Manufacturing of aerospace equipment in the European Union is a thriving high-tech industry. The EU's aerospace industry provides cutting edge jobs to 363,900 people and generates 29 billion Euros.
In terms of economic weight this translates as 0.3 % of the total workforce and 1.1 % of the total manufacturing sector.
Aerospace manufacturing is strongest in and offers most aviation jobs in France and in the United Kingdom. The importance of the aerospace industry in the total non-financial business economy is relatively small. A highly research-intensive sector, aerospace jobs in Europe are orientated towards workers educated to a high level.
The aerospace industry is highly concentrated within the EU. The largest contributor to the sector is the United Kingdom (EUR 11 billion), accounting for a share of 39 %, then France and Germany with respective shares of approximately 22 % and 20 %. Together, these three countries account for about 80 % of the total EU aerospace industry, compared with an average of 55 % in manufacturing. This is a collective weight that is even higher for turnover (85 %), but smaller for employment (72 %).
The manufacture of aerospace equipment covers aircraft equipment, parts and accessories used in the production of aircraft and spacecraft, air transport of passengers or freight, as well as military applications. It is essentially an assembly industry, with miscellaneous components also being produced by other industries.
So much for aerospace employment, but look at financial turnover, and the picture is different. Of the EUR 92 billion generated in the aerospace equipment sector, France emerged as the top contributor, accounting for 41%. This reflects the concentration of aircraft assembly activity. Airbus is based there, one of the world's two dominant civil aircraft producers. The sector in the UK followed with a 27.5 % share, ahead of that in Germany with 16.7%.
Nevertheless, the aerospace equipment sector in the UK provides the most international aerospace jobs, amounting to a share of 29.2 % of the EU-25 total of 363,900. France's sector is the second largest employer with 22.6 %, and Germany's the third with 20.6 %.
Apparent labour productivity in the aerospace equipment sector in the EU-25 amounts to EUR 79,900 value added per person employed, well above the average in manufacturing of EUR 45,300.
Productivity is highest in the United Kingdom, considerably abovethe average of its manufacturing industry. Then follows Belgium, France, Germany and Italy with values over EUR 70,000. The Netherlands and seven other Member States, relatively small contributors to the sector, have lower productivity levels than the average of their manufacturing industry.
Despite higher personnel costs, wage adjusted labour productivity is more than in manufacturing. The United Kingdom again has the highest productivity level. By contrast, in Poland and Portugal, aerospace manufacturing is not profitable. Although the sector in the UK has the highest share of enterprises (31.8 % of the EU-25 total), ahead of France (17.4 %) and Germany (9.3 %), Germany in fact has the highest average enterprise size (359 persons employed), ahead of Italy (227) and France (210). The EU-25 average (in 2001) was 166 persons per enterprise, against just 16 in manufacturing.
Miltary aerospace jobs or civil aircraft jobs?
Looking at the breakdown of the industry in terms of civil and military sectors, there is a gradual shift from the manufacturing of predominantly military aircraft to civilian. The share of the civil sector amounted to 64 % by 2003, after peaking at about 70 % by 2000.
In a breakdown by final products, civilian aircraft ranks first with 43.4 % of turnover, before military aircraft with 25.9 %. Among minor contributions, helicopters accounts for 9.9 % of turnover, slightly more than spacecraft and missiles with 7.7 % and 7.3 % respectively.
Final products, however, generates only 58.5 % of total turnover, aircraft maintenance accounting for 22 %, while engines and equipment make up the remainder.
France has the highest intermediate consumption as a percentage of production value, thus reflecting the concentration of assembly activities in this country. This also explains why the country's share in EU turnover (41%) is almost twice its share in EU value-added (22 %). By contrast, in the United Kingdom intermediate consumption is just 51% of production value.
Because of the assembly nature of the sector, one might expect intermediate consumption to be higher than in manufacturing across the board. However this is only the case in France, by a difference of about 11 percentage points. The high value added typical for the production of single parts reverses the situation for the other main contributors.
Aerospace personnel costs
Relatively high personnel costs does not make aerospace less profitable. Average personnel costs in aerospace equipment manufacturing are relatively high when compared with the average of manufacturing industry. The average in the EU-25 is EUR 51,067, about 58 % more than the average of manufacturing industry of EUR 32,318. Average personnel costs in the sector are above the EU average in four of the main contributing countries and also in Norway. Costs are highest in Germany at EUR 66,186, followed by Norway (EUR 62,592).
