Euro turmoil: the potential fallout

The financial crisis in Europe could have significant repercussions for the aerospace industry, whatever happens.

The Royal Aeronautical Society's head of research, Professor Keith Hayward, believes that any degree of breakdown in European cohesion would be severely damaging for the industry.

Writing in the Society's latest Aerospace Insight, Prof Hayward says that we are likely to see at least one state walk away from the Eurozone in the next few months; and that could mean four significant aerospace powers (the UK, Italy, Spain and Sweden) are outside the unifying currency.

Amongst the highlights of Prof Hayward's paper are:

* This would immediately negatively affect all of the European consortia and transnational companies whose operations were greatly eased by the eradication or simplification of currency fluctuations brought by the euro. 

* The critical link between oil pricing and aviation is the crux of the problem, because it has led to commercial aircraft dollar pricing and the gift of a useful commercial edge to US manufacturers.

* Even limited damage to the eurozone will have a marked impact on the way European aerospace does business — and this is before we factor in the impact of any consequent general economic recession on output and demand for aerospace products.

* A more fundamental breakdown in European cohesion would be much more damaging to the aviation community, affecting emissions trading, airspace integration, the European air travel market and even collective R&D support.

* The EU does have its ‘difficult’ aspects but its processes and political context has encouraged a positive approach to aerospace. 

Prof Hayward concludes by saying that, "we are moving into uncharted waters and a period of sustained uncertainty beckons.

"This does not auger well for industry that needs to look long term and be assured of a stable economic and financial environment."

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