The Aerospace And Defence Industries Association Of Europe

E U RO P E A N D E F E NC E SEC TO RDefenceREVENUEEXPORTS 108bn35bnJOBS438kEuropean defence sectorSupporting over 438,000 high-skilled jobs in Europe, the defence sectorplays a vital role in helping to safeguard our security and contributes toEurope’s economic prosperity.Mirroring the differences in nationaldefence spending, the Europeandefence technological and industrialbase is concentrated in a few MemberStates. The main system integratorsare located in the six so-called “Letterof Intent (LoI) countries” 1 – France,Germany, Italy, Spain, Sweden and theUK; smaller platform manufactures,equipment suppliers and sub-suppliersas well as niche producers can be foundacross the European Union.Many defence companies have alsoan important civilian activity and/orform part of larger industrial groups ofprimarily civilian nature. The totalnumber of SMEs doing business indefence is estimated at 2,000 to 2,500(of which 39.6 % in land, 30.5 % in air,18.7% in naval, 7.8% in cyber, 3.4% inspace)2.1In 1998, the six major European arms producingcountries signed a letter of intent (LoI) to facilitatethe cross-border consolidation and cooperation ofdefence industries.2IHS, Analysis of defence-related SMEs’ compositionin EU, December 2016.EUROPE’S TOP 10 DEFENCE COMPANIES 20182018Defence Revenue(in millions dollars)2018Total Revenue(in millions dollars)Revenuefrom DefenceRankingWorldwide#1 BAE Systems 22,477.48 24,569.0691%#7#2 Airbus 13,063.82 75,220.5917%#9#3 Leonardo 9,828.51 14,453.6968%#13#4 Thales 9,575.57 18,775.6351%#16#5 Rolls Royce 4,682.36 20,110.9323%#24#6 Naval Group 4,260.53 4,260.53100%#29#7 Rheinmetall 3,803.54 7,259.9152%#30#8 SAAB 3,243.68 3,816.0985%#36#9 Dassault 2,934.43 6,003.4849%#38 2,909.79 6,206.6747%#39#10 Babcock InternationalSource: Defense News

EUROP EA N DE F E NCE S ECTO RIn 2018, the European defence industrygenerated a turnover of 108bn. Thisaccounts for more than 20% of theglobal defence turnover but remainsfar behind the US global market share(almost 60%). Companies establishedin the LoI countries alone generatedrevenues of 91.2bn3.E U RO P E A N D E F E NC E SEC TO REXPORT DEFENCE 2018AERONAUTICS 62% 22bnMilitary aeronauticsLAND & NAVAL38% 13bnTURNOVER DEFENCE 2018AERONAUTICS 42%Total export defence 35bn 45bnSPACE 1% 1bnNAVAL 23% 25bnLAND 34% 37bnTurnover defence 108bnMilitary exports reached 35bn in 2018.Out of this total, 22bn is attributableto military aeronautics and 13bn to theland and naval sectors. These exportsare crucial for European industry tocompensate for relatively small homemarkets and to reach the productionvolumes that are necessary to maintaincompetitive per-unit prices.In 2018, defence industry in Europesupported more than 438,000 jobs.Of that total, 168,000 jobs (38%) wereattributable to military aeronautics, theremaining 266,000 (61%) to the landand naval sectors. Recent trends showthat the European defence industry isfacing a shortage of skilled labour. Thisis due to several reasons, including thehigh pace of technological innovationand the increasing competition fromother sectors for younger high-skilledworkers.The European military aeronauticssector produces a broad range ofmanned and unmanned aerial systems,from combat aircraft and drones totransport aircraft and helicopters.It consists of companies of all sizes,from prime contractors which sit atthe top of the supply chain and delivercomplete systems and ‘system ofsystem’ solutions, to tier-3 sub-suppliers which provide components and rawmaterial.mated 63% of total European defenceexports. Employment in the militaryaeronautics sector is estimated at168,000 jobs, which accounts for 38%of total defence employment.Land and navalThe combined turnover of the Europeanland and naval industry increased by18% from 52bn in 2017 to 61.4bn in2018 ( 37bn land, 25bn naval). Bothsectors experienced a decrease in theirexport volumes, from 15bn in 2017to 13bn in 2018. Employment in bothLAND & NAVAL61%AERONAUTICS38%1%European Court of Auditors (ECA), EuropeanDefence, ECA’s Review 9/2019.Air power superiority is a key successfactor for defence. It must be able tosupport all types of missions and tooperate in a joint and collaborativeenvironment. It requires a strong industrial base that must be constantlysustained to remain at the technological edge.EMPLOYMENT DEFENCE 2018SPACE3The European defence industry – an indispensableelement of Europe’s strategic autonomyEmployment defence 438,000In 2018, the European military aeronautics sector generated a turnoverof 45bn. Half of this turnover ( 22bn) is achieved with exports, whichdecreased by 8% compared to 2017( 24bn) but still account for an esti-sectors increased by roughly 6,000,reaching a combined total of 266,000jobs in 2018. This means that the landand naval sector together account for61% of the total defence employment.With a turnover of 37bn in 2018(which accounts for 34% of the totaldefence revenues), the Europeanland industry has a long tradition ofsupporting Member States’ armies

