Volvo 2008 Annual Report Download - page 66

has had an ever increasing impact on airlines’
total costs while the climate and environmen-
tal concerns have increased demand for
engines with lower emissions.
By using Volvo Aero’s knowledge of light-
weight design, simulation and new, patented
production methods, engine manufacturers
can shorten lead times for the development of
new engines while at the same time produce
engines that are lighter and less noisy.
Through the acquistion of ACAB in 2007
Volvo Aero was able to complement the light-
weight konowledge with composite technolo-
gies, which are expected to have a great
importance for future aircraft engines.
Largest contracts so far
Lowered weight and lowered production costs
were success factors when Volvo Aero signed
its largest engine contracts to date with the
engine manufacturers Pratt & Whitney and
Rolls-Royce. The involvement in the two engine
programs is expected to lead to net sales for
Volvo Aero of approximately SEK 90 billion in
the coming 40 years. The contracts are impor-
tant successes for Volvo Aero’s lightweight
technology since the contracts were signed in
stiff competition from conventional technolo-
gies.
During the year, an important milestone was
passed for another new and important aircraft
engine: the GEnx, which received certifi cation
from the U.S. Federal Aviation Administration.
Volvo Aero has been responsible for the de-
velopment of three important components but
in total manufactures six parts of the engine.
The important testing of Volvo Aero com-
posite technology in EU’s VITAL environmental
project was successful. The Fan Blade Out
test is crucial in order to demonstrate the abil-
ity of the components to cope with maximum
strain.
During the year, Volvo Aero and Boeing
extended their marketing and distribution
partnership agreement for an additional 10
years. Volvo Aero’s aftermarket company in the
US will continue to provide services to support
the distribution of aircraft parts for a wide
range of Boeing aircraft.
Declining air traffi c
World airline passenger traffi c increased
somewhat during the fi rst eleven months of
2008. However, almost all regions showed a
clear decline towards the end of the year. The
domestic North American market in particular
had a signifi cant downturn.
According to IATA, the airlines’ fi nancial
problems increased in 2008. In spite of this,
order backlog for large commercial jets
increased. The order backlog increased from
6,848 aircraft at the beginning of 2008 to
7,429 at the end of the year. Airbus and Boe-
ing received 1,586 new orders and delivered
858 new aircraft.
Lower profi tability
In 2008, Volvo Aero’s sales amounted to SEK
7,448 M compared to SEK 7,646 M the pre-
ceding year, a decline of 3%.
Operating income amounted to SEK 359 M, a
decline of 32% compared to SEK 529 M in 2007.
Operating margin declined from 6.9% to 4.8%.
The lower profi tability is mainly attributable to
lower sales and lower margins in the American
aftermarket business, while delays in new aircraft
programs at both Boeing and Airbus impacted
profi tability through lower production volumes and
lower capacity utilization.
The development of composite struc-•
tures has been running according to
plan.
Successful FBO test (FanBlade Out) •
conducted in Derby together with
Rolls-Royce.
The work to meet higher volumes with •
increased productivity and lower prod-
uct cost has developed according to
plan, but will continue in 2009.
Successful activities in the aftermarket •
business, but the sharp decline among
airlines resulted in the American after-
market business not reaching its goals.
Adjust operations to the expected •
downturn and lower volumes.
Continue working on improving pro-•
ductivity and lowering product cost.
Handle the development of com-•
ponents to the new engine programs
Trent XWB and PW1000G.
Increase volumes and profi tability in •
the aftermarket business.
Continue to expand the customer offer •
of composites for cold structures.
Develop composite offerings for cold •
structures within the framework of the
acquisition of ACAB.
Meet increased volumes through •
improved productivity and lower prod-
uct costs.
Continued improvements in volumes •
and profi tability within the aftermarket
business.
Outcome 2008 Ambitions 2009Ambitions 2008
VOLVO AERO
Net sales by market
Volvo Aero, SEK M 2007 2008
Europe 3,462 3,497
North America 3,723 3,534
South America 127 58
Asia 234 234
Other markets 100 125
Total 7,646 7,448
Key ratios
Volvo Aero 2007 2008
Net sales as percentage
of Volvo Group sales 32
Net sales, SEK bn 7.6 7.4
Operating income, SEK M 529 359
Operating margin, % 6.9 4.8
Many aircraft
the world over have
components from Volvo Aero.
Many aircraft
the
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hav
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components from Volvo Aero.
Business areas 2008
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