Aerospace Industry News

AAAI pointed out that Australia has been a major customer for the world’s aerospace industry but cannot continue to be so unless it can reduce its dependence on slow growing price unstable export commodities (raw materials and food stuffs). It needs to participate in the faster growing sector of world trade in high value added goods and services – based generally on the newer technologies to be found in industries like the aerospace industry.

Civil Offsets

Australia continues to rely on offsets leverage to open the door for Australian companies to allow them to gain access to the programmes of the major overseas systems suppliers like Boeing, Rolls Royce etc.

The Defence offsets programme has its own objectives – related to the improvement of the Defence strategic industrial self reliance of this nation – particularly in regard to the repair, overhaul, logistic support and upgrading of the complex aerospace systems being purchased by Australia – so the main burden of industry development has to fall on the civil offsets programme. This is not to say that Defence offsets have not had significant industry development impact within the Australian aerospace industry. Indeed the present size, shape and capability of the industry are more the result of the Defence Australian Industry Involvement (formerly AIP) policy than any other single factor.

Within the civil offsets programme, there is a change of emphasis towards targeting more offsets to getting R&D and design work into the Australian industry thereby·achieving technology transfer of more lasting value. If this is achieved by longer term commercial agreements rather than contract by contract agreements, there is the real possibility of significant Australian aerospace participation, on a collaborative and/or risk sharing basis. The Department of Industry Technology and Commerce is working with the Defence Department on a framework for joint civil/Defence umbrella agreements of this type.

Airline Deregulation

The future of the civil offsets programme is a vehicle for the development of the Australian aerospace industry and relies, to an important extent, on the continuation of the policy of demanding offsets obligation for the purchase of large passenger aircraft. There appears to be general community agreement as to the value of the present policy but there is some dispute as to its costs. There are those who claim that the requirement for Australian offsets inflates the price of an aircraft for the Australian customer. AAAI points out that, if this is so-which it is not prepared to concede – it is not reflected in prices paid to Australian sub-contractors, who have won orders under the offsets requirements. It points to examples where Australian companies have won orders only after agreeing to price cuts to levels significantly below those obtainable from the current supplier.

The Australian government has already announced that civil offsets obligations will continue to be demanded for the purchases of aircraft by Qantas. The future of offsets obligations for purchases by the domestic airlines is the subject of review at present. AAAI argues that the benefits to Australia are such, that offsets obligations should be demanded for all purchases (above the $2. 5m threshold) of aircraft which are to be used for commercial aviation purposes.

Obligation and Acquittal

Since 1980, acquittal of offsets obligations has amounted to 40% of the total. This figure is influenced by the lead time required to cope with the dramatic increase in the amount of agreed civil aerospace offsets which has occurred since 1986. This increase is expected to continue with Qantas alone expected to spend some $5bn in the next few years.

Some 75% + of the acquitted civil offsets have been achieved by the airframes and engines sector. Although one company (Hawker de Havilland) is credited (as the prime Australian contractor) with the majority of this work, it has in fact flowed on to many second, third and lower tier companies.

As previously stated the challenge is now to get the other sectors of our industry to the same level as is being achieved by the airframes and engines sector – whilst at the same time continuing growth in that sector.

Technology Emphasis

The AA. Al supports the emphases on longer term agreements, research and development and technology transfer which are a feature of the current civil offsets programme, whilst pointing out that the Australian industry also needs considerable workload, to earn the wherewithal to attract the investment needed to reach its full potential.

With the growing offsets obligation and the growing competition between Europe and the United States (not to mention from an emerging Japanese aerospace industry), AAAI believes there is potential for both satisfactory levels of workload and technology enhancement within the programme.

Annual General Meeting

The fourth Annual General Meeting of the Association was held on 21st September 1988 in Canberra. In his report, the retiring Chairman Mr Tim Anderson (Managing Director, British Aerospace Australia) noted that in the four years the Association had been in existence, manufacturing output within the industry had doubled (in real terms) as had exports. He did not claim that the existence of the Association had been the major reason for the improved performance but he claimed the Association had acted as a focus and a catalyst.

The meeting expressed its thanks to Tim Anderson for the leadership role he had played during his two year appointment and thanked him for agreeing to remain on the Executive following his compulsory retirement from the chair.

The new AAAI Executive Committee is: Mr Peter Lister, Hawker de Havilland, Chairman; Mr Peter Raphael, ASTA, Deputy Chairman; Mr Tim Anderson, British Aerospace Australia; Mr Rod Dale, Lucas Industries; Mr Bob Koger, Normalair Garrett; Mr Bob Tucker, AWA Ltd; Mr John Wren, Australian Airlines; and Mr Rick Young, Dunlop Aerospace.