E U RO P E A N D E F E NC E SEC TO REUROP EA N DE F E NCE S ECTO Rand is key to deliver a new generationof land military capabilities. Industry’sproduct portfolio is diverse, spanningfrom main battle tanks to families of armored vehicles, artillery, guided ammo,integrated systems and componentsfor the battlefield and protection of soldiers and infrastructures. The largestEuropean land prime contractors arelocated in France, Germany, Italy andUK, although important industrialcapabilities exist also in other MemberStates.The European naval sector generated in 2018 revenues of 25bn,which represents 23% of totalEuropean defence revenues. Thisindustry produces platforms of allsizes as well as embedded systemssuch as electronics and armaments.The sector encompasses the fullspectrum of vessels, including aircraftcarriers and nuclear submarines.In Europe, there are six prime contractors which have the full responsibility to design, integrate and buildnaval ships. For the design and development of combat systems andcombat management systems, mostof them rely on tier-1 suppliers. Thelower tiers of the supply chain consistof a broad range of companies ofdifferent size and activities. Many ofthem generate only a small part oftheir revenues on the defence market.Future challengesFuture warfare will be characterized more and more by a systemarchitecture approach, which takesadvantage of new, emerging anddisruptive technologies (e.g. artificialintelligence, quantum computing, 5G)and uses platforms as nodes orcomponents of a system.This development is driven by changesin both threat scenarios and technology advances. In the future, therewill be an increasing need for armedforces to be able to operate in anintegrated manner across all domains,supported by the necessary technologies. The latter will be stronglyinfluenced by emerging technologytrends that are driven mainly by hugeinvestments in the commercial sector.Whilst defence industry will not beat the forefront of developments insuch technologies, it will have theresponsibility to develop the means ofapplying these technologies to militarysystems and military operations.New technologies, more pervasiveand transversal, are likely to haveconsequences also for the structureof the defence industrial and technological base. It will bring newentrants into the military sector andcause defence companies to adapttheir strategies to meet the need toincorporate these new technologiesinto the products they develop.

RE SE A RC H & D E VE LO P ME NT (R& D)Research & DevelopmentTOTAL R&DINVESTMENT Research & Development (R&D)Research, technology and innovation are instrumentalfor a sustainable and competitive future.19bnThe European aeronautics and defenceindustry is driven by significant activities and investments in Research andDevelopment. R&D refers to the activities companies or public stakeholdersundertake to improve or develop newproducts and services. While R&Dencompasses the whole research anddevelopment process, from upstreamresearch to the final product or service,R&T – Research and Technology –focuses on the first phases (study ofmature technology components (upto TRL 6) that will allow to launch thede development of a project with lowrisks).In 2018, the R&D expenditure onaeronautics and defence from bothindustry and governments is estimatedat the level of 19bn, with an equal splitbetween civil and military activities.For the European industry to stayahead in a fast-changing and globalinnovation race, the support of nationalgovernments and the EU is essential.The investment gap between the EUand the United States (US) is massivewhen it comes to aerospace anddefence-related R&D. In 2018, the R&Dinvestments in the US (from industryand government) were more than fourtimes higher than in Europe. If thislong-term investment gap persistsbetween Europe and other regions ofthe world, this will add further difficulties to maintain Europe’s leadership.RESEARCH & DEVELOPMENT 2018CIVIL AERONAUTICS 47% 9bnMILITARYAERONAUTICS 32% 6bnLAND & NAVAL 21% 4bnTotal R&D Investment 19bn

