BAE Seeks Expansion of Civilian Business With Defense Tailwind

  • Chairman sees growth potential in U.S. plane electronics
  • Governments see ``the world is a dangerous place,'' Carr says

BAE Systems Plc, Europe’s biggest defense company, will take advantage of rising military budgets to continue expanding its civilian business as well, Chairman Roger Carr said. 

BAE will build on the “small foothold” it already has in the U.S. market for commercial airplane electronics, Carr told Bloomberg TV’s Jon Ferro in an interview Friday from the World Economic Forum in Davos, Switzerland. 

Roger Carr in Davos

Photographer: Simon Dawson/Bloomberg

The U.K. company makes control panels for commercial jets such as Boeing Co.’s 777x, due to begin delivery in 2020, and 737 Max, which has set a sales record for the U.S. aircraft manufacturer. The group’s sales of commercial avionics rose 12 percent in the first half of last year, compared to flat revenue in its defense electronics programs.

The U.S. is a bright spot for BAE, which faces a challenge as the dropping price of oil crimps domestic spending in Saudi Arabia, one of its most important customers, Olivier Brochet, a London-based analyst for Credit Suisse, wrote in a note Jan. 19. Brochet downgraded the shares to underperform. 

The upward military spending trend will continue, Carr said. European governments boosted defense budgets by some $50 billion last year in the wake of the January 2015 assault on the headquarters of satire newspaper Charlie Hebdo and the Nov. 13 terrorist attacks in Paris. He predicted the U.K. Parliament’s approval of a 31 billion-pound ($44.2 billion) project to replace the country’s submarine-based Trident nuclear deterrent system.

“Our business is strong because governments recognize that the world is a dangerous place,” the BAE chairman said.

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