Bail outs and capital investment

Last week saw the announcement of a rescue package for the aerospace industry in France worth up to 15 billion euros to secure the positions of large manufacturers such as Airbus and Safran – but also the supply chain of smaller companies that provide first and second tier components.

In both France and Germany, job retention schemes are set to last for up to two years, whereas the UK scheme is set to conclude by October and from August will require employers to pay back 20% of the salaries covered.

These developments have led to calls for the government to grant additional support to the aerospace industry in the UK from both Airbus CEO Guillaume Faury and the ADS (a trade body that represents aerospace and defence in the UK).

Bail outs are a contentious topic in the UK. During the 2008 financial crisis, the Royal Bank of Scotland and HBOS amongst others were bailed out at a cost of £45.5 billion pounds. The decision was seen as an essential one due to the UK economy’s high reliance on financial services and banking. However over the last few decades, successive governments have been more ambivalent about stepping in to support industry. Closures of coal mines in the 1990s and more recently the closure of steelworks in Redcar and the uncertain future of Port Talbot led to widespread public anger and discontent in areas where several generations of the same families had all worked in the local plants. In fact, it could be argued that part of the Brexit vote was driven by the failure of successive UK governments to find a long term solution to the transition of the country from reliance on primary and secondary manufacturing to reliance on a service economy for working class communities.

With respect to the aerospace industry – the UK government has had to invest heavily before – both for the development and entry into service of Concorde and to save Rolls Royce during delays to the development of the RB211 aero engine in the 1970s. Yet in the recent crisis the government response has been muted. There was the announcement of a new tranche of funding for the Future Flight Challenge – yet at £30 million this is modest and clearly aimed at development of small flying taxis rather than commercial passenger aircraft.

In fairness, state funding for aerospace is a thorny business. Over the past twenty years, disputes over the level of funding given to Boeing and Airbus have rumbled on at the WTO and recently led to the proliferation of tariffs on a wide range of products unrelated to aircraft. Yet it’s possible that in the current crisis, alternative solutions can be explored that wouldn’t violate rules, such as Boeing’s refinancing.

Another challenge in the West is the growing pressure on governments not to bail out industries seen as polluting or detrimental to climate change. I’ve seen a number of petitions circulating on social media calling for governments not to bail out industries, of which aviation is heavily featured in the accompanying photos, without commitments to decarbonisation. Yet this is not misaligned to the goals of the aerospace industry – and indeed the French investment package explicitly states that it targets zero emission aircraft. The same week as the French announcement, Germany announced a pledge to commit to hydrogen as a means of decarbonising its economy. This will include exploration of synthetic kerosene as aviation fuel.

Ultimately, commercial aircraft manufacture is not a speedy or low cost way to make a profit – and it never has been. Every successful programme has been supported either directly or indirectly by governments – either through the development costs being borne by defence (Boeing 707) or through repayable launch aid or subsidies (787, A380, A350). This is partly due to the fact that it is inescapably a high cost product. The exponential organisations of the past 10 years have tended to rely on the ability to scale up and down their workforce at will, work remotely and fail fast. Whilst all these techniques could be applicable to the development phase of aircraft – and indeed will be hastened by the current crisis – it is far more difficult to apply this in production.

Also, as long as we are unable to simulate fully the physics of flight – we will have to rely on expensive testing in ground based facilities and in flight to certify products.

There is of course the possibility that Google, Amazon or the indefatigable Elon Musk could turn their attentions to aerospace and use their capital to disruptively enter the market and operate at a lower cost than Airbus or Boeing (potentially by shoring up losses through their other revenue sources.)

Alternatively, it’s been known for at least two decades that the far East is likely to end up dominating aircraft manufacture in the way that it does for shipbuilding. Much of the drive to reduce development costs for new programmes for Boeing and Airbus has been the knowledge of this risk.

There isn’t a clear indication of what the long term UK strategy is in relation to commercial aerospace. It may be simply that the cost of a larger stimulus package is seen as too large to contemplate in the midst of the rest of the Covid-19 crisis. It may also be that the UK government is repositioning itself towards development of EVTOL and autonomous vehicles. Yet the advantage of commercial aircraft development and manufacture is that it provides a wide range of jobs and includes small and medium enterprises alongside the large giants. Part of the government’s stated mission is to level up the UK and address regional inequalities. Maintaining the aerospace industry is an expensive but effective way to do this.

What is certain, is that relying on past success and the current footprint of commercial aerospace in the UK is not enough, particularly in the latest crisis. Having a different long term strategy is painful and difficult. Having no strategy is inexcusable.