RE SE A R C H & D E V E LO P M E NT ( R &D)RE SE A RC H & D E VE LO P ME NT (R& D)R&DCIVIL AERONAUTICS 9bnInvested by private andpublic stakeholdersR&D in civil aeronauticsIn 2018, it is estimated that 9bn wereinvested in civil aeronautics R&D activities by private and public stakeholders.Most of the investment comes froman increasing number of private investors (suppliers and customers) whilegovernment support is increasinglymarginal.According to the European Commission,every euro invested in aeronautics R&Dcreates an equivalent additional valuein the economy annually thereafter.Indeed, it enables the development ofsustainable and competitive productsand services, while maintaining andcreating high-skilled jobs in Europe.R&D is the main driver to achieve theambitious sustainability targets thesector is committed to. The Flightpath2050 roadmap aims that in 2050,technologies and procedures availableallow a 75% reduction in CO2 emissionsper passenger kilometre and a 90%reduction in NOx emissions. The perceived noise emission of flying aircraftwould be reduced by 65%. These arerelative to the capabilities of typicalnew aircraft in 2000. Today’s aircraftand engines are much more fuelefficient than earlier generations: it isestimated that fuel consumption perpassenger/km has been reduced by70% since the 1970s.However, the societal demand for airtravel is booming (with an averageincrease of 5% each year), and constantresearch is critical to further reduce theemissions of the next generation of aircraft. Besides, competitiveness is keyto take the lead on green technology atinternational level and ensure solutionsand pathways are affordable and canbe integrated by the whole sector.The aeronautics sector is marked bythe high complexity of its productsand systems, subject to significantlylong R&D cycles up to 20 years, allof which require long term and largeinvestments.The long development cycles and thehigh technological risks that characterise the aeronautics industry requirecooperation between all the key actorsalong the supply chain (private andpublic organisations) to reinforce andstreamline research.European public-private partnerships(PPPs) such as Clean Sky and SESARare delivering substantial socio-economic impacts:Clean Sky develops innovative, cuttingedge technology aimed at reducing CO2,gas emissions and noise levels producedby airplanes and helicopters. To this end,R&D is the main driverto achieve the ambitioussustainability targets thesector is committed tomore than 30 main demonstrators ofdifferent sizes are being developed at avery high technological maturity level.So far, Clean Sky results confirm anoverall 32% CO2 emission and 50% to86% noise decrease potential. Theseare being crystallised as the technologies are applied to commercial products, while the programme’s partnersare innovating further to increase theperformance of aircraft.SESAR is delivering a catalogue of solutions to modernise the management ofair traffic in Europe, ensuring the safetyand sustainability of European airtravel and aviation. When deployed, the60 solutions already delivered shouldincrease airspace capacity by 34% anddecrease flight time variance by 30%,meaning reduce delays on all EU flights(95% of flights staying within their timeplan), and lead to a 2,3% decrease offuel burn and emissions per flight.

RESE A R C H & D E V E LO P M E NT ( R & D)R&D DEFENCE TOTALInvested by governments 10bnR&D in defenceInvestment in defence R&D and (itssubset) R&T is essential to the longterm sustainability of the Europeandefence industry and its capacity to develop the next-generation capabilitiesof Europe’s armed forces. CombinedEuropean investment in defence R&Damounts to roughly 10bn. The bulkof investment comes from nationalgovernments as the key customers.Private investments are very limitedand concern only lower complexity orlower value research. Defence R&Dspending in Europe remains highlyconcentrated in the six LoI countries(France, Germany, Italy, Spain, Swedenand the UK), accounting for 95% ofdefence R&D investments. France andUK account alone for more than half ofthe total, followed by Germany, Italy,Spain and Sweden.In spite of an overall increase indefence spending, investment indefence R&D has decreased from23.5% of total investment in 2015to 21% in 2017 and is estimated todecrease further. The decrease infunding, the concentration of activityin few countries and the fact thatthe collective benchmark for defenceResearch & Technology (2% of totalspending) has never been reached,raises concerns regarding the longterm European innovation capacity.To reverse this trend and to fosterEuropean collaboration, the EU has putforward several initiatives to supportthe European defence industrial base.Via the Preparatory Action on DefenceResearch (PADR) and EuropeanDefenceIndustrialDevelopmentProgramme (EDIDP), EU resourceshave been allocated, for the first timeever, to support the defence sector.EDIDP and PADR aim at boostingcollaborative research and development, which is crucial for industry’scompetitiveness and capacity tosustain our armed forces withcutting-edge technology. Togetherthey prepare the ground for thefully-fledged European Defence Fund(EDF) that is planned under the nextMulti-Annual Financial Framework (MFF).R&D INVESTMENTS DEFENCELoI COUNTRIES 95%OTHER 5%France, Germany, Italy,Spain, Sweden and the UKTotal R&D Investment Defence 10bn 6bnAERONAUTICS 4bnLAND AND NAVAL

