AERONAUTICAL RESEARCH AND TECHNOLOGY
A STRATEGIC IMPERATIVE FOR EUROPE
Position Paper
June 1997
Aeronautics is a major economic, military and social influence on world development and a matter of strategic importance to Europe. The design and manufacture of aeronautical products employs, within the EU, around 350,000 people directly and very many more indirectly, involving more than 7000 firms throughout the Union. It creates jobs of high quality and an extensiva range of technology which benefits other industrias, and also confers a valuable degree of independence in the procurement of defence equipment. The industry exports more than half its tumover to areas outside the EU, earning about 20 billion ECU annually and producing a positive trade balance of about 8 billion ECU per year.
Aeronautics is a global, intensely competitive business in which technology plays a vital role. It is dominated by the industrias of the USA and Europe, with significant capabilities beginning to emerge in the Pacific region. Every nation which now has a major aeronautical capability has a substancial infrastructure and technology base that reflects sustained investment by industry and government over many years. The European manufacturing industry is in total about half the size of the US industry but, as its export performance shows, it can compete effectively with the US over much of its product range. it is a success and one of Europe's most important industrial assets.
It faces, however, very strong threats to its continued success. The greatest of these comes from the USA, where mergers have created a powerful and coherent industry that is backed by a long-standing pattern of government support, reflecting the view of successive administrations that aeronautics is of vital strategic importance from both economic and military standpoints. The US administration has recently reaffirmed its commitment ".. to ensure continued leadership in aeronautics .." and the current level of US govemment support for aeronautical research and technology acquisition is estimated to be approximately four times the equivalent total support by EU govemments. Investment in aeronautícal R&T by European industry also falls well below that in the USA. The cost of R&T is small compared with the cost of launching a new project but the long-term consequences of its neglect are potentially devastating.
The Confederation of European Aerospace Societies, which is an association of professional bodies of eight nations with substancial aerospace interests - France, Great Britain, Germany, ltaly, The Netherlands, Spain, Sweden and Switzerland - believes that the present disparity in R&T investment between Europe and the USA puts the long-term future of the European aeronautical manufacturing industry at serious risk. Unless the European governments and industry take corrective action, it is inevitable that the aeronautical tecnology base, and with it the manufacturing industry, will become progressively less competitive, with major adverse consequences for employment and the European balance of trade.
To ensure the continued success of the industry, which CEAS regards as an imperative for Europe, the following measures are needed:
This short paper has been produced as a result of widespread, and increasing, concern in the CEAS community regarding the future competitiveness of the technology base available to the European aeronautical industry, and to European governments and authorities for public interest purposes.
Although this is by no means the first paper to address this issue, it is perhaps the first to represent such a wide community of interests. The constituent bodies of the Confederation of European Aerospace Societies represent not just one area, but the whole range of civil and military aerospace interests - operators, regulatory and other public authorities, major manufacturers of both airborne and ground-based products and their supplier base, air lawyers, research establishments, universities, etc. CEAS is an association of professional bodies of eight nations with substancial aerospace interests; France, Great Britain, Germany, ltaly, The Netherlands, Spain, Sweden and Switzerland.
This paper aims to outline the significance of technology within the aeronautical context, to discuss the European situation in relation to the global scene, and to indicate the actions considered to be necessary to avoid a decline in European competitiveness.
The aerospace world comprises the related, though in many respects distinct, fields of aeronautics and space. Each operates in its own technological, political and business environment and therefore merits specific consideration. This paper is concemed with aeronautics, which currently accounts for the majority of European aerospace business and is very likely to do so for the foreseeable future.
Within aeronautics, a contrast is often drawn between the civil and military sectors; the political environments and market forces differ, and there are differences of technological content and emphasis. At the same time, however, there are powerful synergies, with an extensiva basis of common or 'dual use' technology and many opportunities for technology transfer and product adaptation between the civil and military sectors. The paper therefore considers both in general terms.
