The Aerospace Industry in Germany –

Technology to Attain Higher AimsIndustry Overview

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The Aerospace Industry in Germany

Germany is the Geo-

graphic and Economic

Center of Europe

Aerospace is one of Germany‘s best per-

forming and most innovative industries,

and as such, is one of major strategic

importance. It is one of the technolo-

gical motors that drives Germany as a

high-tech nation and one which com-

bines all of the key future technologies

including electronics, robotics, mate-

rials, and software. The aerospace sec-

tor is the birthplace of many innovations

which later make their way into the other

parts of the economy – and Germany is

the right place to realize them. Lying at

the heart of Europe at the crossroads

between the highly developed west and

the booming east, Germany has attrac-

ted major system integrators who are

currently taking advantage of the out-

standing conditions that the country has

to offer.

Industry Overview 2008 www.invest-in-germany.com 3

The German Aerospace

Industry in Numbers

- Since the mid-1990s, the German aero-

space industry has been steadily growing

at an average rate of around nine percent

per year, making it one of Germany’s best

performing industries.

- More than 155 companies and institutions

employ over 88,000 highly skilled mem-

bers of staff, generating sales of EUR 20.2

billion.

- With annual R&D expenditures ranging

between 15 and 20 percent of sales, the

aerospace industry is among the most

innovative industries in Germany.

- Most of the world’s major aerospace

players have manufacturing facilities in

Germany: Airbus (passenger and cargo

planes), Eurofighter (Typhoon jets), Euro-

copter (helicopters), and EADS Astrium

(satellites, launchers, orbital facilities).

Moreover, MTU and Rolls Royce produce

some of the world’s most advanced air-

craft engines in Germany. Were that not

enough, Bombardier and Lufthansa Tech-

nik ensure first class maintenance, repair

and overhaul services (Lufthansa is also

involved in a joint venture with Rolls Royce

called N3 Engine Overhaul Services).

- The aerospace industry in Germany is

especially strong in three powerful geo-

graphical clusters (Bavaria, Berlin-Bran-

denburg, and Hamburg), with thematic

priorities in different areas including

cabin interiors, engines and lightweight

construction.

German Aerospace Employees and Turnover

Employees

Turnover (in EUR billion)

Source: BDLI 2007

20

15

10

5

0

95,000

85,000

75,000

65,000

55,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

7.9

8.710.9

12.2

13.1 14.8

16.6 15.3 15.716

18.6

2007

20.219.5

TurnoverEmployees

Systems

Engines

Equipment

Materials

German Aerospace Industry Turnover by Segment

Source: BDLI 2006

64%

4%

19%

13%

The Aerospace Industry in Germany

The Advantages of Ger-

many as an Aerospace

Investment Location

Market

Aerospace is a rapidly expanding industry.

Over the next 20 years, estimates foresee

the demand for around 25,000 new air-

lines with a market value of USD 2.8 tril-

lion worldwide. Thanks to the presence of

manufacturers of civil and military aircraft,

Germany is a large market where suppli-

ers benefit from close customer proxim-

ity. Moreover, aerospace companies are

also able to take advantage of Germany’s

sophisticated industrial, physical, and R&D

infrastructure. Germany’s proven strength

in industries such as automotive, machin-

ery & equipment, and chemicals provides

a powerful platform for engineering and

4 Industry Overview 2008

1 World Economic Forum: The Global Competi-

tiveness Report 2007-2008. “Capacity for inno-

vation” is an expression of company ability to ob-

tain new technologies from formally conducted

research and pioneering of own new products

and processes, as opposed to licensing propri-

etary technologies or adapting existing company

technologies.

Mechatronics/Microsystems

Engineering

Microsystems

Micro and Nanotechnology

Mechatronics

Microelectronics

Power Engineering

Fuel Cells/Hydrogen

Power Electronics

(Hybrid Engines)

Traffic and Transportation

Automotive Engineering

and Telematics

Information and

Communication Tech.

