Four years on from the last Farnborough International Airshow a palpable excitement has returned as the aerospace and defense community reconvenes for the second-largest event on the global airshow calendar. Growing interest was heightened over the weekend as the vast site filled with flying machines and other leading-edge new technology. Nonetheless, there is also a strong sense that the industry has not entirely recovered its equilibrium after an unplanned two-year hiatus from the biennial event.
Rewind in your mind to what it would have been like on the final day of the 2018 Farnborough show to hear an industry soothsayer telling you that the world would face an unprecedented global pandemic killing more than six million people, with existential collateral damage to the travel business, followed by Russia invading its neighbor Ukraine in a direct threat to world peace. Then imagine slipping into a four-year coma and waking up on July 18, 2022, to discover that every word that avgeek Nostradamus told you that day was true and that the industry now deals with the shockwaves of severe inflation, supply chain disruption, skills shortages, and market uncertainty.
Whether the industry has maintained a prolonged Covid-inflicted holding pattern before getting back to a comfortable cruise altitude or whether it has undergone a permanent change from the experience for good or ill remains a question. Many industry professionals will be arriving here in Farnborough looking for answers.
For the most part, independent observers seem to be erring on the bullish side, while staying mindful of challenges that still lie ahead.
“I think we are looking at realizing some pent-up demand from a quieter year,” said Michael Richter, managing director and global head of aerospace and defense at investment bank Lazard. “We expect to see more consolidation with companies adding more value through acquisition to realize synergy deals.”
The mergers and acquisitions deal-maker is salivating over strong activity in defense electronics, space, and commercial aviation. In the latter sector, Richter sees engine machining and fabrication as growth areas, while aerostructures remain weaker. “Consolidation in the industry has always stimulated growth, and increased mergers and acquisitions will propel the growth,” he concluded.
Professional services firm EY is among those that see commercial aviation as entering a state of flux. The company addresses the challenges it faces in a paper published on Monday titled “How the future of commercial aviation will reshape value chains.”
“In mid-2022, the commercial air transport sector is buoyed by renewed hopes that the worst of the pandemic is behind,” said the report’s authors. “Yet amid this recovery, OEMs and aviation suppliers are grappling with increased volatility, supply chain ruptures, and production constraints like never before, with challenges, and opportunities, rippling across the entire aerospace and defense supply chain. Industry players find themselves in an uncertain ‘in-between’ state, in which pre-pandemic normal is fading from memory but the post-pandemic future remains cloudy.”
Farnborough International 2022 also marks a significant waypoint for the future of the UK's aerospace and defense sector, as highlighted in recently released data from trade group ADS, parent company of the show organizer. British companies have shown an eagerness to position themselves as leaders in key future-facing fields like sustainable technology, even as they struggle with unwelcome trading complexities resulting from the country's Brexit divorce from the European Union.
All this unfolds against a new backdrop of profound political uncertainty, with the ruling Conservative party having just deposed its own leader, Boris Johnson, and in the throes of choosing a successor. It remains to be seen which government figure, if any, is available to open the Farnborough show on Monday morning, and what change in direction the palace coup might bring.