The above matters are extensive and complex, and a full treatment would inevitably be very lengthy. This paper, however, has been kept as short as possible. It is more in the nature of a summary (supported by references to other relevant papers) of the important factors and arguments, leading to Conclusions and Recommendations (Section 7).
Aeronautics is a major feature of the modern world. It has crucial roles in both peace and war, and this ensures that the interests of governments, as well as normal commercial influences, impact upon it. In addition to this relationship with governments, the aeronautical design and manufacturing industry has a number of other distinguishing characteristics, which may be summarised as follows:
The investment required to launch a major new aircraft or engine project is large in relation to the assets of even the largest firms, and is still on an increasing trend.
For industry-financed projects, the period of financiar exposure is long; typically 12 to 15 years from project initiation to breakeven.
The industry is highly technology-intensive, both as regards its products and its processes. The possession of a sound technology base, competitive with that available to others, is therefore an essential requirement to achieve a saleable design, to minimise the technology-related risks associated with the project, and to manufacture the product at competitive cost.
Within Europe, the design and manufacturing industry for aeronautical products employs around 350,000 people directly, and very many more indirectly. It involves over 7000 firms throughout the EU(1), creating high-quality jobs and an extensive range of technology which pervades and benefits other industries. The strong capability of the industry confers a considerable degree of independence in terms of defence equipment supply, so enhancing the political freedom of action of European states. The industry is also a substancial provider of civil aviation products to world markets. Exports of civil and military aeronautical products to areas outside th e EU earn about 20 billion ECU annually, representing over 50% of its turnover and producing a positive trade balance of around 8 billion ECU per year.(2)
It is important to recognise that the European aeronautics industry is not devoted simply to the production of European aircraft, incorporating the products of the European engine and equipment manufacturers. The three major sectors of the European industry - airframe, engine, and equipment - are each operating in the global market. European aircraft often use US engines or equipment, and vice versa. Furthermore, collaborative arrangements, either based purely on industrial agreement or also involving governments, are not confined to Europe. Partners are sometimes in the USA or elsewhere. The European industry thus makes its contribution to the European economy through a variety of worldwide engagements, as well as via projects centred in Europe.
Although constituting a major EU asset, the European industry faces very strong threats to its continued success. Foremost among these is from the USA, which possesses the world's largest and most capable aerospace industry, which has around twice the number of employees, and twice the turnover, of the whole EU aerospace industry. As a military superpower and a large country flanked by great oceans and so requiring an extensiva domestic and international air transport system, the USA has large home markets for both its military and its civil aeronautical products. These in turn provide a wide and firm base for export business. The US government is strongly supportive of its industry and actively fosters the synergy between the military and civil sectors. For example, under the auspices of the Executive Office of The President, the US Administration has reaffirmed its commitment, "...to ensure continued US leadership in aeronautics..." in a National Science and Technology Council paper 'Goals for a National Partnership in Aeronautics Research and Technology'(3). The USA, however, is by no means the only source of competition to Europe. Other nations and regions, for example Japan and other Far East countries, aspire to a larger role in aeronautical design as well as manufacture. And the CIS region represents an already-powerful aeronautical capability which will increasingly impact on the global market as its products achieve greater compatibility with established international standards.
In addition to operating in this highly competitive environment, the European industry faces the need for continuing evolution of its institutional structure and its product mix. The end of the long period of confrontation between NATO and the Warsaw Pact Bloc has resulted in major changes to military equipment requirements. The overall effect for the military aeronautical sector is a substancial reduction in business, forming a powerful driving force for industry rationalisations both in USA and Europe. On the civil side, studies by airlines, manufacturers and other bodies provide an encouraging prospect of long-term continuation of growth in demand for both passenger and freight transport(4,5). Such growth forecasts, combined with the need to replace existing aircraft on age, economic or environmental grounds, imply a need for around 16 000 new airliners over twenty years, with a value in the region of $1000 billion(5). Although this represents a very substancial market, it is by no means enormous in relation to the total capacity of the world's major manufacturers and their suppliers. Every sale will therefore be hard-fought. In particular, Boeing is clearly determines not only to resist further erosion of its market share by Airbus, but to regain lost ground.
