Tuesday, October 9, 2012

BAE – EADS Merger: Economically Freshly Still-Born?

Slated to supposedly result in the biggest non-American aerospace firm, is the BAE – EADS merger be freshly still born due to insurmountable regulatory hurdles and declining defense markets?

By: Ringo Bones

Even though concerned parties may have until Wednesday, October 10, 2012 to decide to give the green light of the proposed merger of BAE – EADS, regulatory hurdles permitting. And at the proverbial “11th Hour” of the proposed merger, there is still no agreement between the governments of France, Germany and the UK despite Number 10 Downing Street stating that state ownership of the resulting aerospace firm should be limited. Given the seemingly insurmountable regulatory hurdles, politics and the “declining defense markets”, will the BAE – EADS merger, if it goes through, result in an economically viable merger?

INVESCO – the main underwriter of the merger was never shy in recently stating that there’s no strategic logic in the proposed merger. And to “seasoned observers” in the post Cold War development of the global aerospace / defense industry – a.k.a. the proverbial “Military-Industrial-Complex”, the oft quoted buzzword of the “declining defense markets” seems to be a euphemism for Al Qaeda and the Afghan Taliban not having a preexisting aerospace industry in which the remaining superpower has to destroy as the world’s aerospace and defense industries’ makes a really handsome profit. So if the merger goes through, how will it ever make a profit?

In our post-9/11 world where America and her NATO allies are currently busily involved in the “War on Terror”, the only pieces of military hardware oft used in this on-going conflict are large propeller driven military troop carriers and long-haul subsonic high capacity long jumbo-jet like cargo planes. Not to mention the odd unmanned aerial drone or two. The truth is, the post-9/11 War on Terror is not just as profitable to established global aerospace and defense firms as the saber-rattling between the US and USSR during the height of the Cold War.