Why is Thales so resilient?

The COVID-19 pandemic has plunged the global economy into a state of shock of historic proportions, threatening the very survival of some industry heavyweights once considered unassailable. Other major companies, like Thales, have demonstrated a remarkable degree of adaptability to withstand these trying times. As part of the Paris Air Forum organised by the French newspaper La Tribune, Philippe Keryer, Executive Vice-President, Strategy, Research and Technology, explains why Thales is proving so resilient.

How has the pandemic affected Thales?

The crisis has had two immediate effects on Thales. First of all, we’ve been impacted by the health and safety restrictions, and the lockdown rules in particular. We have made use of the support measures available, and taken steps to ensure that all of us at Thales, including our engineering teams, have access to the IT tools and systems we need to carry on working as normally as possible. As a result, productivity has been virtually back to normal since August. 

Secondly, some of our activities, representing around 15% of the Group's revenues, abruptly ground to a halt. Unsurprisingly, we’ve seen the steepest drop in demand from aerospace customers, especially for avionics and in-flight entertainment systems. Other businesses, such as secure ID documents and IoT connectivity modules, have faced more cyclical headwinds.

So around 85% of Thales’s business has been largely unaffected by the crisis?

Correct. Of course, we’ve had to adapt our working practices to the public health situation. Based on this experience, some of the changes will be permanent, as part of a shift to what we call “smart working”. Thanks to these adjustments, the main segments of our business in the defence, security, digital security, ground transportation and space areas have been relatively unscathed by the crisis. Overall, Thales is weathering the storm without too much damage.

How come you are so resilient?

I’d put it down to several factors. First and foremost – and this isn’t exclusive to Thales – our employees have stayed totally engaged, adapting quickly to the unprecedented circumstances in order to continue to support our customers.

Another reason for our resilience is linked to our dual civil and military capabilities. In the past, Thales has sometimes faced criticism for its diversified – some would say eclectic – portfolio of businesses. But recent developments have shown that the criticism is completely unfounded and based on an incomplete understanding of what the Thales Group really is. What we are seeing now, as we have seen in the past, is that our portfolio of complementary businesses is a major strength in times of crisis because it enables us to serve customers in long-cycle sectors like defence and space, and in short-cycle sectors like digital security.

In some areas, the COVID-19 pandemic has actually boosted our business. This is especially true in digital security. With more people working from home, shopping and managing their affairs online, and using digital technology to keep themselves entertained, there’s been a huge uptick in demand in areas like digital identity, access management and data protection. These trends are here to stay – and they completely validate our acquisition of Gemalto as a sound strategic move.

It takes an agile organisation and a lot of adaptability to be resilient to a crisis. Those aren’t qualities people tend to associate with a major global corporation...

Actually, our employees have shown time and again in recent months that they have both the agility and the adaptability to respond, usually as a matter of urgency, to our customers' needs. For example, we helped the Paris hospital system deal with a major cyberattack in the early days of the pandemic, and we have helped to produce ventilators in the United Kingdom. We have also been supporting the French armed forces as they deal with the growing number of personnel working from home. 

Thales has a highly skilled workforce, with close to half our people working in R&D-related roles to develop complex, critical systems for our customers. We have the organisation in place to deploy our talent and expertise where they’re needed most. In commercial avionics, for example, which has been hard-hit by COVID-19 – and where certain jobs have been affected, although no redundancies are planned – our people already have the right skills to work on our defence programmes.

Likewise, employees affected by falling demand for digital services have been reassigned to work on internal projects.

More generally, through our engineering competence centres, we can redeploy teams affected by the crisis to work on other Group projects.

We have also managed to reorganise certain activities geographically, moving a number of defence projects to sites that normally work on commercial aerospace programmes. As you can see, even a major global corporation can adapt with speed and flexibility! 

As always, our priority is to maintain our skills base and our capacity for innovation. We believe we’ll come through the pandemic stronger and better able to step up to the big challenges that lie ahead: defence, green aviation, digital security, climate change, and so on. These issues go to the very heart of our core purpose. I think the world may need Thales more than ever during and after this crisis. And we’re readier than ever to build a future we can all trust.