diehl Aerosystems, Liebherr-Aerospace Lindenberg, MTU Aero Engines and Premium AEROTEC, as well as some of the foreign Tier 1 suppliers with locations in Germany, such as Rolls-Royce Deutschland, can be approached directly. Which strategy is preferable in each case depends on the overall situation and the product a company has to offer.
Current Market Trends
The latest available market data published by the German Aerospace Industries Association (BDLI) are for 2012. The 2013 figures will be announced on April 29, 2014. Based on the European Central Bank’s average annual exchange rate of 1.2848 EUR-USD, the 2012 revenues of EUR 28.36 billion generated by the German aerospace industry translate into USD 36.44 billion. The revenues break down as follows: aerospace systems, USD 21.86 billion or 60%; engines, USD 5.47 billion or 15%; equipment, USD 8.02 billion or 22%; material technologies and components, USD 1.09 billion or 3%. The exports reported by the 200+ BDLI member companies amounted to 60% or USD 21.86 billion of the overall revenues, a slight decrease from 2011. According to the trade values for aircraft, spacecraft and parts thereof (HS product code 88) as provided by the European Union Market Access Database (MADB), imports from the United States to Germany reached USD 3.18 billion, marking a 40% growth over 2011 (USD 2.26 billion). Germany is a leading export destination for U.S. aerospace products. The overall extra-EU27 imports to Germany were USD 4.35 billion, boosting the U.S. share from 54% in 2011 to 73% in 2012. The intra-EU27 imports to Germany amounted to USD 20.72 billion.
With the structure of the European aerospace industry in mind, mainly the flow and aircraft parts between the Airbus sites in Germany, France and the UK, it is easy understand that the intra-EU27 imports to Germany were more than four times higher than the extra-EU27 imports and averaged at 65% of the local production. Without France (USD 13.62 billion) and the UK (USD 5.37 billion), the intra-EU27 imports to Germany were only USD 1.73 billion in 2012. It is noteworthy that the 2012 export values reported by the German Federal Statistical Office (DESTATIS) divert from the BDLI values by almost 100%, resulting in exports worth USD 43.27 billion. The 2012 export values reported by MADB are even higher (USD 45.84 billion), but they are approximate enough for giving a good representation of Germany’s overall aerospace exports.
The 2012 import values reported by DESTATIS and MADB balance out the picture, with USD 23.59 billion USD 25.07 billion respectively. The difference between the BDLI and DESTATIS figures may be due to intra-company trade between the French and the German production sites of the Airbus Group. However, according to the BDLI member firms the import share has been around 55% of the revenues for the last couple of years. Applied to the 2012 revenues, this would equal USD 20.07 billion, resulting in a difference between exports and imports of USD 1.82 billion and translating into a market size of USD 34.66 billion (total production plus total imports less total exports). If this model is used for the DESTATIS figures—while deducting Germany’s aerospace trade with France and the UK—it would result in a much smaller market size of USD 21.99 billion. Since the DESTATIS exports of USD 43.27 billion are higher than the total production of USD 36.44 billion, this report assumes that the BDLI figure does not cover the entire revenues in the HS product categories 8801-8804.
Another difference is between HS and NAICS. According to NAICS: 3364 for aerospace products and parts manufacturing, U.S. exports to Germany amounted to USD 5.71 billion in 2012 and USD 5.87 billion in 2013, turning Germany into the sixth-largest U.S. aerospace export destination (up from #7 in 2012).
