The rising cost of oil and strength of the dollar are affecting the competitiveness of European aerospace and defence products.

The Aerospace and Defence Industries Association of Europe (ASD) has said it plans to tell the European Central Bank (ECB) this month that the strength of the euro is affecting the sector’s competitiveness.

ASD President, Ake Svensson, made the announcement at a press conference held in Brussels this week.

In his speech, Svensson said it has become increasingly evident that the strengthening of the euro against the US dollar has had a direct impact on the competitiveness of European aerospace and defence products in markets worldwide.

“One euro was worth $1.16 (£0.59) in June 2003 – it has now almost reached $1.6,” he said. “The civil aeronautics and space sectors have been hit hardest as these are markets priced in US dollars, yet costs of the European industry are primarily priced in euros.”

Svensson also named rising oil prices as reducing the competitiveness of European aerospace and defence products globally.

He added: “The strength of the euro is slightly alleviating the impact of rising oil prices in Europe, but clearly this is not a satisfactory remedy. We envisage more effective policy instruments to be required in areas such as energy, taxation, distribution of goods, as well as measures against financial speculation on oil prices.”

According to the ASD, growth in the European aerospace and defence sectors over the last three years has been strong. During 2005-2007, the industries grew by more than 15%, driven by the aeronautics and defence sectors.

However, recent developments including rising oil prices and the fall of the dollar have started denting the performance. “To remain successful, our companies need to operate in an environment that is conducive to strong technological and commercial performance,” the Association said.

The meeting between the ACB and ECB is expected to take place at ECB’s headquarters in Frankfurt in mid-July.

To read the ASD’s report in full, click here

By Natasha Piscitelli