The Aerospace Industry in Germany – Technology to Attain Higher Aims Industry Overview
The Aerospace Industry in Germany
Germany is the Geographic and Economic Center of Europe Aerospace is one of Germany‘s best performing and most innovative industries, and as such, is one of major strategic importance. It is one of the technological motors that drives Germany as a high-tech nation and one which combines all of the key future technologies including electronics, robotics, materials, and software. The aerospace sector is the birthplace of many innovations
which later make their way into the other parts of the economy – and Germany is the right place to realize them. Lying at the heart of Europe at the crossroads between the highly developed west and the booming east, Germany has attracted major system integrators who are currently taking advantage of the outstanding conditions that the country has to offer.
Finland
Sweden
Norway
Estonia Moscow Latvia Denmark
Ireland
< 24 h by
truck
United Kingdom
30 h >
Lithuania RU
< 12 h
15 h >
Belarus
Netherlands
Belgium
Germany
Poland
Luxembourg
Ukraine
Czech Republic Slovakia
France Switzerland
Austria
Moldova
Hungary
1.5 h >
Slovenia Croatia
Romania
BosniaHerzegovina
Portugal
Serbia
Spain Montenegro
Italy
Bulgaria Macedonia
Albania
3h>
Greece
Turkey
Malta Cyprus
The German Aerospace Industry in Numbers - Since the mid-1990s, the German aerospace industry has been steadily growing at an average rate of around nine percent per year, making it one of Germany’s best performing industries. - More than 155 companies and institutions employ over 88,000 highly skilled members of staff, generating sales of EUR 20.2 billion. - With annual R&D expenditures ranging between 15 and 20 percent of sales, the aerospace industry is among the most innovative industries in Germany. - Most of the world’s major aerospace players have manufacturing facilities in Germany: Airbus (passenger and cargo planes), Eurofighter (Typhoon jets), Eurocopter (helicopters), and EADS Astrium (satellites, launchers, orbital facilities). Moreover, MTU and Rolls Royce produce some of the world’s most advanced aircraft engines in Germany. Were that not enough, Bombardier and Lufthansa Technik ensure first class maintenance, repair and overhaul services (Lufthansa is also involved in a joint venture with Rolls Royce called N3 Engine Overhaul Services). - The aerospace industr y in Germany is especially strong in three powerful geographical clusters (Bavaria, Berlin-Brandenburg, and Hamburg), with thematic priorities in different areas including cabin interiors, engines and lightweight construction.
German Aerospace Employees and Turnover Employees
Turnover
95,000 16.6 13.1
85,000 75,000
15.3
15.7
16
18.6
19.5
20.2
14.8
15
12.2 8.7
20
10.9 10
7.9
5
65,000
55,000
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Employees Turnover (in EUR billion)
Source: BDLI 2007
German Aerospace Industry Turnover by Segment
4%
Systems Engines Equipment Materials
19%
13%
64%
Source: BDLI 2006
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The Aerospace Industry in Germany
The Advantages of Ger-
development cooperation. At the same time, aerospace suppliers have direct access to new markets for cutting-edge technologies in areas including materials, electronics, nanotechnology, and production technologies.
many as an Aerospace Investment Location Market Aerospace is a rapidly expanding industry. Over the next 20 years, estimates foresee the demand for around 25,000 new airlines with a market value of USD 2.8 trillion worldwide. Thanks to the presence of manufacturers of civil and military aircraft, Germany is a large market where suppliers benefit from close customer proximity. Moreover, aerospace companies are also able to take advantage of Germany’s sophisticated industrial, physical, and R&D infrastructure. Germany’s proven strength in industries such as automotive, machinery & equipment, and chemicals provides a powerful platform for engineering and
R&D Germany is home to a world class research community. According to the World Economic Forum’s (WEF) Global Competitiveness Report 2007-2008 of 131 nations, no other economy tops Germany in terms of its capacity for innovation1. The country is characterized by the high value placed on scientific and industrial advancement, and the vibrant exchange and cooperation between the scientific and business communities. Together with the country’s strong net work of universities, Germany’s internationally renowned fundamental and applied research institu-
tions (such as the Max-Planck Society, the Fraunhofer Gesellschaft, and the German Aerospace Center - DLR) contribute to a climate of technical innovation that helps to make Germany a global leader in patent registrations. This environment is ideal for a research and innovation-driven industry like aerospace.
