Airbus, Boeing May Force Supplier Mergers to Reduce Costs

Bloomberg (Mostoe) - Airbus SAS and Boeing Co. may force mergers among component suppliers in the next 12 months as they seek to slash production and research expenses, according to aerospace executives and analysts at the Farnborough Air Show.

Consolidation will focus on producers of fuselage, tail and engine parts that are too small to bear the development costs Airbus and Boeing want to pass on, according to Paul Edwards, international head of aerospace & defense investment banking at Jefferies International. GKN Plc, Senior Plc and Fokker Aerospace say they’re on the lookout for opportunities.

Many companies that produce composite parts are former planemakers seeking to adapt to new realities, Edwards said. Because the fabric of an aircraft isn’t replaced in its lifetime, they miss out on maintenance and spares orders and should use mergers to expand into higher-value work, he said.