AVIATION NEWS 1 | 2015

AVIATION DIVISION

AVIATION NEWS01/2015 – OBJECTIVES AND PERSPECTIVES

2014 was not a good year for aviation in Germany – the number of takeoffs and land-ings stagnated here and the passenger kilo-metres also developed below average. That fitted in with the mood of the Engineering Services providers, who even in the past year had to live with a considerable decline: a dwindling order volume, increasing cost pressure and keen competition created mayhem on the market. Consolidation also left its mark at FERCHAU AVIATION: after years’ growth, our business declined for the first time in 2014. Consequentially, we must adapt closer to the customer’s outline conditions. This con-cerns both the application of resources and the manner in which we approach our tasks – on the one hand in the supplier chain, but also within our own organization. The key to success lies in the efficiency which is a de-cisive factor for our competitiveness. Adjustment to the conditions - “Align” - is

the first step away from consolidation. Secondly, it is essential within difficult sur-roundings to protect what we have estab- lished during the past decade: “Protect”. This includes, for example, our locations in South Germany, France and Spain, but also the employees’ important competences and steadily grown partner relationships. Finally, in the third phase, the “Attack”, we lay the foundation for our strategic tar-get to be one of the winners in the diminish- ing market following consolidation. For this purpose, we invest, for example, in centers of competence for the cabin and calculation, in new locations such as Barcelona, Paris and Marignane as well as within the inter-nal organization. We are also extending the customer portfolio outside Aviation and ad-ditionally contemplating takeovers for areas critical for success. The prospects are anything but poor. The economic environment has basically been positive for many years, aircraft manufac- turers from emerging countries grow into the market, the number of orders in hand for the duopoly Airbus/Boeing is huge and the existing fleets also need innvations and en- gineering in order to keep abreast of the com-petition. Incremental changes, customizing

and improvements will always ensure that engineering services are required. “There- fore, there is no viable alternative other than to keep on the route we have already taken”, as I wrote here one year ago. Nothing has changed in this regard, even if turbulence still lies ahead of us. We take visual flights with raw data, doing our best to evade the storm. As opposed to this, the autopilot which steered us through the past years’ engineering hype will remain deactivated for the time being.

CONTACT FLIGHT INSTEAD OF AUTOPILOT

“The key to success lies in the efficiency which is a decisive factor for our capacity to compete.”

Dipl.-Ing. Harald Felten CEO FERCHAU AVIATION

+++ OUR LOCATIONS +++ AUGSBURG +++ BREMEN +++ DONAUWÖRTH +++ HAMBURG +++ LAUPHEIM +++ MUNICH +++ BANGALORE +++ BOURNEMOUTH +++ BRISTOL +++ MADRID +++ TOULOUSE +++

02 AVIATION NEWS 1 | 2015

The engineering sector is in the middle of a consolidation phase.Economic decisions taken by the customer Airbus lead to a chain of serious changes.The engineering suppliers affected must adapt in several areas.

CONSOLIDATION OF THE ENGINEERING MARKET

FROM THE JETSTREAM INTO THE LOW PRESSURE FRONT

“Despite imminent turbulence, there’s also good reason for optimism.”

Review – Subcontracting Development

Germany-North

2009 2010 2011 2012 2013 2014

14035

8020

130

70

12030

6015

30

110

50

205

10025

4010

10

90

0Forecast 2015

Germany-SouthFranceUK

TOTAL SpainFMA/SUPPLIER no.

5.2

9.35

18

27.326 25.5

30

All engineering service providers in aircraft construction have been aware of the fact that the beanstalk has an end since 2013 at the latest. Back then, the most im-portant customer Airbus announced that it would considerably reduce its engineering volume from a high level – in three years up to 2016 – by at least 20 to 40 percent. Simultaneously, the company increased price pressure on its suppliers and thinned out the supplier landscape. Two examples: today, some 60 percent of expenditure for engineering services is made with the top ten suppliers, in the future this is planned to rise to 90 percent. Also, the turnover share of the top five suppliers should double from one third to two thirds. So the turbulence did not come out of the blue, nonetheless FERCHAU AVIATION’s income also dropped in 2014, resulting in staff reductions as a painful consequence. Also, the short-term prospects are anything but rosy because the decline will probably continue up until 2016. Then, the new E2S Framework Agreement with Airbus will come into force which will be negotiated as of this summer. Therefore, FERCHAU AVIATION