1
World Economic Forum: The Global Competi-
tiveness Report 2007-2008. “Capacity for innovation” is an expression of company ability to obtain new technologies from formally conducted research and pioneering of own new products and processes, as opposed to licensing proprietary technologies or adapting existing company technologies.
Innovation Infrastructure – Networks of Competence DENMARK BALTIC SEA
Kiel
BALTIC SEA
Schleswig-Holstein NORTH SEA
2
3
Schwerin
Hamburg
MecklenburgVorpommern
2 1 Hanover
5
THE NETHERLANDS
1
2 2 2
5
4
2 4
Magdeburg
Adaptronics
2
Automotive
3
Carbon Fiber Reinforced Plastics
Power Engineering
4
Virtual Engineering
11
Fuel Cells/Hydrogen
5
Saxony-Anhalt
Mechanical Engineering
2
Power Electronics
6
5
Process Technology
4 5
5
1 3
4
Component Behavior
Automotive Engineering
2
Surface Engineering
and Telematics
3
Lightweight Construction
4
Natural Fiber Composites
5
Textile Research
1
FRANCE
4
3
i
Communication Tech.
d
i
2
Stuttgart
6
@
5
1
2
Information and
CZECH REPUBLIC
3
l d
2
Saarland Saarbrücken
2
1
1
Mainz
Materials Science
Traffic and Transportation
Hessen
Wiesbaden Rheinland-Pfalz
Microelectronics
Dresden
Saxony Thuringia
LUXEMBURG
Mechatronics
(Hybrid Engines) Erfurt
BELGIUM
Industrial Manufacturing 1
Potsdam
Düsseldorf
1
3
Micro and Nanotechnology
POLAND
3 5
1
2
Berlin
1
North RhineWestphalia
Recycling Technology
Microsystems
4
Brandenburg
Lower Saxony
Environmental Technology
Engineering 1
3
Bremen
Mechatronics/Microsystems
Bavaria
4
3
Baden-Württemberg
Munich
1
Navigation, Telematics
2
Traffic Systems
3
Software Engineering
4
Virtual and Augmented Reality
Aerospace Cluster
1 National Border (Federal) State Borders (Federal) State Capital
SWITZERLAND
4 Industry Overview 2008
City-State
Source: Federal Ministry of Economics and Technology, 2007
Personnel Germany’s excellent highly skilled labor force is at the heart of the aerospace industry’s success. Our dual education system – unique in combining the benefits of classroom and vocational training over a period of 2-3 years – is specifically geared to meet industry needs and ensure that skilled workers are well-prepared for the workplace.
German Physical Infrastructure
Denmark
Kiel Kiel
Sc hleswig-
In addition, Germany is home to 13 universities that offer special courses of studies such as aeronautical engineering and aircraft construction. These institutions educate around 4,500 aerospace students each year.
Bremerhaven
Rostock
Holstein Hamburg
Cuxhaven Wilhelmshaven Emden
Lübeck
Mec klenburgSchwerin
Ha m burg
Western Pom erania
Poland
Bre m e n
Netherlands
Greifswald
Lower Saxony
Potsdam
Hanover
Berlin
Magdeburg
Physical Infrastructure Located at the heart of Europe, Germany offers a sophisticated infrastructure that integrates state-of-the-art transportation networks with the most modern and cost efficient IT and telecommunications systems available today. Not for nothing is Germany Europe‘s number one in logistics. Germany‘s exceptional strength in this area has been underlined by the World Economic Forum‘s (WEF) Global Competitiveness Report 2008 in which the German economy took first place for infrastructure. It is this world class infrastructure of roadways, railways, waterways, seaports, and airports which supports the continued success of the highly efficient and smooth-operating aerospace logistics environment.
North
Brandenbu rg
SaxonyAnhalt
R hine-
Leipzig
Dusseldorf
Westphalia
Erfurt
Cologne/ Bonn
Saxony Dresden
Hessen Thuringia
Belgium
Wiesbaden
R hinelandLuxembourg
Hahn
Frankfurt a.M. Czech Republic
Mainz
Palatinate Saarland
Nuremberg
Saarbrücken
Stuttgart France
Bavaria BadenWurttem berg
Munich
Capitals of Federal States
Austria
Borders of Federal States German Autobahn
Stable Investment Environment Highly developed social, economic, and political frameworks provide the necessary security for your business investment. Our judiciary and civil service institutions are professionally regulated to ensure consistent and qualified delivery of service. Contractual agreements are secure and intellectual property is strictly protected in Germany.
