Aviation Industry Companies Analysis

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Aviation industry

Aviation Industry, now a multi-billion industry owes its rise to the Man’s fascination for the Birds swinging, floating and swapping their wings high up in the sky which induced in their spirit to touch the unlimited sky’s beyond their imagination could reach. To turn their dreams into reality they try to attach feathers to their arms and take a jump towards the sky, naturally they fall, still their willingness instigated them to develop something with the help of which they can also beat the birds and so their inventions and discoveries lead them to the biggest ever Aviation Industry with numerous planes taking on the people to far away places in the shortest ever possible time.

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In 1485, Leonardo Da Vinci invented the Ornithopter flying machine just to show how man can fly and this machine later led to the invention of helicopter and conceptualized his ideas in his 100 drawings illustrating theories on bird and mechanical flights. (Remoortel, Time Messagie, online source, Para. 5).  In 1783, Joseph and Jacques Montgolfier brothers also invented first hot air balloon and alighted sheep, rooster and duck as first passengers in this flight. It climbed to a height of about 6,000 feet and traveled more than one mile. After this first success, brothers on 21st November send Pilatre de Rozier and Francois Laurent men in hot air balloons at a distance of 9 km (5.5 m) over Paris. (Spartacus, Virtuous School, Para. 1-2).

In 1799, Sir George Cayley became Father of aerodynamics. Cayley experimented with wing design, formulating the concepts of vertical tail surfaces, steering rudders, rear elevators, and air screws. For over 50 years, George Cayley made improvements to gliders for man to fly naturally. ( Sir George Cayley, online source). Then on December 17, 1903 at 10.30 a.m. with five witnesses in wind swept sand dunes on Kill Devil hills, four miles South of Kitty hall, North Carolina, Orville and Wilbur Wright made their first flight in their own invented machine. In Orville Wright’s own words, “This flight was the first in the history of the world in which a machine carrying a man had raised itself by its own power into the air in full flight, had sailed forward without reduction of speed, and had finally landed at a point as high as that of which it started.” ( All Star Network, The Beginning Years- level 1).

            Later in 1909, XI monoplane crossed the natural and political barriers for the first time when Louis Bleroit flew it across the English Channel, and then the danger started looming large on the British who were relying solely on Royal Navy. (All Star Network, The Beginning Years- level- 1). But the first seaplane was built and flown by Henri Fabre in 1910 at Martigues, and he was followed in 1911 by Curtiss of the United States who fitted floats to one of his sturdy pusher biplanes and flew it off the water. On 28th March 1910, Hydroplane was flown by Frenchman Henri Fabre who used 50 horsepower Gnome rotary engine, which flew at 1650 feet above water. (All Star Network, The Beginning Years- level- 1)

            The earlier planes invented were only used for recreation and pleasure and gradually their use for commercial purpose began to be soon realized. In 1932, the first Beechcraft Staggerwing was built which had enclosed cabin, staggered wings and high powered engine and with this engine, thus began the Journey of the Aeronautics Industry when Walter H. Beech launched the Beech Aircraft Corporation. And since 1945, Airplanes began to be widely used as a business tool. The Beechcraft Bonanza proved to be most reliable airplanes in the industry, and till now The Beechcraft Super King Air 200 is being used for business purposes.(Wikipedia Encyclopedia).

            Boeing Aircraft and Aerobus are the leading aircraft manufacturers in the today Aviation Industry.( All Star Network, Aviation Today, Level 1). And others in Competition are  Boeing, Airbus, Northrop Grumman, Lockheed Martin, Finnmecannica, BAE Systems, Textron (formerly Bell Helicopter), Raytheon, Rolls Royce and Pratt & Whitney. (McCue, Business Journal, August 21. 2006),

            The second largest Aerospace Company after Boeing is The European Aeronautic Defense and Space Company (EADS). It was formed on 10th July 2000 by the merger of Aerosoatiale Matra of France, Construcciones Aeronautics SA (CASA) of Spain and DaimlerChrysler Aerospace AG (DASA) of Germany.  The main task of the company is to develop and market civil and military aircraft along with missiles, space rockets and several other systems. EADS was fully established into an integrated company on 12th July 2001 with the EADS holding 80 % of share and its partner in Airbus BAE Systems holding 20 percent of shares. Again in April 2001 it agreed to merge its Missile business with that of BAE systems and Alenia Marconi systems and thus was formed MBDA. On December 2001, it took 31 % share of the new company. Again on 16th June 2003, EADS attained 25 % share of BAE in Astrium, the satellite and space system manufacturer and became its sole owner. It renamed the company EADS Astrium. EADS has Airbus division, Eurocopter Division, Military Transport Aircraft Division, Defense and Security Division systems, Fire Control, EADS North America among others. It has consortium with Eurofighter, two joint ventures with MBD and ATR, majority interest in Airbus and Domier GmbH and investment in his associate Dassault Aviation. (EADS, online site).

            EADS prides itself of becoming a global leader in fields of aerospace, defense and many other related services.  And now in its group are the members, Airbus, Eurocopter-which is the largest helicopter supplier in the world and EADS Astrium which boasts of itself of being a European leader in Space programs. It is also manufacturing A400M military transport aircraft in collaboration with MBDA. It has a large network of 30 offices.

