The dominant player in Belgium’s aerospace sector, Wallonia is out to prove at Le Bourget this year that it has what it takes to remain competitive in the face of increasing demand, despite the value of its exports falling dramatically due to the global financial crisis.
The recent financial climate has been unkind to the aeronautical sector, with orders for both civilian and military aircraft depressed in comparison with pre-crisis years.
But it is with renewed zeal that Wallonia – the French-speaking southern region of Belgium – will be taking its offering to the Paris Air Show at Le Bourget in search of new opportunities and partners.
For a region of its size, Wallonia has a lot to offer to aerospace investors. In the past decade, there have been 25 major investments in the sector with a total value of just over €226m. Major investors include Safran (an investor in Techspace Aero), Thales, Pratt & Whitney, Vitrociset and AMI Metals. And while Wallonia lags behind the economy of Flanders – the Flemish-speaking northern region of Belgium – in other industrial sectors, in aerospace it is almost certainly the more dominant player – accounting for about 70% of the Belgian industry (which is in itself the fifth largest in Europe).
Setting out its stall
At Le Bourget this year, 39 Walloon companies will be displaying their wares as against 15 Flemish companies. Many of these are smaller, tier-two contractors providing parts and components that include everything from composite structures, avionics and testing systems, airframe and wing structures to turbine technologies.
As a sector it has a good story to tell: in 2009, for example, it provided more than 8000 jobs and generated a cumulative turnover of €1.3bn. But the industry knows that there is little room for complacency. In 2010, the value of Walloon aeronautic and space industry exports was €670m – down from a peak of €930m in 2008. Clearly, this reflects the slowdown in demand that was a direct consequence of the financial crisis – and is in keeping with the pattern in other regions and countries. The challenge for Wallonia is to prove that it remains competitive as demand steps up.
At a briefing in the Walloon capital of Namur on May 17, Marc Humblet, president of the Walloon Aerospace Association (Entreprises Wallonnes de l’Aéronautique), outlined some of the ambitions that the industry has for Le Bourget and beyond – and also the role that the public purse can play in creating new opportunities for companies to compete on the world stage.
Certainly, he said, Walloon companies will be interested in finding suitable subcontractors in cheaper markets – for example, in the Far East. Just as importantly, they will be interested in exploring new opportunities within big programmes such as the COMAC C919, which is due for roll-out from 2014.
Wallonia’s policy of developing industry capacity through grants and the creation of clusters means that it has been able to participate in the Airbus 320 NEO and Boeing Dreamliner 787 programmes, through the manufacture and supply of composite materials and also fuselage components. The experience Wallonia has gained, he pointed out, will put it in good stead for other, comparably sized programmes (adding that access to military programmes such as the A400M – the Airbus airlifter – is dependent in large part on the Belgian government’s decision to buy into them).
Walloon companies already have strong associations with many leading brands in the global aeronautics industry. In fact, the Walloon aerospace industry – at least a century old – really took off in the 1970s, by which time more than 200 companies were manufacturing parts for airframes, engines and other specialised equipment. The 1980s witnessed the arrival of a landmark contract for the manufacture of F-16s licensed by Lockheed Martin (still a very important association for the Walloon industry); other companies and aircraft benefiting from the input of Walloon subcontractors include Airbus, Boeing, the A400M, Rafale and the Falcon 7x among others.
Key market sectors for aeronautical companies include engine manufacturing, airframe and structures, maintenance repair and overhaul, and services including design and optimisation, industrial processes and aeronautics training.
The hidden hand behind the Walloon economy is the ‘Marshall Plan’, which provides financial assistance to companies that need an extra push to participate in international bids and tenders, but also engineers synergies between players in the commercial sector of all sizes and academic and research institutions. On this front, Wallonia has the advantage of four universities situated in the region (the Catholic University of Louvain, the University of Liège, the University of Mons, and the University of Namur) producing aerospace research and graduates.
“The result is that whereas efforts might otherwise be atomised or duplicated, now companies know where and how to partner with others,” one industry player told fDi Magazine. Leading the charge on behalf of the sector is Skywin, which describes itself as a combination of more than 100 public and private companies and research centres – or, as they say in Wallonia, a ‘Pôle de Compétitivité’ creating synergies between its members so that they can jointly maintain critical mass in a global industry.
Skywin coordinates closely with the Wallonia Foreign Trade and Investment Agency (AWEX), which has offices around the world and aims to promote trade and attract foreign investment. It has set itself the task of increasing the profile of Walloon businesses, increasing exports by 10% per year, and creating financial incentives for companies to export (including export credit, country risk cover and assistance with finance outside of Belgium).
This year, Skywin and AWEX will recommend that the region as a whole increases its research and development budget to €29m – about two-thirds of which would be government spend, and the remainder contributed by the industry itself. As Mr Humblet remarked, changes in global supplier dynamics demands that research and development – particularly in areas such as engines and composites – is essential if the industry is to continue to grow.
And growth will be essential if the industry is to weather an inclement – though improving – global economy, and the shifting winds of global supplier dynamics.
The cost of this report was underwritten by AWEX. Reporting and editing were carried out independently byfDi Magazine.