Navigation, Telematics

Traffic Systems

Software Engineering

Virtual and Augmented Reality

Environmental Technology

Recycling Technology

Industrial Manufacturing

Adaptronics

Automotive

Carbon Fiber Reinforced Plastics

Virtual Engineering

Mechanical Engineering

Process Technology

Materials Science

Component Behavior

Surface Engineering

Lightweight Construction

Natural Fiber Composites

Textile Research

Aerospace Cluster

1

Innovation Infrastructure – Networks of Competence

Dresden

Kiel

Potsdam

Stuttgart

Hanover

Mainz

Wiesbaden

Saarbrücken

Erfurt

Magdeburg

Schwerin

Düsseldorf

Munich

Berlin

Hamburg

Bremen

SWITZERLAND

FRANCE

THE NETHERLANDS

POLAND

CZECH REPUBLIC

BALTIC SEA

BALTIC SEA

BELGIUM

LUXEM-

BURG

Mecklenburg-Vorpommern

Brandenburg

Saxony-Anhalt

Saxony

Thuringia

Bavaria

Baden-Württemberg

Hessen

Saarland

Rheinland-Pfalz

North Rhine- Westphalia

Lower Saxony

Schleswig-Holstein

DENMARK

NORTH SEA

di

i@

ld

National Border

(Federal) State Borders

(Federal) State Capital

City-State

Source: Federal Ministry of Economics and Technology, 2007

1

2

3

4

1

2

1

2

3

4

1

2

3

4

5

6

1

2

3

4

5

1

4

5

3

2 1 14

3

34

1

1

1

2

36

2

1

5

24

3

development cooperation. At the same

time, aerospace suppliers have direct

access to new markets for cutting-edge

technologies in areas including materials,

electronics, nanotechnology, and produc-

tion technologies.

R&D

Germany is home to a world class research

community. According to the World Eco-

nomic Forum’s (WEF) Global Competi-

tiveness Report 2007-2008 of 131 nations,

no other economy tops Germany in terms

of its capacity for innovation1. The country

is characterized by the high value placed

on scientific and industrial advancement,

and the vibrant exchange and coopera-

tion between the scientific and business

communities. Together with the country’s

strong network of universities, Ger-

many’s internationally renowned fun-

damental and applied research institu-

tions (such as the Max-Planck Society, the

Fraunhofer Gesellschaft, and the German

Aerospace Center - DLR) contribute to a

climate of technical innovation that helps

to make Germany a global leader in patent

registrations. This environment is ideal for

a research and innovation-driven industry

like aerospace.

2

2

25

5

5

4

32

2

1 2

1

4

5

1

5

3

Personnel

Germany’s excellent highly skilled labor

force is at the heart of the aerospace

industry’s success. Our dual education

system – unique in combining the bene-

fits of classroom and vocational training

over a period of 2-3 years – is specifically

geared to meet industry needs and ensure

that skilled workers are well-prepared for

the workplace.

In addition, Germany is home to 13 univer-

sities that offer special courses of studies

such as aeronautical engineering and air-

craft construction. These institutions edu-

cate around 4,500 aerospace students

each year.

Physical Infrastructure

Located at the heart of Europe, Germany

offers a sophisticated infrastructure that

integrates state-of-the-art transporta-

tion networks with the most modern and

cost efficient IT and telecommunications

systems available today. Not for noth-

ing is Germany Europe‘s number one in

logistics. Germany‘s exceptional strength

in this area has been underlined by the

World Economic Forum‘s (WEF) Global

Competitiveness Report 2008 in which the

German economy took first place for infra-

structure. It is this world class infrastruc-

ture of roadways, railways, waterways,

seaports, and airports which supports the

continued success of the highly efficient

and smooth-operating aerospace logistics

environment.

Stable Investment Environment

Highly developed social, economic, and

political frameworks provide the neces-

sary security for your business investment.

Our judiciary and civil service institutions

are professionally regulated to ensure

consistent and qualified delivery of service.

Contractual agreements are secure and

intellectual property is strictly protected

in Germany.

Industry Overview 2008 www.invest-in-germany.com 5

German Physical Infrastructure

Netherlands

Luxembourg

Belgium

France

Denmark

Poland

Czech Republic

Austria

Switzerland

GreifswaldRostockLübeck

Kiel

Emden Bremerhaven

CuxhavenHamburgWilhelmshaven

Cologne/ Bonn

Frankfurt a.M.

Hahn

Nuremberg

Leipzig

Berlin

Dusseldorf

Munich

PotsdamHanover

Schwerin

Mainz

Stuttgart

Magdeburg

Wiesbaden

Saarbrücken

DresdenErfurt

Western Pomerania

Schleswig-

Mecklenburg-

Lower Saxony

BrandenburgSaxony-

Bavar ia

Baden-

Wurttemberg

Bremen

Rhineland-

Hamburg

Saar land

North

Westphal iaSaxony

Thur ingia

Hessen

Rhine-

Kiel

Holste in

Palat inate

Anhalt

Capitals of Federal States

Borders of Federal States

German Autobahn

Freight Rail Networks

Navigable Waterways

Source: comcontor

Capitals of Federal States

Borders of Federal States

German Autobahn

Freight Rail Networks

Navigable Waterways

Seaports

Major Airports

The Aerospace Industry in Germany

6 Industry Overview 2008

Opportunities

Climate Change – Challenge

and Opportunity for the Industry

Climate change and the consequences

thereof have become an important issue for

society at large and the aerospace indus-

try in particular. In 1997, thirtynine indus-

trial nations signed the Kyoto Agreement

to reduce environmentally damaging emis-

sions. Although, no direct provision was

made for aviation within the framework,

the industry is now set to be included in

the European Emissions Trading Scheme

(ETS). The ETS has been introduced as an

instrument to help tackle emissions by

issuing certificates allowing companies to

produce an agreed amount of emissions.