Words from the Secretary GeneralThe aerospace and defence sectors areof strategic importance for Europe andits capacity to live up to the challengesof the 21st century. We develop thetechnologies that matter for Europe’ssovereignty and contribute to achievingthe Union’s climate ambitions.In 2018, our industry reached a newrecord: sales growth amounted to 3.5%,with total revenue reaching 246bnworth of state-of-the-art technology,making this industry a championfor exports, thus contributing to theEuropean trade balance and creatingprosperity for the European economy.In this regard, I would like to thank the870,000 men and women employed byour industry, engaged and passionate,who are behind this success story.Despite these exceptional results, thisis no time to rest on one’s laurels. Oursector is facing important challenges,such as the new digital revolution andits impact on technologies and skills,increasing trade tensions and the emergence of new, often state-sponsoredcompetitors, which create unfair competition on global markets. With competition only increasing, developing theright strategies is essential to ensureEurope’s continued place at the cuttingedge of innovation while securing jobsfor hundreds of thousands of people inthe EU.Building up the future is at the heart ofASD’s commitment. In this regard,our industry is investing massively inResearch and Development to keep upAbout ASDASD is the voice of European Aeronautics, Space, Defence and SecurityIndustries, representing over 3,000 companies and actively supporting thecompetitive development of the sector in Europe and worldwide.MethodologyASD Secretary General, Jan Piepace for Europe’s success as well asachieve climate neutrality, one of thebiggest challenges facing mankind. Atthe same time, protecting the European citizens and defending Europe’sinterests and values imply a Europeanindustrial base capable of developingthe technologies which are critical forthe freedom to decide and to act.The EU’s support is crucial in theseimportant endeavours and ASD looksforward to a renewed and strengthened partnership with the EU Institutions, in light of their new mandate.The 2019 facts and figures set out thestrength of our sectors, their contribution to European growth and howindustry, government   and   the   EU–   working   together – can deliverthe jobs and exports we need to secure a prosperous future. Let’s advanceEurope together!ASD Secretary GeneralJan PieThe ASD Facts & Figures result fromthe contribution of the NationalAssociations that are members of ASD,with ASD as a coordinator. In 2018, ASDNational Associations members werespread across 18 European countries*.The data published in this industrialoverview takes into account thefollowing factors: exchange rate fluctuations, different statistical accountingin the UK, unconsolidated data for aeronautics and defence and consolidateddata for space. The analysis was conducted using a consolidated processbased on crosschecks. The perimeter ofthis analysis is different from that of theEU, the European Defence Agency orthe North Atlantic Treaty Organisation.Due to membership changes in ASD andits members, any year-to-year comparison should be considered in terms oftrends and order of magnitude.The definition of aeronautics includes civil and military aeronautics. Inthis edition, the aeronautics chapter ofthis brochure only covers civil activities.The definition of defence combines allsectors, i.e. military aeronautics, space,land and naval. Each sector combinessystems, platforms and components,while electronics and missiles are embedded transversally.The brochure doesn’t specify information on dual use nor the securitysector whose perimeter has not yetbeen fully defined.All photos used in this brochure belongto ASD members.* Austria, Belgium, Bulgaria, Czech Republic,Denmark, Finland, France, Germany, Greece,Italy, Norway, Poland, Portugal, Spain, Sweden,The Netherlands, Turkey, and the United Kingdom.

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aerospace and defence industry Despite continued economic and political uncertainties, the aerospace and defence industry continued to expand, following the growth trend of recent years. Sales growth for the industry as a whole amounted