With the exception of Belgium, the difference between average personnel costs in aerospace equipment manufacturing and in total manufacturing is highest in the main contributing countries, ranging from a gap of almost EUR 22,000 in Germany to less than half that amount in Sweden (EUR 10,753). However, in relative terms, average personnel costs in the Hungarian manufacturing sector are only 53 % of what they are in aerospace equipment manufacturing. Interestingly, in the 7 Slovak aerospace enterprises, these costs are on average lower.
The United Kingdom has the highest gross operating margin, at 22 %, which exceeds the average of manufacturing industry by approximately 10 percentage points. France, by contrast, has a low gross operating margin of 5 %, mainly due again to its particular assembly activity.
Personnel costs account for 20 percent of turnover for aerospace equipment manufacturing, which is 2 percentage points more than the average in manufacturing. However, this does not hamper the profitability of the sector, as measured by the gross operating margin (gross operating surplus over turnover), which is 11.5 percent in aerospace manufacturing, about 2.7 percentage points more than in manufacturing.
Aircraft jobs Germany.
Aircraft jobs in Germany have shown the most stable growth in a volatile sector. Over 10 years to 2004, growth in the aerospace sector was about 50 %, compared with approximately 19 % in manufacturing. Even if the aerospace sector has grown substantially over the last decade, its development has been relatively volatile.
The most striking example was the rebound in the late nineties, characterised by six consecutive years of growth, just after a period of declining output over five successive years.
However, in the context of a general economic slowdown and a downturn in air transport following the terrorist attacks of 11th September 2001, aerospace output dropped by 10.5% in 2002, whereas manufacturing only slightly contracted. It is now commonly accepted that this drop was the net result of declines, particularly in the United Kingdom (19 %) but also France, Italy and Spain, only partly offset by a sustained growth in Germany.
Growth rebounded, however, in 2003 by 5.5 % and by a further 3.7 % in 2004, clearly exceeding the average of manufacturing industry. However, Italy and the United Kingdom still felt the downturn, as output in 2004 was still below the 2000 level.
Despite stability, over the last decade, employment in the German aerospace industry grew at less than half the pace of production, while the Spanish aerospace industry thrived with employment growing by +158 %, exceeding its production growth of +110%. In Belgium and the United Kingdom, on the other hand, employment shrunk by -30 % and -2 %, in spite of production growth of +70 % and +42 % respectively. Employment also decreased slightly (-0.7 %) in France, but by -37.8 % in Italy. Production increased also in these Member States by 63 % and 17 % respectively.
Looking briefly at the effects on employment of the -10.5 % decline in production between 2001 and 2002, employment decreased in Belgium, France, Italy and the United Kingdom, but actually increased in Germany, Spain and Sweden.
Full-time aerospace employment.
Employees are more likely to have full-time jobs in the aerospace sector, than, on average, within manufacturing industry. The shares of part-time employment in the aerospace sector are generally very low. In Belgium, Germany, Italy and the United Kingdom, shares range between 0.1 % and 3.3 %, between 5 and 6 percentage points lower than in manufacturing. In Spain, where the share is 0.3 %, the difference is smallest: just over 1 percentage point less. However, in France, part-timers make up 7 % of the employees, which is however still less than the average of this country's manufacturing industry (9 %).
Employees in the UK's aerospace sector work longest, about 18 % more hours than their counterparts in France, ranking second. When comparing average hours worked in the aerospace industry with manufacturing. This has something to do with national labour market policies, of course, but the UK's aerospace sector stands out because the average in aerospace industry exceeds that in manufacturing by about 16 %.
However, although employees in the UK's aerospace sector work longest, they are not the most productive. German and Belgian employees are most productive, each at just under EUR 54 per hour, while those in the UK rank third at EUR 49 per hour. Value added per hour worked in the aerospace industries in Spain, Germany and the United Kingdom is around 1.5 times these countries' respective manufacturing industry averages. In France and Italy this sector generates around 40 more, at EUR 40 and EUR 42 per hour respectively. In Belgium, the difference is only 15 % and in Sweden there is not much difference.
Clearly one of the EU's cutting-edge, high-technology sectors, the aerospace sector is highly research intensive, with research budgets always significantly more than the average of manufacturing industry. In France, 28 % of the sector's value-added turnover is devoted to this expense (manufacturing: 7%), while in the UK and Germany it was 17 (manufacturing 5 % and 10% respectively).