4.0 THE AERONAUTICS TECHNOLOGY BASE
As indicated above, a high dependence on technology is one of the defining characteristics of aeronautics. While this is most obviously the case in the design and manufacture of the air vehicle itself, it also applies to the conduct and control of operations; safety arrangements; environment regulation and other 'public interest' aspects of aviation. There is thus a technological dimension to the policies and actions of govemments and public authorities regarding aviation.
For those involved in design and manufacture, the maintenance of a competitive technological capability is one of the prime requirements for continuing success in the world marketplace. This is no small challenge. The technological disciplines involved are numerous, and in most cases their advancement demands sustained research effort, often using expensive experimental and computing facilities. The cost is not small, though it is dwarfed by the financial commitments associated with actually developing and launching a major new product.
It is important to maintain this distinction between technology and its exploitation. In terms of principle, the generation of a capability is different from its use in products. Furthermore, the distinction has great significance in regard to comparisons of resources. The common practice of presenting a combined total expenditure on 'Research and Development' (i.e. 'R&D') usually gives a very misleading impression of the resources actually being devoted to sustaining the technology base itself. Much confusion has been caused, and comparisons rendered invalid, in this way.
It should also be noted that the term 'research and technology acquisition' or 'R&T' is more appropriate than simply 'research' when the task of sustaining the technology base is discussed. This is because the activities involved span a wide range, extending from fundamental research, through various levels of 'applied' research, to validation and 'demonstrator' work.
The importance of this last category deserves emphasis. Experience has shown that in the aeronautical field demonstrator programmes can form a vital link in transferring research advances across to product application. This is because the engineering and operational environment of the final product may introduce effects which are absent in laboratory research, possibly leading to complications and difficulties. The technical risks associated with product development may thus be high unless there has been appropriate prior demonstration of new features in a more representativa environment. Demonstrator activities are generally more expensive than laboratory-style research, but again, much less costly than product development.
In most countries which have substancial industries, aeronautics R&T work is conducted in a range of organisations according to their capabilities in relation to particular parts of the R&T spectrum:
the industry design and manufacturing companies
the national research establishments
companies or associations specialising in R&T contract work
universities and other institutes of higher education
The existence of national aeronautical research establishments in the aircraft manufacturing countries reflects the strong national intereses, both defence and commercial, associated with aeronautics. These establishments play a large role, both in Europe and elsewhere. They conduct in-house R&T, provide important advice and assistance to their governments and industries, and act as developers and operators of major nationally-owned facilities. Most are also involved in the management of government-supported contract work in industry and universities, and in the implementation of intergovernmental R&T collaboration agreements. As part of the evolution of European collaboration, an association of seven European establishments, AEREA, was formed in 1994. In the USA, the large research establishments of NASA and the DoD form major features of the R&T scene and cooperate closely to produce a powerful and cohesive national effort.
5.0 EUROPEAN STRENGTHS AND WEAKNESSES
This section summarises the strengths and weaknesses of European aeronautical R&T within the global environment and particularly in relation to the USA as Europe's current major competitor.
(a) Although the European aeronautical industry structure is less coherent than that of the USA, reflecting the structure of Europe itself with its variety of nation states having their individual defence and commercial intereses, this very diversity has been a source of healthy competition both within the R&T process and during the design of collaborative European products. Examples of the benefits are to be found in European military and civil projects, an important one being the competition regarding major aircraft components between the partners of Airbus Industrie, the outcome being aircraft of very high technical standard.
