Aerospace, advanced manufacturing & rail

6 min read

Aerospace

This is the latest weekly update from Santander’s aerospace, advanced manufacturing & rail team on how the coronavirus pandemic is affecting our clients and the sector as a whole.

Areospace

Assessing the challenges ahead

Santander is working closely with partners and customers from across the aerospace, advanced manufacturing and rail sectors as they struggle with the challenges posed by the coronavirus crisis – and focus on emerging opportunities.

We recently ran an aerospace sector webinar, hosted by John Carroll, Santander UK’s Head of International & Transactional Banking, which was aimed at exploring the current and expected impacts of the pandemic as well as how the industry can look to recover.

The webinar also featured Dominic Cartwright, CEO of Gardner Aerospace; Paul Everitt, CEO of the ADS Group trade body; Mike Mueller, Senior Vice President of the Aerospace Industries Association of Canada (AIAC); and Halil Bedevi, Santander’s UK Head of Aerospace, Defence, Rail & Advanced Manufacturing.

The key topics discussed were:

  • The main focus on cashflow, survival and stabilisation, as businesses look to meet reduced demand levels.
  • The outlook for demand over the next few years, as well as the move towards greater regionalisation of supply chains.
  • The ongoing importance of research and development (R&D) alongside innovation and investment in technology to maintain the UK’s international competitiveness.
  • The importance of collaboration in supply chains and with original equipment manufacturers (OEMs) for aerospace manufacturers.
  • The pressing priority to increase flight levels to aid recovery, despite the fact that climate change and decarbonisation remain of utmost importance.

Dominic Cartwright at Gardner Aerospace said lockdowns around the world mean his company is currently operating at below 50% in the UK, 0% in India, and around 50%-60% in France and Poland. This suggests the crisis is likely to have a far deeper impact than previously envisaged. To listen again to the webinar, click here.

New figures echo this message: flights are reportedly down 87% on January 2020 levels, while around 60% of the global aircraft fleet is currently thought to be grounded. International Air Transport Association (IATA) predicts a 48% fall in traffic this year, while the Royal Aeronautical Society expects the airline ecosystem to shrink to half its pre-crisis size.

The defence and space side of the industry is faring better. However, reports suggest that many R&D staff have now been placed on furlough, while investment decisions have been frozen until further notice.

The picture in advanced manufacturing is mixed.  Businesses which supply to the civil aerospace and automotive sectors face significant challenges. However companies which work with industries such as electrical and electronic appliances, defence, space and rail, have seen less dramatic impacts and are likely to recover more quickly.

Meanwhile, Welsh train manufacturer CAF is set to reopen its facility in Spain, while Talgo has already restarted production. It still has plans to open a factory and R&D centre in the UK in the near future. Bombardier last week revealed its plans to ramp up activity in Britain.

 

Manufacturing sector news

Industry body MakeUK has been working with colleagues in Europe, sharing intelligence on how lockdown policies around the continent have affected the manufacturing sector. The organisation will monitor closely the progress in countries such as Denmark and Austria which have started to lift restrictions.

Also last week, MakeUK’s CEO Stephen Phipson joined Santander’s Head of Manufacturing Paul Brooks on a podcast to share his thoughts on the current challenges facing the sector. Click here to listen again.

Stephen Phipson welcomed the Government’s confirmation that the manufacturing sector should remain open during the lockdown period but stressed that further state support was likely to be necessary over the weeks and months ahead.

The first hospital ventilator designed specifically for coronavirus patients has gone into production at the Advanced Manufacturing Research Centre in north Wales. Created by the VentilatorChallenge UK consortium, initially 5,000 ventilators – based on a model made by the Oxfordshire company Penlon – will be made. Staff from Airbus and Siemens have built assembly lines at the centre, while design skills have been supplied by firms from across the country.

The Chairman of one of India’s largest conglomerates has said that global manufacturers may need to reassess their supply chains in the wake of the coronavirus crisis. Anand Mahindra of the Mahindra Group said: ‘What people thought was a global supply chain was a Chinese supply chain,’ with the disruption caused by the pandemic only serving to highlight the importance of Chinese firms as a provider of inputs to factories across Asia and around the world. As a result, businesses are likely to move away from single-sourcing and build out their choice of suppliers, even if this results in higher costs and some loss of efficiency.

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