must be awarded the contract in the coming months for some Airframe packages in or-der to anchor its position as one of the top ten suppliers. As such, the market is attractive in the long-term and the order books at Airbus are full for several years to come. Business op-portunities arise, for example, for the new “Beluga XL” generation, for the “A330 NEO” and, should rumours be confirmed, for the “A380 NEO”. Moreover, several incremental improvements in the single-aisle area (cabin efficiency, avionics, the short airfield package)

and the A350 XWB are pending. However, only suppliers who rigorously develop innovations with commercial value such as with regard to weight, fuel consumption or reliability will be given the opportunity. FERCHAU AVIATION has clear strengths, also in the cabin and calculation areas - the full optimization potential must be exhausted here in order to expand the business further. On top of this, new competence fields, such as in the field of technical documentation, will be built-up. However, as Airbus wishes to increase its in-house engineering share considerably, FERCHAU AVIATION must fre- quently conduct make or buy analyses in order to test which tasks can be dealt with internally with technical and economic suc-cess instead of using external partners. In turn, this causes shifting in the partner network. Despite imminent turbulence, there’s also good reason for optimism. With Premium

Aerotec, a new customer was gained at the Augsburg location, whereby the order volume is in the seven-digit euro range. A transna-tional calculation and design project for the wing area for the A350 XWB-900 will keep the FERCHAU AVIATION Bremen, England and India locations busy for three years. And, in France, additional general engineering services for automotive OEMs are offered on top of the aviation portfolio. Similar develop-ments are also targeted for Spain. Nonetheless: the engineering suppliers’ sector must primarily work to adapt its own cost structures and project expenditure to the prevailing outline conditions. A task which really isn’t new because no supplier has lived beyond its means during the past years. Nonetheless, this time more is requi-red than “mere” efficiency increase: when it boils down to it, the sector is not only steering through a trough of low pressure, but through the largest depression of the past years.

03 AVIATION NEWS 1 | 2015

Save the Date

Partner Meeting 2016

27.01.2016Hotel Hafen Hamburg

“Small but fine” – was the characteristic motto for the New Year’s Meeting 2015 at FERCHAU AVIATION in Hamburg. The round table really was smaller than during the past years, reflecting the dominant trend with- in the aviation market: consolidation. ”We must adapt to the situation at our customer Airbus’, which will reduce the work volume in the engineering area in the coming years by 20 to 40 percent”, as CEO Harald Felten said regarding the outline conditions which are effective for all the companies along the supply chain. Nonetheless, Mr Felten was in a positive frame of mind in view of the choice group at the Hotel Hafen Hamburg: “We have our most important customers and partners here, with whom we must co-operate closely in the coming years.” Even if the crisis has not yet been over-come at the beginning of 2015, the CEO re-ferred to the central target at FERCHAU AVIATION: “We will survive the lean period and finally be one of the winners of conso-lidation. “This would, for example, be pos-sible with additional customers and tasks in different sectors such as the Automo- tive sector, but also by founding Centers of Competence for the cabin and calculation, the opening of new locations in Barcelona, Paris and Marignane as well as targeted in-vestments in the organization. When it boils down to it, the general outline conditions are very good in the Aviation sector. For sever-al years, there has been an overall upward

trend, manufacturers from emerging coun- tries force their way into the market, order books are full to bursting. “And the fleets permanently need innovations and en- gineering in order to remain competitive in the skies.” Not only the FERCHAU AVIATION CEO saw light at the end of the tunnel - the rest of the participants also were in a consider-ably better frame of mind than at the out-set of consolidation last year. More than 20 customers and international partners had followed the invitation and they used the afternoon and evening to exchange thoughts on current developments.

“All market participants are currently suf-fering”, as Mr Felten admitted, “but in the meantime the mood has brightened up and the upward swing can be felt once again.”