Freight Rail Networks
Switzerland
Navigable Waterways
Capitals of Federal States Borders of Federal States German Autobahn Freight Rail Networks Navigable Waterways Seaports Major Airports
Source: comcontor
Industry Overview 2008 www.invest-in-germany.com
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The Aerospace Industry in Germany
Opportunities
In order to achieve these targets, aircraft manufacturers and suppliers will be required to develop and introduce new technologies that enable airlines to modernize and expand their fleets with new and more environmentally friendly aircraft. Meeting the “Vision 2020” targets (while reacting to the continuous growth in passenger and freight traffic) signifies a potential new market volume of around 25,000 new planes with an overall market value of USD 2.8 trillion by 2026.
Climate Change – Challenge and Opportunity for the Industry Climate change and the consequences thereof have become an important issue for society at large and the aerospace industry in particular. In 1997, thirtynine industrial nations signed the Kyoto Agreement to reduce environmentally damaging emissions. Although, no direct provision was made for aviation within the framework, the industry is now set to be included in Germany is the ideal business location the European Emissions Trading Scheme to seize these new market opportunities. (ETS). The ETS has been introduced as an The country’s longstanding tradition and instrument to help tackle emissions by know-how in environmental technologies, issuing certificates allowing companies to coupled with its leadership in key techproduce an agreed amount of emissions. nology areas (including mechanical engiThese certificates can then be traded freely neering, nanotechnology, chemicals, and (so-called “emissions trading”). Thereby a materials) make it one of the main locamonetary value is attached to emissions tions for the development and introduction which acts as an incentive for compaof innovations to meet the challenges of nies to switch to environmentally friendly climate change. technologies. Recognition of the need for new, environmentally friendly technologies is wellestablished within the aerospace industry. The Advisor y Council for Aeronautics Research in Europe (which brings together representatives of European nations, the aviation industry, airports, airlines and research institutes) have created the “Vision 2020” for European aeronautics which sets out a number of ambitious targets. These include:
Business Aviation Business aviation - and air taxi services in particular - are among today’s most promising market segments within the aviation industry. Factors including the introduction of fuel efficient technologies, advances in product development, the emergence of very light jets, the reduction of operating costs, and the increasing popularity of the fractional ownership concept are all helping to drive business jet service expansion. In Europe, it is still very early days for the business jet market. However, it is expected to grow, driven by the continuous rise in European air traffic putting pressure on Europe‘s main airports who are limited in their expansion options. As the economic engine of Europe with one of the highest number of business destinations in the continent, Germany is at the center of these developments. The country is home to the ideal infrastructure for business aviation providers. Over 30 regional airports allow customers to fly closer to their final destinations, sparing the time and effort of flying over the major airports.
- 50% reduction of CO2 emissions - 80% reduction of NOx emissions - 50% reduction of perceived external noise - 50% reduction of new product time to market - threefold capacity increase
Airbus 350
6 Industry Overview 2008
Executive Lounge, Illustration Lufthansa Technik AG
Interiors Engineering and R&D Centers Germany is the ideal location for setting up The comparatively short product life cycle R&D and engineering facilities. It provides of cabin interiors and the need to continthe sophisticated innovation infrastructure ually optimize space management, pasnecessary for excellent development and senger comfort, and weight reductions engineering cooperation. Moreover, the combine to make this an extremely promtechnology overlap between Germanyâ&#x20AC;&#x2DC;s ising and attractive supplier segment. traditionally strong industries (e.g., the Moreover, companies operating in this automotive industry) and the aerospace sector find additional business opportuindustry opens up untapped market poten- nities in the automotive industry where product differentiation through interiors tial for engineering services providers. is a major selling factor â&#x20AC;&#x201C; particularly in the premium segment where Germany is the world leader. The fact that Germany is the main site for Airbus cabin interiors and home to 31 ďŹ nal automotive assembly sites makes Germany the place to be.