These certificates can then be traded freely

(so-called “emissions trading”). Thereby a

monetary value is attached to emissions

which acts as an incentive for compa-

nies to switch to environmentally friendly

technologies.

Recognition of the need for new, envi-

ronmentally friendly technologies is well-

established within the aerospace industry.

The Advisory Council for Aeronautics

Research in Europe (which brings together

representatives of European nations, the

aviation industry, airports, airlines and

research institutes) have created the

“Vision 2020” for European aeronautics

which sets out a number of ambitious tar-

gets. These include:

- 50% reduction of CO2 emissions

- 80% reduction of NOx emissions

- 50% reduction of perceived external noise

- 50% reduction of new product time

to market

- threefold capacity increase

Business Aviation

Business aviation - and air taxi services

in particular - are among today’s most

promising market segments within the

aviation industry. Factors including the

introduction of fuel efficient technologies,

advances in product development, the

emergence of very light jets, the reduc-

tion of operating costs, and the increas-

ing popularity of the fractional ownership

concept are all helping to drive business

jet service expansion. In Europe, it is still

very early days for the business jet market.

However, it is expected to grow, driven by

the continuous rise in European air traf-

fic putting pressure on Europe‘s main air-

ports who are limited in their expansion

options. As the economic engine of Europe

with one of the highest number of business

destinations in the continent, Germany is

at the center of these developments. The

country is home to the ideal infrastruc-

ture for business aviation providers. Over

30 regional airports allow customers to

fly closer to their final destinations, spar-

ing the time and effort of flying over the

major airports.

In order to achieve these targets, air-

craft manufacturers and suppliers will

be required to develop and introduce new

technologies that enable airlines to mod-

ernize and expand their fleets with new

and more environmentally friendly air-

craft. Meeting the “Vision 2020” targets

(while reacting to the continuous growth

in passenger and freight traffic) signifies

a potential new market volume of around

25,000 new planes with an overall market

value of USD 2.8 trillion by 2026.

Germany is the ideal business location

to seize these new market opportunities.

The country’s longstanding tradition and

know-how in environmental technologies,

coupled with its leadership in key tech-

nology areas (including mechanical engi-

neering, nanotechnology, chemicals, and

materials) make it one of the main loca-

tions for the development and introduction

of innovations to meet the challenges of

climate change.

Airbus 350

Industry Overview 2008 www.invest-in-germany.com 7

Interiors

The comparatively short product life cycle

of cabin interiors and the need to contin-

ually optimize space management, pas-

senger comfort, and weight reductions

combine to make this an extremely prom-

ising and attractive supplier segment.

Moreover, companies operating in this

sector find additional business opportu-

nities in the automotive industry where

product differentiation through interiors

is a major selling factor – particularly in

the premium segment where Germany is

the world leader. The fact that Germany is

the main site for Airbus cabin interiors and

home to 31 final automotive assembly sites

makes Germany the place to be.

Engineering and R&D Centers

Germany is the ideal location for setting up

R&D and engineering facilities. It provides

the sophisticated innovation infrastructure

necessary for excellent development and

engineering cooperation. Moreover, the

technology overlap between Germany‘s

traditionally strong industries (e.g., the

automotive industry) and the aerospace

industry opens up untapped market poten-

tial for engineering services providers.

Executive Lounge, Illustration Lufthansa Technik AG

The Aerospace Industry in Germany

8 Industry Overview 2008

Incentives

Germany offers numerous incentives for

all investors - regardless of whether they

are from Germany or otherwise. There is

a large selection of programs designed to

support a wide variety of business activi-

ties at different stages of the investment

process available. Support ranges from

cash incentives for the reimbursement of

direct investment costs to incentives for

labor and R&D.

Germany’s Investment

Incentives Package

Germany’s investment incentive package

significantly reduces investor production

facility set-up costs. The package consists

of cash incentives, loan programs offering

reduced interest rates, and public guaran-

tees at state and national level.

