At the ADS CEO Briefing, held earlier this month ahead of the ADS Annual Dinner, we ran our first FINN Sessions panel, debating the key issues affecting aerospace companies. Taking part were Scott McLarty, VP UK & Malaysia, Spirit AeroSystems; Colin Smith, Chairman of the Aerospace Growth Partnership & President, ADS; and Paul Everitt, CEO, ADS. First up for discussion: Brexit.
While acknowledging the undeniable threats Brexit poses, the panellists focused on the industry’s positives and proactive methods for both finding a long-term resolution and taking action during uncertain times.
Paul Everitt said: Obviously, Brexit is a big challenge for industry, and particularly the global and European aerospace industry.”
“But,” he urged, “Let’s not take too downbeat a view.”
He said the focus needs to be on how aerospace as an industry can “get the best possible deal to ensure that the growth that we’ve seen in recent years continues”.
Key factors in this, he said, are “staying part of the European Aviation Safety Agency, making sure that we have access to the widest pool of talent and, from the UK point of view, that we get to access to some of the collaborative R&D programmes that our colleagues in Europe will and that we have been part of.”
Life goes on
In the immediate term, the priority is ensuring a transition arrangement, Everitt said, commenting: “We’ve been very clear with government that to understand what our new relationship with the rest of the EU is going to be will take some time. And even when we understand what that new relationship is going to be, there’s going to be a significant burden for industry to transition from where we are now to what that new relationship is going to be. So the focus for us is to ensure that we get an early agreement.”
And, he said: “We now need to see that formalised quickly…because what we are finding is that life goes on. Companies are already taking decisions that have a life well beyond March 2019. They are already beginning to factor in what they think might be the circumstances, and it seems to us the longer we have before we can provide some level of certainty, the more likely companies will put in place their own contingency measure which may well not be particularly helpful to the UK.”
Everitt concluded: “We’ve been very clear that ‘no deal’ is the worst possible outcome.”
He added: “The reality is, it’s in no one’s interest that there is not a sensible deal. It’s just a question of understanding what the terms of that are going to be.”
ADS recently set out five steps for UK companies to take to prepare their business for Brexit, despite current uncertainty.
The US view
Scott McLarty is responsible for the UK and Malaysia at Spirit AeroSystems, although the company itself is American.
He told attendees: “I don’t think the American HQ is particularly concerned by Brexit. I think we’re more interested in how it affects customers like Airbus. For Airbus, they have certainly lobbied pretty hard, and I agree with that — 95% of our business is airframes, wings and it goes to [the Airbus plant in] Broughton. If they have to pay export tariffs that then affects the future of that site, which impacts on the supply chain and being a part of that supply chain.
“It’s fundamental that we don’t get tariffs and that’s a strong message from us. I think our HQ would push very heavily on ‘How do we grow our Airbus business, being predominantly 75% a Boeing business today? How do we make sure we protect the UK Airbus division?’. That’s probably the most important message for us on Brexit.”
Labour is also a key issue, he noted, saying that in its engineering and R&D investments, Spirit has invested heavily in people, many from outside the UK.
He said: “That would be a significant blow to us in terms of intellectual property, I think, and our people and skills from an engineering side of things. That’s a key risk; in the US we’d be really concerned about that.”
A good time for aerospace
McLarty summed up: “The appetite is absolutely still there for investment. We see a strong, industry, a strong appetite for investment, and actually it’s a good time to be in the aerospace industry, so we don’t really see any risk, other than the Brexit risk. That’s a medium concern to us, but I still think we can work our way through that.”
Look out for more highlights from the event and FINN Sessions coming soon.
The FINN Sessions will provide a forum to share and discuss the major topics and trends affecting the aerospace industry today and in the future. Submit your proposal for the FINN Sessions at Farnborough International Airhsow 2018 now.