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The Aerospace Industry in Germany
Types of Incentives in Germany Incentives
Investment Incentives Package
Operational Incentives Package
Cash Incentives
InterestReduced Loans
Public Guarantees
Labor-Related Incentives
Investment Grant
KfW Loans (National Level)
State
Recruitment
Combined State/Federal
Training
Investment Allowance 1
1)
+
State Development Bank Loans
Grants Loans
only in eastern Germany
Incentives Germany offers numerous incentives for all investors - regardless of whether they are from Germany or otherwise. There is a large selection of programs designed to support a wide variety of business activities at different stages of the investment process available. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor and R&D.
Germany’s Investment Incentives Package Germany’s investment incentive package significantly reduces investor production facility set-up costs. The package consists of cash incentives, loan programs offering reduced interest rates, and public guarantees at state and national level. The amount of these investment incentives generally depends on three factors: project scope, investor company size, and the new investment location. Investment incentives can reach up to 50 percent of eligible expenditures once these factors have been considered.
8 Industry Overview 2008
R&D Incentives
Interest-Reduced Loans Special loan programs make up a second component of Germany’s investment incentives package. They are offered by publicly-organized financial institutions. These programs usually offer loans at below market interest rates and subordinated loans similar to equity. The provision of such loans makes it easier for investors to access additional funding from public banks.
Wage Subsidies
Silent/Direct Partnership
Source: Invest in Germany Research, 2008
Public Guarantees The investment incentives package is completed by public guarantees. This tool is offered by the states and the federal government to help secure private bank loans.
Germany’s Operational Cash Incentives The main instrument of Germany’s investment incentives package are cash incentives provided in the form of direct investment grants. Germany will make more than EUR 2.3 billion in cash incentives available in 2008. Investment grants are offered in several incentive regions in Germany. Eligible investment costs include the purchase or production costs of buildings, machinery and equipment. The purchasing costs of intangible assets are likewise eligible. In general, investment projects must create long-term employment in order to benefit from investment grant provision. In eastern Germany, investment grants are complemented by the Investment Allowance (Investitionszulage IZ), which is usually provided in the form of a cash payment and/or tax credit. As with investment grants, eligible Investment Allowance costs include the purchase or production costs of buildings, machinery and equipment. Because the Investment Allowance is a tool specifically created to support the eastern parts of Germany, all equipment financed through the investment allowance must remain at the location for at least five years upon completion of the investment project.
Incentives Package Labor-Related Incentives Labor-related incentives are available throughout Germany. The Federal Employment Agency and all German states offer a range of different labor-related incentives programs. They can be divided into three main groups: programs focusing on recruitment support; training support; and wage subsidies respectively. R&D Incentives Germany offers several incentives programs targeted at reducing the costs of R&D projects. Some of these programs are specifically targeted at the aerospace industr y; others refer to related areas such as materials or new production technologies. Programs are run at the European, national, and regional level.
R&D Incentives for the Aerospace Industry The European Level – 7th Research Framework Program At the European level, the most important R&D financing instrument is the 7th Research Framework Program (FP7) of the European Union (EU). EUR 4.2 billion of the overall budget of EUR 50.5 billion is specifically reserved for the area of transport (including aeronautics). Aeronautics focus is given to the following research areas: - Greening of air transport - Increasing time and cost efficiency - Protection of aircraft and passengers - Ensuring customer satisfaction and safety Specific topics addressed include: aerostructures, propulsion, systems and equipment, avionics, flight physics, maintenance, and production. Subject to the concrete research project, other areas (e.g., materials technologies) are also applicable to the aerospace industry. FP7 funding applications are made by forming a transnational consortium for the submission of a project proposal in response to a call for proposals. In the official call for proposals (which takes place once or twice per year) the EU publishes the research topics, the rules of participation, and the budget available. Research grants can be as high as 75% of eligible project costs for small and medium-sized enterprises (SME). The National Level – Germany’s High-Tech Strategy At the national level, all R&D incentives programs are subsumed under the Federal Government’s four year High-Tech Strategy. The High-Tech Strategy defines specific sectors with a high dependency on new high-tech developments.