The structure of the German aerospace market becomes clear by looking at the size and revenue distribution of businesses. There are only 8 companies with over 2,000 employees but they employ 61% of the workforce (61,425) and generate 66% of the revenues (USD 24.09 billion). Another 16 companies with 501 to 2,000 employees employ 20% of the workforce (20,260) and generate 15% of the revenues (USD 5.48 billion). Thus, some 20% of the companies make up 80% of the market. Among these companies are the above-mentioned OEMs, Tier I suppliers and systems integrators. They are also the companies with sufficient purchasing capacity to buy from U.S. aerospace manufacturers. Obviously, smaller manufacturers also buy U.S.-made aerospace technology, yet in smaller quantities. The German aerospace market is mostly driven by civilian aircraft orders. That means the orders first go to Airbus and then feed the entire inter-connected supply chain. The U.S. content in Airbus’ aircraft is already high. For some models, such as the A380 with the Engine Alliance GP7200 turbofans by General Electric and Pratt & Whitney, it’s arguably higher than 50%. The new A350 XWB also boasts a high U.S. content. For example, the center fuselage sections and wing spars will be made by Spirit AeroSystems in North Carolina. The forward and the rear fuselage sections will be added at the Airbus facility in Hamburg. Through Airbus and its suppliers, the German aerospace industry is already buying a vast array of aircraft parts from U.S. aerospace manufacturers, including structural parts, raw material, avionics, and equipment. Among the more than two dozen U.S. Tier I suppliers are such major firms as Alcoa Mill Products, Coast Composites, Fairchild Controls, Honeywell, Teledyne, and Vought Aircraft Industries. Several hundred further suppliers are spread across 40+ States. The trend towards U.S. procurement is set to increase and it’s not limited to the OEM-level. German Tier I suppliers also have a vested interest to improve their costs by purchasing from the dollar zone. However, getting access to the supply chain depends on varying factors and can be hard for new suppliers—from the United States or elsewhere.
In December 2013, the 22 German international and 16 German regional commercial airports recorded some 13.5 million passengers. This represents a growth of 2.2% over December 2012. In total, some 202 million passengers were counted at German airports from January to December. Domestic traffic was down by 3.6%, while European traffic grew by 2.5%. Intercontinental traffic saw a slight increase of 0.4% but fell behind the expectations. The number of commercial aircraft movements was stable with 152,000 departures and landings in December, but decreased by 2.6% to 2.2 million compared to the previous year.
Air freight grew for the third consecutive month to 361,000 tons, 2.1% more than in December 2012. Overall, air freight remained stable, with 2 million tons of outbound cargo and 2.3 million tons of inbound cargo in 2013. Despite the positive trends since April 2013, the conditions for air traffic in Germany continue to be volatile and are influenced by the political-economic development in Europe. The German airports are represented by the Association of German Commercial Airports ( ADV -- http://www.adv.aero ). Air traffic figures and rankings are published by ADV on a monthly basis. The annual figures for 2013 are included in the monthly report for December 2013 (http://www.adv.aero/fileadmin/pdf/statistiken/2013/12.2013_ADV-Monatsstatistik.pdf ). The report is only available in German but a breakdown of the passenger numbers by airport is included on page 9. On the following page of this report is a map of the international airports in Germany.
As described above, the current demand for U.S. aerospace technology in Germany is largely dictated by the order intake from Airbus and to a much smaller degree from Boeing with its 70 to 80 suppliers in Germany. This trickles down to the German Tier 1 suppliers, such as Diehl Aerosystems, Liebherr-Aerospace Lindenberg, MTU Aero Engines and Premium AEROTEC, depending on their work shares in the respective aircraft programs. The resulting demand for aerospace technology from Tier 2 and Tier 3 suppliers is hard to measure but the below-listed revenue figures may provide a clue, as do deliveries and orders. In 2013, Airbus delivered 626 aircraft to 93 customers, took in 1,503 net orders and recorded a year-end backlog of 5,559 aircraft. Of the delivered aircraft, some 493 were A320s, equaling a production rate of 42 per month, 108 were A330s and 25 were A380s. The strong commercial momentum will lead to a production rate increase to 46 aircraft per month in the second quarter of 2016. The ramp-up of production capacities has a direct influence on the current and future demand for aircraft parts to be used by Airbus and its suppliers in Germany as well as in other European countries.
