The Paris Air Show got going Monday with the usual fanfare, but the outlook for the aerospace industry isn't bright, as The Deal Pipeline readers are aware.
In a
Q&A based on a new report,
Philip Toy, managing director and co-leader of global aerospace and defense practice at advisory firm
AlixPartners LLC, foresees an
extended slump cutting into the profitability of top-tier original
equipment manufacturers and potentially crippling smaller suppliers. It's a theme picked up in a Monday Wall Street Journal piece about the difficulties Boeing Co. (NYSE:BA) may face in its defense business. Toy told The Deal's Lou Whiteman: "W
e think defense spending will be flat for the
next two years, and barring any major global conflicts, budgets are
likely to fall in the years to come."
On the civil side, Toy fears liquidity problems among the airlines, which will limit their ability to order new aircraft. But Boeing and Airbus SAS do still have substantial order backlogs to be thankful for, as the AP observes.
The result of all this, Toy says, will be consolidation led by stronger companies like Boeing. Jim Albaugh, head of Boeing's defense business, intends to play a role. He told the WSJ the company plans to continue to invest and make related acquisitions.
One other Boeing note from the Paris Air Show: Boeing's oft-delayed 787 Dreamliner won't make its maiden flight there, according to CNNMoney, though it is still expected to fly before the end of the month, as Boeing has indicated it will. - Kenneth Klee
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