The amount of these investment incen-

tives generally depends on three factors:

project scope, investor company size, and

the new investment location. Investment

incentives can reach up to 50 percent of

eligible expenditures once these factors

have been considered.

Cash Incentives

The main instrument of Germany’s invest-

ment incentives package are cash incen-

tives provided in the form of direct

investment grants. Germany will make

more than EUR 2.3 billion in cash incen-

tives available in 2008.

Investment grants are offered in several

incentive regions in Germany. Eligible

investment costs include the purchase or

production costs of buildings, machinery

and equipment. The purchasing costs of

intangible assets are likewise eligible. In

general, investment projects must create

long-term employment in order to benefit

from investment grant provision.

In eastern Germany, investment grants

are complemented by the Investment

Allowance (Investitionszulage IZ), which is

usually provided in the form of a cash pay-

ment and/or tax credit. As with investment

grants, eligible Investment Allowance

costs include the purchase or production

costs of buildings, machinery and equip-

ment. Because the Investment Allowance

is a tool specifically created to support the

eastern parts of Germany, all equipment

financed through the investment allow-

ance must remain at the location for at

least five years upon completion of the

investment project.

Interest-Reduced Loans

Special loan programs make up a sec-

ond component of Germany’s investment

incentives package. They are offered by

publicly-organized financial institutions.

These programs usually offer loans at

below market interest rates and subordi-

nated loans similar to equity. The provision

of such loans makes it easier for investors

to access additional funding from public

banks.

Public Guarantees

The investment incentives package is com-

pleted by public guarantees. This tool is

offered by the states and the federal govern-

ment to help secure private bank loans.

Germany’s Operational

Incentives Package

Labor-Related Incentives

Labor-related incentives are available

throughout Germany. The Federal Employ-

ment Agency and all German states offer

a range of different labor-related incen-

tives programs. They can be divided into

three main groups: programs focusing on

recruitment support; training support; and

wage subsidies respectively.

R&D Incentives

Germany offers several incentives pro-

grams targeted at reducing the costs of

R&D projects. Some of these programs

are specifically targeted at the aerospace

industry; others refer to related areas

such as materials or new production tech-

nologies. Programs are run at the Euro-

pean, national, and regional level.

Cash Incentives

Investment Incentives PackageOperational Incentives

Package

Interest-

Reduced LoansR&D IncentivesLabor-Related

Incentives

Investment

GrantKfW Loans

(National Level)

Investment

Allowance1

State

Development

Bank Loans

Grants Recruitment

Loans

Training

Silent/Direct

PartnershipWage Subsidies

+

1) only in eastern Germany

Types of Incentives in Germany

Source: Invest in Germany Research, 2008

Incentives

Public

Guarantees

State

Combined

State/Federal

Industry Overview 2008 www.invest-in-germany.com 9

R&D Incentives for the

Aerospace Industry

The European Level – 7th Research

Framework Program

At the European level, the most impor-

tant R&D financing instrument is the 7th

Research Framework Program (FP7) of

the European Union (EU). EUR 4.2 billion

of the overall budget of EUR 50.5 billion is

specifically reserved for the area of trans-

port (including aeronautics). Aeronautics

focus is given to the following research

areas:

- Greening of air transport

- Increasing time and cost efficiency

- Protection of aircraft and passengers

- Ensuring customer satisfaction and safety

Specific topics addressed include: aero-

structures, propulsion, systems and equip-

ment, avionics, flight physics, maintenance,

and production. Subject to the concrete

research project, other areas (e.g., mate-

rials technologies) are also applicable to

the aerospace industry.

FP7 funding applications are made by

forming a transnational consortium for

the submission of a project proposal in

response to a call for proposals. In the offi-

cial call for proposals (which takes place

once or twice per year) the EU publishes

the research topics, the rules of participa-

tion, and the budget available. Research

grants can be as high as 75% of eligible

project costs for small and medium-sized

enterprises (SME).

The National Level –

Germany’s High-Tech Strategy

At the national level, all R&D incentives

programs are subsumed under the Fed-

eral Government’s four year High-Tech

Strategy. The High-Tech Strategy defines

specific sectors with a high dependency on

new high-tech developments.

Each sector comprises various R&D pro-

grams. More than EUR 15 billion has been

made available for all sectors until the end

of 2009.

Most important for the aerospace industry

are programs from the space technologies,

and aviation and aeronautical technologies

sectors. Programs subsumed by other

sectors of the High-Tech Strategy may

also be relevant for aerospace industry

research projects subject to individual

project focus.

Within the framework of the High-Tech

Strategy, a special R&D program for the

aerospace industry has been created: the

German Aerospace Research Program.

