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39
THE VOLVO GROUP YEAR 2000
Aero
Volvo Aero develops and manufactures high-technology components for commercial aircraft
and rocket engines. Aero also develops, manufactures and maintains military engines for the
Swedish defense forces. Volvo Aero offers a wide range of services, including sale of parts for
aircraft engines and aircraft, sale and leasing of aircraft engines and aircraft, overhaul and repair
of aircraft engines, and asset management. In addition, Volvo Aero develops, produces and pro-
vides aftermarket services for gas turbine engines and systems.
The company’s businesses are based on close cooperation with partners and on selective
specialization in order to be truly competitive. This is mirrored in the business concept
“Specialized for Partnership” and the vision of being the “Best Partner.” Volvo
Aero operates in Sweden, Norway and the U.S.
Total market
Commercial airline traffic developed favorably throughout the world in 2000. World airline
passenger traffic increased by 7.2% in the year 2000, exceeding the long-term growth rate of
5% that has prevailed for several decades. For the year 2000, the load factor was up to a new
record level of 72.2%, compared to the prior record level of 70.5% in 1999.
The confidence of the world’s leading airlines was clearly reflected in the large number of
orders for new aircraft. During 2000, Airbus and Boeing received orders for 1,131 new aircraft,
an increase of 30% compared with 1999.
Business environment
During 2000, the market for commercial aircraft engines continued to be characterized by
increased competition. The high level of new aircraft deliveries during recent years has led to
some weakening of demand for spare parts, leading to increased competition in the aftermar-
ket. On the strength of its specialized core operations, Volvo Aero works in alliance with the
world’s three major engine manufacturers: Pratt & Whitney, General Electric and Rolls Royce.
The military market is undergoing a dramatic change due to the new strategic concept called
Revolution in Military Affairs (RMA).
Sales and market shares
The company’s order backlog for commercial aircraft engine components increased by 8% as
a result of the large number of orders for new aircraft.Volvo Aero managed to capture a strong
position in the market, and in 2000, engine components from Volvo Aero were installed in
96 97 98 99 00
Net sales, SEK bn
4.1 7.5 8.6 10.0 10.7
96 97 98 99 00
Operating margin, %
3.7 6.3 6.1 5.9 5.8
96 97 98 99 00
Operating income, SEK M
153 472 527 584 621
▲
Several important contracts
secured
Net sales as percentage
of Volvo Group sales
8 %
Net sales per market Aero
SEK M 1998 1999 2000
Western Europe 4,231 4,560 4,651
Eastern Europe 47 16 42
North America 3,502 4,557 5,040
South America 284 193 134
Asia 336 491 701
Other markets 184 136 145
Total 8,584 9,953 10,713