With a turnover of 12 billion USD in 2019 and a direct workforce of over 50,000, the Italian aerospace and defense industry ranks among the top 10 worldwide and 4th in Europe and represents the largest manufacturing sector in Italy in the field of high-tech integrated systems. Five regional players and over 300 small- and medium-sized enterprises (SMEs) stand out at the national and international level, both in civil and military fields. The major players include Leonardo, Fincantieri, Ge Avio Aero, Thales Alenia Space Italia, Avio S.p.A. and Elettronica.
According to the Italian Aerospace Industry Federation (AIAD), 85 percent of its members are SMEs spread out across the country in clusters located in the regions of Piedmont, Lombardy, Lazio, Puglia, Campania and Umbria. About two-thirds of the sector is made up of companies that supply aircraft, spacecraft and related devices (47%) and companies specialized in repair (19.6%). The remainder manufacture equipment such as radars, flight recorders and instruments for engine control. The industry is characterized by a highly skilled workforce. Leonardo counts some 4,000 Italian SME suppliers that support 52 Italian sites. Avio Aero has over 1,000 suppliers accounting for a total purchase volume of around 470 million USD.
The 2 most important international programs for Italian industry include the Boeing Dreamliner 787 , on the civil side, and on the defense side the Joint Strike Fighter (JSF). Leonardo partners with Boeing to produce composite fuselage and horizontal stabilizers for the B787. Fuselage parts are integrated in the industrial complex in Grottaglie in southern Italy prior to shipment to the Boeing assembly facility in Everett, WA. As for the JSF program, the FACO in Northern Italy assembles aircraft for Italy and the Netherlands, and produces wing assemblies for the F-35 program worldwide. The FACO should assume a central regional role as more orders are expected across Europe.
The best market entry strategy is becoming suppliers to Tier 1 companies that will seek certified components and require a vendor screening process. Market access is rooted in strong relationships and distribution practices and industrial competence play a fundamental and very delicate role in this industry. U.S. companies that do not wish to operate with a direct presence should have an agent or distributor that is well introduced, knowledgeable and can easily interface with technical departments and decision makers.
Financing and trade practices adhere to normal Italian business standards. The majority of financial transactions are handled through private agreements and banking institutions. Italian firms sometimes find U.S. supplier payment terms too rigid, leading to a loss of business to other suppliers. Financing is considered as much a competitive factor as the product itself, the delivery date, or after-sales service. While some U.S. manufacturers request payment upon receipt of the goods, more successful sellers offer terms allowing settlement of the account from 60 to 120 days following the invoice date, which is the most common practice in Italy.
Current Market Trends and Demand
Prior to the market disruptions of 2020, the trend of Italian industry policy was focused on strengthening its stake in the civil market to lessen dependency on the defense market given strained budgets. The effects of an extreme market impact of these industry disruptions are causing a reverse trend, with orders and revenues holding up mainly thanks to the defense sector. On the commercial side, production cuts announced by Boeing and Airbus will greatly impact its suppliers including Leonardo and Avio Aero. Leonardo recently signed MOUs with banks and credit institutions to facilitate access to credit for its suppliers, including some 3,000 SMEs. At this writing, it is not yet clear how the main Italian players will reorganize supply chains, whether the trend will be to continue outsourcing as in recent years, versus insourcing to mitigate the impact of the crisis. The latter case would signify thousands of jobs at risk.
Opportunities may exist for U.S. suppliers to the space industry. Italy holds the 6th market position worldwide and 3rd in Europe. The industrial complex counts some 600 companies and 7,000 workers that generated about 2.4 billion USD in 2018 of which about 70 percent accounting for exports. Italy’s know-how includes launcher production, satellite production, ground stations, flight control and data transmission.
Opportunities may also be found within the national champion Leonardo’s helicopter division. Interested U.S. suppliers should register in the supplier portal: https://www.leonardocompany.com/en/suppliers/supplier-portal.
Aerospace & Defense Meetings Torino
November 29 – December 1, 2021 | Turin, Italy
U.S. Embassy Rome, Italy
+39 06 46742427