FERCHAU AVIATION also started the new year 2015 together with its customers and partners.The decisive topic was the lasting consolidation of the market - as well as the question as to which measures help to survive the lean period.

SOLIDARITY WITH PARTNERS

FERCHAU AVIATION NEW YEAR‘S MEETING

Left-hand side image (speaker) Hubert Baren – Managing Director Sonovision Deutschland GmbH

Upper right-hand side image (from left to right) Daniel Sánchez Espinosa – Head of Mechnical Engineering Atos, Óscar Elvira – Site Manager Spain, Marko Beutler – CEO Avionic Design Service

Lower right-hand side image (from left to right)Torben Baumgardt – Etiq GmbH/Eurogiciel Group, Georgios Spyrou – Airbus General Procurement, Josef Brüggemann – Airbus General Procurement

04 AVIATION NEWS 1 | 2015

In the area of technical documentati-on, FERCHAU AVIATION has strengthened its position by entering a partnership. The company in question is in Hamburg, called ALTHOM and was founded by Alkiviadis Thomas in 2010, who has worked in the Avi-ation industry for more than 25 years. “We have specialised in large work packages in the areas of technical documentation, static

calculation, load tests and cost-efficient numeric flow simulation (CFD) relocation”, as the Managing Director of the outsourcing service provider reports. Here, ALTHOM uses its international position in addition to the German locations in Hamburg and Gera: the company even has some own employees in Greece, in Poland and India it reverts to professional sub-suppliers. “This enables us to run ramp-ups on up to 160 employees very fast at the customers’ request without quality suffering”, says Thomas. The col-laboration with FERCHAU AVIATION plans that both companies offer their customers, and therefore in particular the Airbus Group, cost-efficient and service-orientated overall planning of projects in the customer ser- vices area from a single source. A common project for Airbus Helicopters is currently in the offer phase.

COOPERATION WITH ALTHOM

EXPERTS FOR TECHNICAL DOCUMENTATION

FERCHAU AVIATION cooperates with the Spanish national Atos subsidiary, an inter-national provider of IT services. “Within the company, we have established a Center of Competence for Mechanical Engineering”, as Daniel Sánchez Espinosa, Department Manager explains. Of his approximately 130 employees, 90 percent are located in Spain. The Mechanical Engineering depart-ment has also specialised in global stress analyses, primarily for the customer Airbus Civil. “Our teams are very experienced”, says Sánchez, “and together with FERCHAU we have several complementary competences for the upcoming projects.” Both companies aim to create a complete and future-orien- tated engineering package which meets the requirements of the global market and in particular of the Airbus Group. As a good value near-shore location, Atos Mechanical Engineering also contributes established procedures to the partnership and recently opened different sectors such as the Auto-motive, Energy und Space areas.

COOPERATION WITH ATOS

COMPETENCE GAIN IN SPAIN

Success for FERCHAU in France: the Toulouse team secured a contested agree-ment with Airbus at the interface between engineering and manufacturing the wings for the work package project “MAP Wing Support”. A total of eight experts from FERCHAU will support both the Flight Test

Teams (FT) and the Airbus units in the final assembly area (Final Assembly Line = FAL) in Toulouse. This relates to the wing activ-

ities in the MAP/Mise-au-Point area from single-aisle aircraft via long-haul up to the A380. Moreover, the FERCHAU team com-prises the point of intersection to the design specialists involved in Great Britain and Germany. A second component of the MAP Wing Project relates to the European research and development project BLADE (Break- through Laminar Aircraft Demonstrator in Europe), within the scope of which new tech-nology for wings is developed. Part of the FERCHAU team for the creation of technical Special Instructions (SI) will work for the MAP BLADE project at the Tarbes location in southwest France. Here, the focus is placed on the assembly of experimental wings on an Airbus A 340 for a demo model.

AIRBUS PROJECT IN TOULOUSE

PROJECT ACQUIRED FOR “MAP WING SUPPORT”

Daniel Sánchez Espinosa – Head of Mechanical Engineering Atos

“Moreover, the FERCHAU team comprises the intersection to the participating design specialists in Great Britain and Germany.”