Aeronautic research in a post Covid-19 world

Yesterday I took the opportunity to register for an online webinar hosted by the chief executive of the Royal Aeronautical Society, Sir Brian Burridge and the NASA Aeronautics Associate Administrator, Bob Pearce. The topic of the webinar was Aeronautic research in a post Covid-19 world. Despite a few technical glitches that saw Bob Pearce drop out a few times, the conversation worked well and covered a range of different topics.

The webinar started off on the subject of decarbonisation. This was arguably the most compelling part of the discussion – with Pearce and Burridge discussing some aspects linked to configuration and some to energy sources. Pearce mentioned that NASA investigation of electric and hybrid-electric propulsion in the longer term is considering superconducters as a means of storage. This is interesting, as current lithium batteries present a major challenge both in terms of power density and cooling requirements. In particular, the thermal cascade failure risk is a major challenge for a safe aircraft.

There was some discussion around alternate propulsion sources – in particular hydrogen but also synthetic fuels developed using carbon capture technologies. The conclusion seemed to be that it is still unclear which technology will emerge as the frontrunner for a long term replacement to kerosene and therefore researchers must hedge their bets and continue investigating all of them.

Discussion around configuration was limited – high aspect ration truss-braced wings and blended wing bodies were the main topics covered. However, there was little discussion around the specific challenges of integrating new fuel sources, for example the cooling and heat exchange requirements of electric propulsion, or the storage tanks that might be required for hydrogen.

More surprisingly, a significant portion of the discussion revolved around urban air mobility and supersonic research. Urban air mobility has undoubtedly been one of the largest growth areas in aerospace research, with multiple start-ups developing eVTOLs. Prior to Covid-19, supersonic research was resurgent in the USA, with the NASA X-59 QueSST demonstrator in development and companies such as BOOM and Aerion working on aircraft concepts.

Yet even before the pandemic, these applications, whilst glamorous and exciting – had the hint of being toys for the rich. 

Concorde was undoubtedly a magnificent technical achievement. In addition, the transnational way of working set the scene for the future of the European aerospace industry before the genesis of Airbus.

However as a commercial product it was an abject failure. The orders were all cancelled before it entered service – with only state-owned flag carriers taking ownership of the production aircraft – and they didn’t pay for them. (Well, BA paid a pound for them….) There is a popular narrative in the UK that this was down to nefarious Americans objecting to overland sonic booms to kill an aircraft they hadn’t been able to create. Whilst there might be elements of truth to this – the reality is that Boeing and the US industry had understood better than the UK and France where the future of the commercial aerospace industry lay. It wasn’t in selling a luxury lifestyle to the fabulously wealthy, with a product that was used principally by celebrities, some business travellers and royalty. Instead it was in creating a safe, accessible means for ordinary people to travel the world. That was essentially what drove the success of the 707 and later the 747. 

In 2020, aviation ground almost to a halt in the face of the pandemic. It it likely that as people start to travel again, it will be the wealthy and powerful that begin travelling first. Yet ultimately, the success of the industry will be dependent on ordinary people flying again. There may very well be a case for a small supersonic transport to cater to business travellers for ultra long haul routes – but the major growth areas for aerospace in the next twenty years are still expected to be Asia-Pacific, followed by South America and Africa. That still requires a product that is safe, cheap and reliable to operate.

Urban air mobility is a different kind of challenge. As lockdowns ease, people are being discouraged from using public transport for commuting for fear of a second peak. To stimulate growth and to prevent emissions from simply ramping back up to their pre-pandemic levels, governments are offering incentives to switch to electric cars. In this environment, the idea of personal electric air vehicles could be appealing. Yet the means of certifying and regulating them are still at the stage of draft guidelines from the authorities.

Bob Pearce spoke intriguingly of interest from the Department of Defense and in work NASA was doing on public acceptance and airspace integration. These will undoubtedly be useful and interesting trials. Yet it’s difficult to envisage these becoming commonplace in areas with high population density any time soon.

Both speakers were clearly passionate about the need to inspire a new generation of engineers and to ensure that we innovate both to survive and to attract new talent. The major theme of decarbonisation will undoubtedly be one that is essential for the long term survival of commercial aerospace. 

Yet I would have liked to see more recognition of areas of research that might slow down or see major cuts. Also, discussion around how to address that and keep our knowledge base growing. There was some skirting of this, with discussions around automation and multiphysics models – but not a clear message on how different the post Covid-19 research landscape will look.