Demand coming from German airport construction projects is closely monitored by the U.S. Commercial Service. Opportunities are relatively scarce compared to growth markets such as China and India. The saga of Berlin Brandenburg Airport Willy Brandt (BER) deserves a separate report. Located adjacent to the current Schoenefeld Airport south of Berlin, BER is intended to become the single commercial airport serving the German capital, Berlin, and the surrounding state of Brandenburg, an area with a combined 6 million inhabitants. With a projected annual passenger number of 27 million, it would become the third largest airport in Germany. Originally planned to be opened in June 2012, the project has been plagued by a series of uncharacteristic delays due to poor construction planning, management, and execution. Until February 2014, it had been hoped that a partial opening would be possible this year, allowing 10 take-offs and landings per day. The current status is that the airport will remain closed until 2016. This latest delay adds another year to a string of setbacks. It is blamed on several reasons, including the unplanned reconstruction of the northern runway due to stricter rules for noise protection. BER-CEO Hartmut Mehdorn criticized in a letter to the State of Brandenburg that the air transport authorities are complicating the situation.
Another project that looks more promising is the third runway of the award-winning Munich Airport. In June 2012, it was voted down in a city-wide referendum. With roughly 33% voter turnout (enough to make a quorum under Bavarian law), the results were 54% having voted against to 45% having voted for the new runway project. Decisions about the airport's future must be made by the German Federal Government (Bund), the Bavarian State Government and the City of Munich. On February 19, however, the Bavarian Administrative Court turned down 17 cases filed against the building of the new runway, rejecting the results of the referendum. Legally, there should be no further hurdles for starting the project which is an important signal for the future development of Munich Airport and the region as a whole. While the third runway project has been revitalized, a satellite extension to Terminal 2 was begun in 2012 and is due for completion in 2015.
Airbus Group – Hamburg, Germany http://www.airbus.com
On an OEM-level, the Airbus Group (formerly EADS) is the main competitor of Boeing Inc. Legally headquartered in Leiden, Netherlands, Airbus is the largest aerospace company in Europe and the second largest worldwide. The company develops and markets civil and military aircraft, as well as communications systems, space technology and defense-related systems. The 4 Airbus divisions Airbus (commercial aircraft), Airbus Defence and Space (formerly Cassidian), Airbus Defence and Space (formerly Astrium), Airbus Helicopters (formerly Eurocopter), all haves sites in Germany (29 in total). In 2013, Airbus generated revenues of EUR 59.3 billion compared to 56.5 billion in 2012, representing an increase of 5%. The order intake increased by 67% from EUR 131 billion in 2012 to EUR 219 billion in 2013 (based on list prices). The order backlog grew from EUR 566.5 billion (December 2012) to EUR 687 billion (December 2013). As of December 31, 2013, the Airbus Group (back then still EADS) employed a workforce of 144,061 people worldwide compared to 140,405 in the previous year. The headquarters were consolidated in Toulouse, France. Through abandoning the previous structure with Munich and Paris as dual centers of power, further weight was shifted to the French side. Which long-term effect this will have on the German production sites remains to be seen.
Diehl Aerosystems, Überlingen, Germany
Diehl Aerosystems is one of five corporate divisions of the Nuremberg-based Diehl Group, a family-run enterprise with 14,300 employees and revenues of EUR 2.8 billion in 2012. Diehl’s aviation activities are consolidated in four business units: Diehl Aerospace, Diehl Aircabin, Diehl Comfort Modules, and Diehl Service Modules. In 2012, the division had 3,700 employees and generated a turnover of EUR 800 million. The annual report for 2013 will be published in June 2014.
Liebherr-Aerospace Lindenberg, Lindenberg, Germany
Liebherr-Aerospace is a division of the family-run Liebherr Group, which generated revenues worth EUR 9.1 billion with 37,801 employees in 2012, up from EUR 8.3 billion with 35,333 employees in 2011. The division develops, manufactures and maintains aircraft air management systems, flight control and actuation systems as well as hydraulic and landing gear systems. Besides the division headquarters in Lindenberg, they also have a site in Toulouse, France. Liebherr-Aerospace achieved revenues of EUR 1,032.6 million up from EUR 913.4 million in 2011, together with Liebherr’s Transportation Systems division.