FERCHAU Engineering SARL has opened a new office in Paris. Marc Brunstein, an experienced manager in the service provision sector, assumes full responsi- bility for the location. From 2010 to 2012, he was a member of the Eurogiciel management be-fore moving to a consultancy. The Country Manager started at FERCHAU in November 2014 and reports to Harald Felten, CEO FERCHAU AVIATION. Mr Brun-stein has already set his goals up to the end of 2017: to expand business with the major cus- tomer Airbus, but also convince other Aviation clients. “More- over, we will expand the Toulouse

location and the new Paris of-fice”, as the manager explains. Additionally, he wishes to found a location in Marseille, where FERCHAU freelancers already work at Airbus Helicopters in Marignane today. Also, Brunstein is working on a strategic con-cept which enables diversifica-tion in further sectors such as the Automotive sector in France and Spain, where Continental is already a business partner. “We need new fields of activity, new customers and new programmes in order to cushion the consoli-dation in the Aviation sector”, says the Country Manager.

NEW OFFICE IN PARIS

DIFFERENT COUNTRIES,DIFFERENT SECTORS

In autumn 2014, FERCHAU AVIATION was bestowed as the “Supplier 2014” for the “Engineer- ing Services Wing” (ESW) area by Airbus. The prize in the “Punc- tuality” category is a special hon- our for the excellent services provided by the company in the area of high-lift elements. The awards ceremony took place in November 2014 and they were presented by Dr. Matthew Orchard, Vice President Engineering Series Wing at Airbus, within the scope of the “ESW Supplier Confer- ence 2014” in Filton, England. “This accolade emphasizes the

requirements of our engineer- ing services in the aviation and space industry and once again proves the excellent coopera-tion with the Airbus Group”, as Dr. Kolja auf der Heide, Chief Marketing Officer at FERCHAU AVIATION said. For customers, the supplier network as well as for potential job applicants, this sector-wide renowned accolade sets a clearly positive signal. Already in the previous year, FERCHAU AVIATION was acclaimed at the same place, back then for the best adherence to costs for the A380 projects in England.

AWARD FOR PUNCTUALITY

“ESW (WING) SUPPLIER” TO AIRBUS 2014

FERCHAU AVIATION was re- peatedly distinguished by Diehl Aerosystems, one of the leading manufacturers of avionics sys-tems and cabin elements, once again as a “First Tier” Supplier. This makes the company the only near-shore partner of Diehl to be selected a second time round. From a list of twelve suppliers, FERCHAU AVIATION was also the only company to achieve certifi-cation for the areas of “Design” and “Calculation”. Regarding the success factors, the technical know-how, quality management and presence of the FERCHAU business in Laupheim, Hamburg

and Toulouse played a decisive role. Both companies have collab- orated for some 13 years, cur-rently approximately 70 FERCHAU employees work at Diehl Aero- systems in the competence areas of cabin, interior and ducting. “The successful cooperation pro-vides our business division great planning security, a high status as a supplier company in the area of cabin systems and, for our em-ployees, naturally, a high degree of new, exciting challenges”, as Chris Köhler, Site Manager of FERCHAU AVIATION Laupheim is happy to report with regard to the accolade.

STILL IN THE FIRST ROW

FIRST TIER-SUPPLIER TO DIEHL

The Munich company Avionic Design Service GmbH (ADS), part of the FERCHAU fleet since 2013, had a high-ranking visitor at the ILA Berlin Air Show: the Bavarian Minister of Economic Affairs Ilse Aigner visited the shared booth bavAIRia and took over the stee-ring for the helicopter simulator

Avionic Developer System. Follow- ing short instruction she flew her laps, accompanied by a large press contingent. The Avionic Developer System is a configurable realtime development platform for various applications which enables adap- tation to individual customer re-quirements within a short period.

ADS AT THE ILA BERLIN AIR SHOW

HIGH-RANKING COCKPIT VISITOR

From left to right: Marco Schmidt – CTO ADS, Ilse Aigner – BavarianMinister of Economic Affairs, Marko Beutler – CEO ADS

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