As per report of EADS on 7th March 2007, EADS and NV are registered in the Frankfurt, Madrid and Paris Stock exchanges. According to the Dutch company Law, EADS generated revenue of € 39.4 billion in 2006. EADS Security and Defense Solutions has as customers,  HQ Air Force Communications Agency, Air Force Reserve Command, 45th Medical Group, United States Army, Department of Defense, Kinetic Concepts, Inc., HQ AMR , Nellis AFB, HQ AETC ,AFPC CSC, MultiMax  and Harris Corporation and among its major customers are International Lease Finance Corporation, Malaysian Air System and Emirates Airlines etc. The biggest market is US with UH 72-A Lakota. For EADS Telecom North America based in Dallas, major customers are Federal Reserve Bank-New York, Hertz, Hong Kong Jockey Club, Air Products, Microsoft, New York Daily News, Pacific Gas & Electric, Sprint, State of Texas Capitol Complex, Temple University and Hospital, and Western Financial Services. The major Customers of Airbus are Singapore Airlines, which is going to buy 10 A380s and has an option to buy 15 more. Qantas Airways, based in Australia has ordered 12 A380s, but have to wait. Emirates is one of the biggest and most Important A380 customer. Among the Asian Customers are Royal Thai Air Force, the UB Group of India, and Skytraders of Australia.

The contribution of EADS in the operating profit in 2006 had been €649 m much below the previous year which was €757 m. (EADS, Online website). There has also been visible sign of the growth of EADS commercial aircraft activities which is the result of the growth in Gross Domestic Product due to the increase in demand in the air travel market. Fluctuation in the currency exchange rate is a biggest hurdle that can be faced by EADS. EADS revenues are generally measured in U.S. Dollars whereas the costs are measured in Euro and Pounds Sterling so according to their hedging portfolio which covers its cash flow only, the changes that can occur in relation to Euro can create an adverse effect on the EURO value of EADS and to a lesser extent on EBIT.  (EADS Online website).

The shares of EADS fell by about a quarter in value in 12 months, and showed a loss of 4.73% to € 22.57 in trading in a Paris market. Although net profit of EADS shows an increase to €99m as compared to €1.676bn in 2005, it incurred loss of 86 % in operating profit to €399m, as reported by Mcgregor BFA. (AFP, online News, Para. 7) .  EADS owes this loss and fall in share prices to the delay in the deliveries of Airbus A 380.  The result of this delay has been drastic, the leading clients of A 380 International Lease Finance Corporation and Malaysian Air System, who ordered six A 380s, out rightly cancelled some orders. (Lifson, Clear Politics, Para. 17). Airbus suffered an operating loss of €572m in 2006 from an operating profit of €2.3bn in 2005. This led to the speculation of job cuts that can lead to further precipitate the crises. (AFP, Yahoo News Service, Para.1). The speculations are rising in the air that Airbus may have to face another loss in 2007 which is reciprocated by the European Aeronautic Defense and Space Company. Immediately followed were accusations on Noel Forgeard, CEO of EADS by BAE and along with that ensued a strangulated relationship between EADS and BAE who believed that the announcement of the delay was to devalue their share and in return filed a law suit against EADS on the charge of failing to inform the investors about the financial implications of this delay. This was not enough its EADS chief Noel Forgeard and air bus CEO Gustav Hembert announced their resignations on 2nd July 2006. (PlaneBuzz, online news service).

And on 28th Feburary 2007 in his restructuring plan, CEO Lois Gallois decided to cut 10,000 jobs that lead to Airbus Unions in France to go on strike. (Wikipedia Encyclopedia).  As reported by AFP, Gallois again went further to lay emphasis on the implementation of the “Power8”, and the need of the hour as stated by Gallois is to streamline the production by divestment of three factories, forming a network of partners and along-with it to integrate Airbus as a complete company but not as a partnership between four national companies. (AFP, Yahoo News Service, March 9, 2007).

                                                               WORKS CITED

1.         “Airbus crisis deepens with loss.” Internet (March 9, 2007) Available:

http://www.fin24.co.za/articles/companies/display_article.aspx?Nav=ns&lvl2=comp&ArticleID=1518-1783_2081251, March 23, 2007.

2.         “Airbus crises deepens plunges into losses” AFP (Agence France Presse) Internet (March 9,   2007) Available:  http://news.yahoo.com/s/afp/20070309/ts_afp/franceaerospace_070309172850,

       March 23, 2007

3.  “EADS: Annual Report & Registration Document 2005.” Internet Available:
http://www.reports.eads.net/2005/ar_2005/en/book2/3/1/1.html, March 23, 2007

4.       Lifson Thomas. “Airbus Agonistes” Real Clear Politics Internet (June 28, 2006) Available:

       http://www.realclearpolitics.com/articles/2006/06/airbus_agonistes.html, March 23, 2007

5.    Montgolfier Joseph and Jacques “History of Aviation” Spartacus. Internet. Available:
http://www.spartacus.schoolnet.co.uk/AVmontgolfier.htm, March 23, 2007

6.        Remoortel Van Helena & Messaige Tine “Lionardo Da Vinci” Internet. Available:

        http://mathsforeurope.digibel.be/Leonardo.html, March 23, 2007

7.       “Sir George Clayey, 1773-1857” Carroll Gray. Internet. Available:

        http://www.flyingmachines.org/cayl.html, March 23, 2007

8.    “The Beginning Years – Level 1” All Star Network Internet. Available:

        http://www.allstar.fiu.edu/aero/history1c.htm, March 23, 2007

9.        Wayne Leslie & Landler Mark “At EADS, a pledge to heal rifts” International Herald

        Tribune: Business Internet ( July 19, 2006) Available:

        http://www.iht.com/articles/2006/07/19/business/eads.php, March 23, 2007

10.   “EADS”  Wikipedia Encyclopedia Internet ( Last Modified: March 20, 2007) Available;

        http://en.wikipedia.org/wiki/EADS

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