(b) The European aeronautical scientists and technologists in industry, research institutions and universities have become increasingly well-known to cach other, and in many disciplines can be regarded as fairly close-knit specialist communities. While such relationships have existed at the fundamental research level for many decades, the drawing together of European effort on both projects and research has brought much closer contacts among those engaged in applied research, in product design and development, and in manufacturing. In general, European scientists and technologists are now accustomed to collaboration and how to handle the associated problems of differing national and commercial interests. This is also aided by the wider international perspective gained by participation in the NATO organisation AGARD, which has operated very effectively for many years as a vehicle for controlled information exchange and co-operation both within Europe and with the USA and Canada on defence-related technology.
(c) European aeronautical scientists and technologists are well-accustomed to co-existing alongside more generously-resourced US activities. They are thus well aware of the need to pursue their own efforts as efficiently and selectively as possible, and are generally skilled in doing so, e.g. by making maximum use of 'pre-competitive' research information published via intemational conferences and the open literatura.
(d) The European 'R&T infrastructure' of research establishments, universities and related institutions, although somewhat diverse because of the multinational nature of Europe, is generally of good quality both in terms of human resources and facilities. Educational institutions concerned with aeronautics have cooperated increasingly in recent years, assisting the promotion of greater human mobility in Europe. They have also recognised the need to impart a broad knowledge of systems and processes as well as specialist science and technology. In regard to experimental facilities, far-sighted collaborative studies and commitments in past decades have produced a situation where certain major facilities in European research establishments are currently superior to their counterparts in the USA. This was cited by NASA in making a case for US government funds for a 'facility rejuvenation' programme, and is evidenced by the fact that important aerodynamic development work on recent Boeing airliners, which compete directly with Airbus products, has been done on a contract basis in European wind-tunnels.
Despite the significant strengths summarised above, it is widely perceived that the European position is at risk because of certain serious weaknesses. These are outlined below.
(a) Europe is composed of sovereign states having individual defence and commercial interests which place limits on the pooling of knowledge, the rationalisation of resources and the cohesion of R&T and industry efforts. Although further progress towards integration in Europe will be reflected by gradual harmonisation of many of these national interests, the process will take considerable time because of the scope and importance of the issues at stake.
(b) Although considerable progress, within the constraints outlined above, has been made in developing collaborative aeronautical R&T in Europe, there are deficiencies which limit the pace and strategic effectiveness of the work. For example, aeronautics research under the European Commission Framework Programmes suffers administratively from being merely one part of a wide-ranging 'generic' programme covering many technologies, and so lacks a strong strategic focus on the urgent needs of aeronautics. On the other hand, while GARTEUR is devoted specifically to aeronautics, it lacks any element of central funding, which experience has shown to provide added driving force and cohesion.
(c) Political stances and financiar stringency in some major European aeronautical nations during the past decade have led to reductions in government funding contributions to important national R&T programmes and to the support of specialist facilities. These effects have been exacerbated by stringent conditions in European industry arising from reductions in defence procurement and the impact of recession on civil markets. The level of long-term strategic commitment by governments to maintaining the aeronautics technology base has been much lower than in the USA, where the Administration has stated its intention to maintain a strong level of R&T as part of its future defence posture(6) and to sustain its leading position in civil aeronautics(3). The totality of resources devoted to aeronautics R&T in Europe is now very far below that of the USA. In terms of support from public funds, it is estimated that the US level may be in the region of four times that for the whole of the European Union(7).
6.0 THE COMPETITIVE PROSPECT FOR EUROPE
Although, as indicated, the European scene exhibits some significant relative strengths, the judgement of CEAS is that the competitive benefits of these are now heavily outweighed by the effects of the weaknesses describes above. This is not a new conclusion; other appraisals have reached the same view(8,9). Unless a substancial improvement can be made, the prospect is that the European aeronautical technology base will become progressively less competitive in relation.to that of the USA. This will increasingly affect the saleability of European products, and make European companies less attractive partners to non-Europeans for wider collaborative projects. It is important to recognise that the current technical success of European products is based on R&T largely done 10-20 years ago when national investment in these activities was substantially greater.