High-Tech Strategy funding is generally allocated in the form of what are termed “R&D grants” - usually following specific calls for proposals. On average, incentives cover up to 50% of all eligible project costs. The High-Tech Strategy: Aerospace Industry Relevant Sectors with Relevant Budgets (2006-2009 in EUR million) Space technologies Energy technologies Information and communication tech. Health research and medical technology Automotive and traffic technologies Nanotechnologies Biotechnology Environmental technologies Materials technologies Optical technologies Plants Aviation and aeronautical technologies Production technologies Microsystems technology Maritime technologies Security research Services
3,650 2,000 1,180 800 770 640 430 420 420 310 300 270 250 220 150 80 50
Source: German Federal Ministry for Education and Research (BMBF)
Each sector comprises various R&D pro- - Environmental sustainability of air traffic grams. More than EUR 15 billion has been - Increase of transport capacities made available for all sectors until the end of 2009. - Security and passenger friendliness Most important for the aerospace industry - Efficient aircraft are programs from the space technologies, - Production, maintenance and repairs and aviation and aeronautical technologies sectors. Programs subsumed by other The Regional Level – Funding SME sectors of the High-Tech Strategy may Regional R&D grants usually target small also be relevant for aerospace industry and medium-sized enterprises (SME). research projects subject to individual Some German states have focused their project focus. funding policy on specific industry clusters, Within the framework of the High-Tech but funding programs are generally availStrategy, a special R&D program for the able for projects that do not have a specific aerospace industry has been created: the technological focus. German Aerospace Research Program. This goes beyond the timeline of the HighTech Strategy; providing a budget of EUR 636 million until 2013. The German Aerospace Research Program gives priority to the following research areas:
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The Aerospace Industry in Germany
Invest in Germany Closely Supports Your Project Management Team throughout the Entire Investment Decision Process Investment Decision Process – Areas of Invest in Germany Support Investment Process Milestones
Invest in Germany Key Support Areas
Strategy
Evaluation
Decision and Investment
- General market information Information
- Industry guides/reviews - Conditions for investment, e.g. economic data,labor market, incentive programs, and tax & legal framework
- Discussion of market entry strategies
- Support with final site decision
- Advice on project financing
- Selection of project partners and facilitators (service providers,financial partners)
- Model calculation of potential incentives Consulting and Project Coordination
- Proactive identification of business opportunities - Identification of projectspecific location factors
- Cost factor analysis - Identification of possibilities for cooperation with suppliers, R&D institutes, technology partners, etc. - Organization of site visits and fact finding missions - Contact with the economic development corporations of the German states
Invest in Germany Helps You Our teams of industry experts in the aerospace and related industries will assist you in setting up your operations in Germany. Be it design and engineering centers or manufacturing and assembly plants, we support your project management team from the earliest stages of your expansion strategy. We provide you with all of the industry information you need – covering ever ything from aerospace markets and the supplier landscape to aerospace technology and R&D.
10 Industry Overview 2008
Profit from our experience and know-how to identify the business location which meets your specific investment criteria. We help turn your requirements into concrete investment site proposals, providing consulting services to ensure you make the right location decision. We coordinate site visits, meetings with potential partners, universities and other institutes active in the aerospace field. Our team of consultants is at hand to provide you with the relevant background information on Germany’s tax and legal system, industr y regulations and the domestic
- Negotiations with relevant authorities - Assistance with the incentives application process - Seamless project handover to the economic development corporation in the selected state
labor market. Invest in Germany’s experts help you create the appropriate financial package for your investment and put you in contact with suitable financial partners. Incentive specialists provide you with detailed information about available incentives, support you with the application process, and arrange contacts with local economic development corporations. Take advantage of our range of free of charge services.
Picture credits
Cover Photograph: ©MTU Maintenance Page 2 Germany is the Geographic and Economic Center of Europe Graphic: ©www.typoly.de Page 4 The Advantages of Germany as an Aerospace Investment Location Graphic: ©www.typoly.de Page 5 The Advantages of Germany as an Aerospace Investment Location Photograph: ©www.comcontor.com Page 6 Opportunities Photograph: ©Computer Rendering by Fixion-HCSGM Page 7 Opportunities Photograph: ©Lufthansa Technik AG
Imprint
Publisher & Editor Invest in Germany GmbH Friedrichstraße 60 10117 Berlin Germany T. +49 30 200 099-0 F. +49 30 200 099-111 office@invest-in-germany.com www.invest-in-germany.com Managing Director: Michael Pfeiffer Director Marketing Communications: Bettina Knape Contact Aerospace Industry: aerospace@invest-in-germany.com Conception, Layout, Text, Translations Invest in Germany Supported by Federal Ministry of Economics and Technology Note Invest in Germany, May 2008 All information provided by Invest in Germany is for informational purposes only and not legally binding. Invest in Germany does not accept liability for inaccuracies or errors in translation.
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