MTU Aero Engines, Munich, Germany
MTU Aero Engines is Germany's leading engine manufacturer and the largest independent provider of commercial engine maintenance services worldwide. Revenues posted in 2012 were EUR 3.4 billion, up from 2.9 billion in 2011. The current workforce is estimated to be at 8,500 people. On the civil aircraft engines side, MTU is mainly a partner or risk-revenue sharing collaborator to Pratt & Whitney (PW1000G 15%, PW2000 21.2%, PW4000G 12.5%, etc.), but also to Engine Alliance (GP7000), General Electric (GEnx), and to International Aero Engines (V2500). The 2013 figures will be announced in May 2014.
Premium AEROTEC, Augsburg, Germany
Premium AEROTEC (PAG) is a leading aerostructures supplier and a fully owned subsidiary of the Airbus Group with sites in Augsburg, Nordenham, Varel (Germany) and Brasov (Romania). The company manufactures fuselage components for the following civil aircraft programs: Airbus A320 (super shell, fuselage sections 15/17/19), A330/A340 (fuselage sections, floor beams, and titanium components), A380 (fuselage shells, floor structure, wing components), A350 XWB (fuselage sections 13/14/16/18, pressure bulkhead, floor structure, wing components), and Boeing 787 (aft pressure bulkhead). The company has more than 7,000 employees and generated revenues of EUR 1.5 billion in 2012.
Best prospects in the German aerospace industry are relatively evenly distributed across all levels of the industry. However, while it’s possible for U.S. firms to supply aerostructures on an OEM level, getting access to the supply chain on the first, second or third tier should be faster. OEMs and systems integrators constantly screen the market for capable suppliers. The overall best prospects include everything from commercial, business and GA aircraft, aircraft and engine parts, airborne equipment and systems, aircraft interiors, pilot controls and avionics, as well as composite materials, structural components, and forgings and fasteners. Potential suppliers should be AS9100-certified and/or NADCAP-accredited. Entering the market requires a long-term approach.
Subsector Focus: Helicopters
According to the German Federal Aviation Office (LBA), there were 769 registered helicopters in 2013. In terms of production, Airbus Helicopters (formerly Eurocopter) is the dominant player in the market. The company is headquartered Marignane, France, and has sites in Donauwörth and Kassel, Germany. Donauwörth, the German head office, is home to the final assembly process for the EC135, EC635, EC145; blades manufacturing for the combat helicopter Tiger; testing, research and prototyping; as well as the Systems Support Center for helicopter fleet of the German Federal Armed Forces, including the transport helicopters NH90 and CH-53. In 2013, Airbus Helicopters saw slower commercial momentum but took in 422 orders, down from 469 in the previous year. Some 33 orders were for the civil workhorse Super Puma. Deliveries amounted to 497, up 4.6% from 475 in 2012. The revenue split was 55% civil and 45% defense. Airbus Helicopters employs some 23,000 people worldwide, of which 5,800 are based in Donauwörth and 150 are based in Kassel. U.S. exports in to Germany the HS customs categories for helicopters under 2,000 kg (8802.11) and over 2,000 kg amounted to USD 17 million in 2012, while German imports to the United States reached USD 133 million. This huge imbalance might be due to revenue allocation inside Airbus Helicopters, which may impact the trade figures. However, the German aerospace magazine, Aerokurier, confirmed that the demand for new helicopters in Germany was somewhat limited in 2013, both on the civil and the defense side. The German Air Force operates some 60 Sikorsky CH-53 and 3 Cougar AS532 helicopters. The most notable current programs are the Tiger (UHT), made by Airbus Helicopters, and the transport helicopter NH90, made by NH Industries (NHI). In March 2011, the German MoD agreed with the manufacturers to reduce the orders from 122 to 82 NH90s and 80 to 57 UHTs as part of the reorientation plan for the armed forces. Some 18 of the NH90s will be converted to the maritime variant Nato Frigate Helicopter (NFH). The German Helicopter Association (DHU) provided the following breakdown of non-military helicopters by application areas: Federal and State police (120), air rescue (110), offshore and wind farms (10-15), personal transport / two-engine VIP (70), aerial work (130). The U.S. content on Airbus Helicopter models is substantial but not as high as the content on commercial aircraft. Honeywell Aerospace, for example, is listed as an engine supplier. The EC135 uses collision avoidance systems from Avidyne, full authority digital controls from Goodrich Engine Control Systems, engine air filters from Pall, and rotor drives from UTC Aerospace Systems. Last not least, a quick glance at the UH-72A, Airbus Helicopter’s EC145-based, American-built solution for the U.S. Army utilizes systems, components and hardware from numerous U.S. suppliers, including CAE, Goodrich, Keith Products, NORDAM and Sikorsky.
