Space and defense markets have traditionally been large consumers of composite materials and have, over the years, driven many of our product developments. In fact, Hexcel’s original products were first used in this market. Both Hexcel and the space and defense industry have come a long way since 1948 when honeycomb was our primary product. Today carbon fiber composites drive the market and Hexcel is the preferred supplier of carbon fiber for the majority of US and a number of important European space and defense programs. In addition to carbon fiber, Hexcel supplies its full range of composite materials to these markets.

While build rates for military aircraft programs were at an all time low during the nineties, a new generation of military platforms was developed for production after 2000. Hexcel has secured strong positions on many new European and US programs that will generate significant revenue once they move from development into production over the next few years. New program wins in 1999 include the selection of Hexcel’s carbon fibers for two new programs, the E-3 anti-tank munitions and the Joint Air to Surface Strike Missile (JASSM). These programs join Hexcel’s existing positions on the teams supplying numerous military aircraft programs.

Hexcel is also a major supplier to both the launch vehicle and satellite markets. Our products are used in the Delta, Ariane and Titan launch programs, as well as by various satellite manufacturers. Unfortunately 1999 was a poor year for the space market, which saw both the bankruptcy filing of two commercial satellite programs (Iridium and ICO Global), as well as a number of launch mishaps. Although revenues for 2000 are expected to be flat, we believe the medium term outlook is strong as the cost of deployment falls and an even greater number of new military, weather and commercial satellites (particularly for broadband applications) are built and launched in the coming years.

In 2000, Hexcel will continue supplying materials to several new programs that are transitioning into full production including the Eurofighter Typhoon, F-18 E/F, V-22, Eurocopter’s Tiger and NH90 helicopters, Sea Launch and Delta IV launch vehicles. As these programs ramp up over the 2001-2003 time frame, they will become major contributors to our space and defense revenues. Hexcel carbon fiber is also the material of choice for the F-22, RAH-66 and Joint Strike Fighter (JSF) programs. The F-22 and RAH-66 are expected to transition into production in the next few years, to be followed by the JSF near the end of the decade. All of these programs are being developed using Hexcel composite materials.