What can be done to improve the situation? Europe's relative strengths, listed in Section 5.1, have existed and been developed over a considerable period of time. Thus the scope for further enhancement of their beneficial effects, while not negligible, is limited. Furthermore, in regard to facilities, the USA is making improvements and, in the meantime, governmental pressures for European research establishments to operate 'more commercially'. has facilitated access by US firms to important European facilities. (It should be noted that, in contrast, the US authorities exercise severe restrictions on foreign access to their government facilities in cases where the project in question is in competition with a US industry product).
The main hope for relative improvement must therefore lie in taking actions to reduce the weaknesses of Section 5.2. These are considered in turn below.
Item (a) of 5.2 is essentially a reflection of the present constitucional and industrial condition of Europe. Further European integration will bring alleviation but, as indicated already, this will be over a long timescale.
In regard to (b), there is considerable scope for improvement in the organisation of collaborative R&T in Europe, though achieving this in the face of administrative and policy difficulties will not be easy. One encouraging recent development within the European Commission is the setting up, on the initiative of Commissioners Cresson, Bangemann and Kinnock, of the 'Aeronautics Task Force'(ATF), a major objective of which is to improve coordination across Commission aeronautical programmes and with national activities(1). At this early stage in its operation, however, it is difficult to predict how much strategic influence the ATF will be able to exert. Another opportunity for improving the Commission's aeronautical work lies in the formulation of the arrangements for the Fifth Framework Programme which is due to begin in about 1998. It should, however, be noted that programmes of the Commission are restricted, by virtue of its general mandate, to non-military objectives. Thus, while its aeronautical research inevitably includes 'dual-use' technologies, programme objectives and policies are concentrated on civil aeronautics. Collaborative R&T directed specifically towards sustaining the technology capability for military products involves agreements between national defence ministries, and these are also the subject of continuing evolution.
It is item (c) of 5.2 that offers by far the greatest prospect for alleviating European weakness. Indeed, while progress has already been made in some aspects of (a) and (b) in recent years, it is in (c) that Europe has faltered badly in contrast to the clear US resolve to maintain its technological strength. To avoid decline in its relative position, Europe needs a more strategic, long-term approach, based on a reaffirmation by its governments of the value of the aeronautics industry as a key, hightechnology European asset. Adequate resourcing of R&T at both national and European level is essential. This requires appropriate contributions by industry and by governments. Although European aeronautical scientists and technologists have shown their skill at maintaining a competitive capability with considerably less expenditure than their US counterparts, the present expenditure gap is far too large for this to be sustainable.
There is a clear need for European investment in aeronautics R&T to more closely reflect that of the USA as a proportion of industry turnover. The ratio of about 4:1 in government support between the USA and the EU, referred to in Section 5.2, is twice the ratio of USA:EU industry turnover, which is approximately 2: l. This, and the accompanying large shortfall in EU industry investment, points to the need for an increase of at least 50% in total annual investment, coupled with continuing action to improve the organisation and coordination of R&T, if European competitiveness is to be maintained.
It is important to keep this R&T funding requirement in perspective. As already indicated, R&T costs are much less than those associated with project development. Furthermore, there is plenty of evidence of the delays, technical shortfalls and heavy cost overruns that arise on military and civil projects if the technology base is inadequate when the project is launched. In consequence, manufacturers have experienced major financiar damage, and governments have suffered serious shortfalls in defence capability.
In the field of government procurement, the past two decades have understandably seen an increased emphasis on the need to minimise such risks by achieving 'technology readiness' prior to project commitment. This inevitably implies adequate programmes of basic research, applied research, validation and demonstration. The philosophy is important, not only for new products, but also for 'upgrading' schemes which form an increasing part of the procurement scene. In addition to placing procurement actions on a sound basis, well-judged investment in the technology base strengthens the position of governments on technology-related defence issues generally.