Germany's regulations and bureaucratic procedures can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters. Complex safety standards, not normally discriminatory but sometimes zealously applied, complicate access to the market for many U.S. products. U.S. suppliers are well advised to do their homework thoroughly and make sure they know precisely which standards apply to their product and that they obtain timely testing and certification.
For more information, please see “Chapter 1: Doing Business in Germany – Market Challenges” and “Chapter 5: Trade Regulations and Standards – Trade Barriers”: http://export.gov/Germany/MarketResearchonGermany/CountryCommercialGuide/index.asp
October 28-30 | Frankfurt
Targeted aerospace event designed to connect buyers and technology experts from OEMs and primes with manufacturers from the entire supply chain. Offers a professional B2B platform enabling all exhibitors to initiate meetings some 6 to 8 weeks before the event through a pre-organized matchmaking process that is ideally suited to initiate new business co-operations and to prepare conversations with procurement, supply chain and technology managers, as well as developers and engineers. Accompanied by an International Aerospace Congress spanning 5 topics (Supply on the Wings, UAV World, Heli World, Space World, and Aerospace Sensors & Testing). Attracted some 5,000 trade visitors from 45 countries, plus 500 congress participants and 400 companies that took part in 6,300 B2B meetings in 2013. The targets for 2014 are 650 companies and 10,000 meetings.
Aircraft Interiors Expo 2015
April 14-16 | Hamburg
World's largest exhibition for airline interior design and airline cabin systems engineering and launch pad for a wide range of product types from cabin management systems, fasteners, finishing, flooring, galleys, in-flight entertainment, interior paints, lighting, seating, repairs, safety, wiring, and more. The show attracted over 500 exhibitors from 26 countries and some 9,000 trade visitors from 90 countries in 2013. Some 20% of the exhibitors were from the United States.
April 15-18 | Friedrichshafen
International trade fair for general aviation and ideal stepping stone to enter the European market. The range of exhibits comprises business jets, single and twin-engine aircraft, light aircraft (UL, VLA, LSA), motor gliders, kit planes, helicopters, propulsion systems, components, avionics, and more. The show attracted 600 exhibitors from 30 countries and 35.000 visitors from 40 countries in 2013. Some 50 of the exhibitors were from the United States.
Inter airport Europe 2015
October 6-9 | Munich
World’s leading exhibition for the airport industry with a comprehensive range of equipment, technology and services for ground handling, terminal operations, airport IT and airport design, the exhibition. The show is held every two years in Munich, Germany and caters to a global audience of industry professionals from airports, airlines, air cargo carriers and aviation-support. It attracted 640 exhibitors from 37 countries and more than 11,900 visitors from over 110 countries in 2013. Some 55 of the exhibitors were from the United States.
German Aerospace Industries Association (BDLI):
German Airport Technology & Equipment:
HANSE AEROSPACE e.V.:
ALROUND (Association of Aerospace-oriented SMEs in Germany):
German Helicopter Association (DHU):
U.S. Commercial Service Contact Information:
Mr. Moritz v. Holst
+49 (89) 2888-754
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