Gamesa, the Spanish aerospace equipment manufacturer, has begun a drastic cost-reduction plan for the current financial year following a two-thirds plunge in profits due mainly to a reduction in orders from Embraer. The company does not expect that new business from the Airbus A380 super-large airliner will compensate for its short-term revenue loss and has warned that if action is not taken, it expects losses next year. Its plight illustrates the lingering effects on second-tier suppliers of the recent market downturn.

The industrial group’s Gamesa Aeronáutica subsidiary designs, develops, assembles and certifies large aerostructures and aircraft sections and manufactures high-end structural components. The group’s net income grew by 10 percent to €221 million ($271.8 million) last year and its workforce increased by 1,057 to reach a total of 7,221. But at the same time the Aeronáutica operation contributed a net profit in 2004 of just €7 million ($8.6 million)–65 percent short of the €27 million ($33.2 million) earnings target.

Based in Vitoria-Gasteiz, Gamesa has plants in the Alava, Galicia, Aragon and Andalucia regions of Spain. It has advised trade unions that it plans to reduce production capacity by 30 percent. The company attributes its downturn mainly to a strong reduction in deliveries for the Embraer 135/145 regional jets and their Legacy business jet sibling. It is a risk-sharing partner in these programs, responsible for the design and manufacture of fully equipped wings, complete nacelles including air inlet, thrust reverser and exhaust, as well as the fairings and main landing gear doors.

There is good news for Gamesa, however. Boeing recently selected the company to join the design team for its Large Cargo Freighter (LCF). The specially modified 747-400 passenger jet will be used to transport major assemblies for Boeing’s new 787 airliner. The deal with Boeing makes Gamesa part of an engineering analysis and development team designing the “swing zone” section of the jumbo freighter’s aft fuselage, which opens to allow loading and unloading of large 787 composite structures such as the fuselage and wing components.

The two Large Cargo Freighters that are needed to support initial 787 production will each hold 300 percent more above the main deck than the current 747-400. Boeing expects certification of the LCF in 2006 and is currently seeking a third 747 airframe for conversion.

Meanwhile, Gamesa and Airbus have signed a letter of intent covering various aerostructures for the new A350. The Spanish group already has risk-sharing involvement in the larger A380, including producing metallic parts for section 19 of the rear fuselage, where the horizontal and vertical tailplanes are attached.

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