This goes beyond the timeline of the High-

Tech Strategy; providing a budget of EUR

636 million until 2013. The German Aero-

space Research Program gives priority to

the following research areas:

- Environmental sustainability of air traffic

- Increase of transport capacities

- Security and passenger friendliness

- Efficient aircraft

- Production, maintenance and repairs

The Regional Level – Funding SME

Regional R&D grants usually target small

and medium-sized enterprises (SME).

Some German states have focused their

funding policy on specific industry clusters,

but funding programs are generally avail-

able for projects that do not have a specific

technological focus.

The High-Tech Strategy: Aerospace Industry Relevant Sectors

with Relevant Budgets (2006-2009 in EUR million)

Source: German Federal Ministry for Education and Research (BMBF)

3,650

2,000

1,180

800

770

640

430

420

420

310

300

270

250

220

150

80

50

Space technologies

Energy technologies

Information and communication tech.

Health research and medical technology

Automotive and traffic technologies

Nanotechnologies

Biotechnology

Environmental technologies

Materials technologies

Optical technologies

Plants

Aviation and aeronautical technologies

Production technologies

Microsystems technology

Maritime technologies

Security research

Services

High-Tech Strategy funding is generally allocated in the form of what are termed

“R&D grants” - usually following specific calls for proposals. On average, incentives

cover up to 50% of all eligible project costs.

10 Industry Overview 2008

The Aerospace Industry in Germany

Invest in Germany Closely Supports Your Project Management

Team throughout the Entire Investment Decision Process

Investment Decision Process – Areas of Invest in Germany Support

Invest in Germany Helps You

Our teams of industry experts in the aero-

space and related industries will assist you

in setting up your operations in Germany.

Be it design and engineering centers or

manufacturing and assembly plants, we

support your project management team

from the earliest stages of your expansion

strategy.

We provide you with all of the industry

information you need – covering every-

thing from aerospace markets and the

supplier landscape to aerospace technol-

ogy and R&D.

Profit from our experience and know-how

to identify the business location which

meets your specific investment criteria.

We help turn your requirements into con-

crete investment site proposals, providing

consulting services to ensure you make the

right location decision. We coordinate site

visits, meetings with potential partners,

universities and other institutes active in

the aerospace field.

Our team of consultants is at hand to pro-

vide you with the relevant background infor-

mation on Germany’s tax and legal system,

industry regulations and the domestic

labor market. Invest in Germany’s experts

help you create the appropriate financial

package for your investment and put you in

contact with suitable financial partners.

Incentive specialists provide you with

detailed information about available incen-

tives, support you with the application

process, and arrange contacts with local

economic development corporations. Take

advantage of our range of free of charge

services.

Investment Process Milestones

Inve

st

in G

erm

an

y K

ey

Su

pp

or

t A

rea

s

Strategy Evaluation Decision and Investment

Information

Consulting

and Project

Coordination

- General market information

- Industry guides/reviews

- Conditions for investment, e.g. economic data,labor market,

incentive programs, and tax & legal framework

- Proactive identification

of business opportunities

- Identification of project-

specific location factors

- Discussion of market

entry strategies

- Advice on project financing

- Model calculation

of potential incentives

- Cost factor analysis

- Identification of possibilities

for cooperation with suppliers,

R&D institutes, technology

partners, etc.

- Organization of site visits

and fact finding missions

- Contact with the economic

development corporations of

the German states

- Support with final

site decision

- Selection of project partners

and facilitators (service

providers,financial partners)

- Negotiations with

relevant authorities

- Assistance with the incentives

application process

- Seamless project handover

to the economic develop-

ment corporation in the

selected state

Picture credits Cover

Photograph: ©MTU Maintenance

Page 2 Germany is the Geographic and Economic Center of Europe

Graphic: ©www.typoly.de

Page 4 The Advantages of Germany as an Aerospace Investment Location

Graphic: ©www.typoly.de

Page 5 The Advantages of Germany as an Aerospace Investment Location

Photograph: ©www.comcontor.com

Page 6 Opportunities

Photograph: ©Computer Rendering by Fixion-HCSGM

Page 7 Opportunities

Photograph: ©Lufthansa Technik AG

Imprint Publisher & Editor

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Director Marketing Communications: Bettina Knape

Contact Aerospace Industry: aerospace@invest-in-germany.com

Conception, Layout, Text, Translations

Invest in Germany

Supported by

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Note©Invest in Germany, May 2008

All information provided by Invest in Germany is for informational purposes

only and not legally binding. Invest in Germany does not accept liability for

inaccuracies or errors in translation.

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