In civil aeronautics, the fiercely-competitive nature of the internacional marketplace has produced a dynamic product scene. For example, although Airbus Industrie can now span a large part of the airliner market with up-to-date aircraft, Boeing sustains its challenge by upgrading its products. Such aircraft as the Boeing 737-600/700/800 series will make use of state-of-the-art technology. To retain, let alone increase, its market share, Airbus will need to respond suitably with its own upgrades. New projects obviously pose major requirements for European competitiveness, e.g. the proposed Airbus 'A3XX' large capacity airliner, and the possible future SST. Furthertnore, as indicated earlier, the technological competition is not confined to the design of the aircraft and its systems - it also includes process technology and its application to reduce manufacturing costs.
An additional stimulus on the civil side for Europe to invest properly in technology stems from the 1992 US/EC (now EU) agreement concerning civil aircraft having more than 100 seats. This limits government 'direct support' of products to 33% of total development cost, and requires arrangements for repayment. Such direct support by means of 'launch aid' has been a common mechanism for assisting the European industry"' and especially Airbus. US government policy, on the other hand, has generally not been to give direct support to civil projects but to concentrate on providing substancial indirect support by funding contributions to R&T activities.
The agreement's limitation of direct support emphasises the importance of industry's technology base in keeping development cost under control. At the same time, the agreement permits 'indirect support' (i.e. pre-product R&T) of up to 3% of the industry's civil aircraft turnover in the country concerned, which is significantly greater than is generally provided at present by European governments. It should be added that the agreement (which currently applies to aircraft only; not engines or equipment) is formally stated to be the subject of further negotiations. It appears likely that any change might well reduce the permitted percentage of direct support, which would further emphasise the importance of investing in the technology base.
7.0 CONCLUSIONS AND RECOMMENDATIONS
public interests
The present prospect is that the European aeronautical technology base will become progressively less competitive. This will increasingly affect the saleability of European civil and military products, and make European companies and consortia less-attractive partners to non-Europeans for collaborative projects. There will be major adverse consequences for employment and for the European balance of trade.
Although there is scope for improving the organisation and coordination of aeronautical research and technology acquisition in Europe, this alone will not be sufficient to counter the decline. The principal requirement for maintaining competitiveness is a substancial increase in investment in research and technology acquisition activity.
It is unlikely that European technological competitiveness can be maintained without agreement between governments, at the highest level, that the aeronautics industry is strategically vital.
European governments should reaffirm the value of the European aeronautics industry as a key industrial asset, strategically important for economic, employment and defence reasons.
Action should be taken by European governments and industry to increase investment in aeronautical research and technology acquisition, and to develop these activities on a more strategic, long-term basis. CEAS considers that an increase in total annual investment of at least 50%, coupled with continuing action to improve organisation and coordination, will be necessary to maintain competitiveness.
It is important that Europe should conduct strong national R&T programmes in aid of the national and commercial interests of European Member States, while at the same time continuing the development of collaborative European programmes based on common industrial goals and
'Report of the Aeronautics Task Force', European Commission Staff Working Paper, SEC(96) 458, 11 March 1996
'The European Aerospace Industry, 1996. Trading Position and Figures', European Commission Staff Working Paper, DG III, Ref III/5021/96, supplemented by AECMA data.
'Goals for a National Partnership in Aeronautics Research and Technology', US National Science and Technology Council Paper, August 1995
'Progress Through Partnership'.. Technology Foresight Report, Volume 12 - Defence and Aerospace, UK Office of Science and Technology, 1995.
'Current Outlook' (long-term forecasts by Boeing and Airbus), Flight International, 7-13 June 1995.
'A New Approach to Defense Acquisition', US Department of Defense Fact Sheet, 1992
'Towards a European Aerospace Policy: Perspectives and Strategies for the Aerospace Industry - Part I', AECMA, Nov 1996.
'Flying Ahead - a View of the Future for Civil Aeronautics', Report of the Panel on Long-Term Outlook for Aeronautics Research and Technology (LOTOS), European Commission, EUR 13334, 1991.
'Focusing on the Future - Aeronautical Research and Technology Acquisition in Europe', European Commission, EUR 14412,1992.