Summary
Russia's VSMPO-Avisma , the world's largest titanium producer, has postponed a major increase in production until 2014, two years later than planned, due to the financial crisis, a company official said. Looking beyond the corporate-speak however, is the massive upset to titanium draw-down plans caused by the A350 and 787 delays.
Analysis
While there remains a certain State Dept reticence about the US' buying Russian titanium, on political as opposed to qualitative grounds, of course, this latest very interesting example of how far-reaching are the implications of the delays to the two most prominent upcoming commercial aircraft programs of the next decade, strongly suggests there is an increasingly serious shift in emphasis at work here.
Worldwide.China, Russia, Brazil, Canada, Japan and Europe wouldn't have an aircraft-manufacturing industry without taxpayer funding. Others have tried and failed (remember Indonesia?) The case for the US is not clear-cut either.
It seems that :whether you consider Embraer, Bombardier, AVIC, Sukhoi, Mitsubishi, Boeing, Airbus, Finmeccanica, BAE Systems, GKN, Rolls-Royce, EADS, Pratt & Whitney, General Electric, Safran, Northrop Grumman, MTU, Lockheed Martin or an absolute host of others across virtually every supply chain and with the possible exception only of such non-commercial, elective areas as GA or bizjets (neither sector being exactly in the pink -- there won't be so many free sausages at the next NBAA kick-off breakfast, that's for sure), governments, politics, national and international regulations, competitive/anticompetitive oversight, WTO (a global organization that takes an incredibly long time to confirm its fundamental uselessness), alliances, mergers, acquisitions etc, govt-backed finance from ECAs to special-funds to blatant taxpayer handouts, the commercial aerospace industry is being regulated to death.
So while there are still occasional voices in favor of more regulation, and to be fair these voices are not heard quite so often these days although the rationale for that is fairly obvious as governments only interfere in an upturn when they sniff a percentage to be gained unless of course they are forced as recently to man the fiscal lifeboats and bail the hell out of everything. For a percentage, of course. Civil servants don't take pay-cuts.
Commercial aerospace is being homogenised to death. How many regular mom-and-pop travelers can honestly tell whether they're sitting in an A320 or a 737? That's why product differentiation is becoming an increasingly bipolar concept -- on the one hand price (Ryanair, easyJet, AirAsia, Southwest, jetBlue etc) or onboard facilities (Singapore Airlines, Emirates, Virgin Atlantic, Japan Airlines, & co.). Peanuts doesn't cut it, guys.
And when all's said and done -- and there's probably a thousand further examples of regulations which are strangling this industry -- I strongly suspect 99% of all travelers would rather have a free cup of coffee once they've found their seat than watch TV news, listen to 1,000+ 'entertainment' channels, muck about with selective WiFi (security concerns notwithstanding), or have their eyes glued to the live in-flight cameras which can only ever pose more scary questions than they can answer.
Here's a market for the A380 that Airbus should consider: lower deck, government-regulated; Upper deck, airline-run...
Doug McVitie consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
