Safran Aftermarket.jpg

OEMs Simplify Post Consolidation

Companies looking to rationalize under fewer business divisions.

As consolidation continues in aviation’s manufacturing, aftermarket and airline sectors, larger companies are also seeking to rationalize under fewer main business lines.

French conglomerate Safran is the latest example, stating last week that from its September financials it would report under three segments rather than five: aerospace propulsion; aircraft equipment, defense and aerosystems; and aircraft interiors.

According to the new structure, aerospace propulsion now includes Safran Transmission Systems due to “its close relationship with engine activities,” Safran states.

Meanwhile, the new Aircraft Equipment, Defense and Aerosystems segment combines the former Safran Aircraft Equipment activities with part of the former Zodiac Aerospace Aerosystems and Safran Defense businesses.

Applying the new structure to previous reporting, Aerospace Propulsion accounted for 50% of Safran revenue in 2018, Aircraft Equipment, Defense and Aerosystems accounted for 38% and Aircraft Interiors accounted for 12%.

Aerospace Propulsion, which includes Safran’s 50% share in CFM, is by far the company’s most profitable sector, accounting for 78% of free cash flow in last year.

Looking ahead, by 2022 Safran is targeting a 20% operating margin for propulsion, 14% for aircraft equipment and 13% for interiors.

Safran’s restructuring follow similar moves by other large OEMs, some of which have also felt the need to simplify following big acquisitions. In June, for instance, United Technologies said that after its merger with Raytheon, the new business, called Raytheon Technologies, would comprise four business units.

And last year Rolls-Royce said it would simplify into three business units: civil aerospace, defence and power systems.

The goal of its restructuring – which is expected to cost £500 million – is to achieve free cash flow of roughly £1 billion ($1.3 billion) by around 2020.

Safran, in contrast, has said that its performance targets are not affected by its re-organisation.

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