Forecast remains unsettled

It has long been a British trait to discuss the weather with all and sundry. This habit, long scoffed at by those from other countries, fulfils a number of functions not least providing a topic of conversation when there is nothing else to say. Strange then that at an event as multi-national as the Paris Air Show perhaps the conversational high point has been a cacophonous storm on Tuesday that made more noise than the flying displays that lacked the combined clout of the US and Russia.

Yes, there was the largest civil aviation contract of all time announced by Emirates, but that had been widely forecast before this week and therefore surprised no-one, certainly not Airbus. Noel Forgeard, CEO of the European manufacturer, was clearly determined to enjoy the fact that his company is at last dominating the battle with arch US rival Boeing despite an economic climate, which he described as "the worst crisis ever to hit our industry."

Barring the absence of US aircraft in flight, the pre-show controversy regarding the Pentagon's reported requests for companies to cut their involvement in this year's event has been largely glossed over by those who have made the trip. In fact the current economic situation has provided them with a ready made excuse for there being less of a US presence than usual.

In terms of defence there has been a dearth of significant contracts and much has been made and will continue to be made of the tensions that exist between Europe and the US. The encouraging message that has been emerging from US companies, led by Lockheed Martin, has been one of conciliation.

"The time is right to achieve and implement an integrated transatlantic defence marketplace," said Bob Trice, Senior Vice President for Corporate Business Development for Lockheed Martin, but he warned there would be "bumps in the road."

There is a groundswell of opinion that the US market needs to become more accessible and that Europe has to increase its levels of spending particularly with regard to research and development. The big question that must be answered in both cases is how.

Take for example the competition to provide the next fleet of helicopters for the President of the US via the Marine Corps. AgustaWestland, in combination with Lockheed Martin, is offering the US101, a version of the EH101, for the HMX-1. The helicopter is an established performer that meets the requirements, has the backing of UK Prime Minister Tony Blair, supposedly President Bush's closest ally, and yet the contract will probably go to its US rival Sikorsky's H-92.

Equally, in Europe it is difficult to see how governments can increase defence spending to the levels required to significantly close the gap that exists with the US, certainly in cases like Germany which is struggling to fund the programmes that it is currently involved in. There must be more joint initiatives but when you look at the example of the A400M programme, which has taken 18 years simply to reach a stage where a definitive production contract can be signed, there is scarce ground for comfort.

Inevitably it is the defence contractors themselves that can ease the process. BAE SYSTEMS, for example, have made no secret off their ambitions with regard to the US and may even be willing to be absorbed by one of the US big boys in order to achieve them. However, Duncan Craig of ATKearney suggests that a smaller scale may present a more palatable answer. "Perhaps the answer is to have more transatlantic share ownership, with US companies investing in European companies and vice-versa," he said.

At any rate the next few years will continue to be unsettled as the politicians soothe some ruffled feathers, and the civil market keeps its fingers crossed for the expected upturn by 2005.

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