TOP management at British Aerospace appears to have kept its eye on the trading ball while being absorbed by the grander questions of strategy in a globally consolidating defence industry.

The 27% increase in the order book to #28bn is particularly impressive, but this will not necessarily translate into strong sales growth - in the short term at least.

Military orders are flat, while pricing pressures are being seen in Airbus. This does not preclude higher profits this year because margins on the military side are increasing. This is to be expected, as margins on aircraft are thin.

The cream comes in the back-up services and spares - at least, it does if the customer pays up. It is not the first time that fears that the Saudis would not continue the giant Al-Yamamah contract have surfaced, but it seems that once again they are groundless.

This business is important because although it may now only account for 11% of turnover, its contribution to profits is considerably higher.

On the strategy front, BAe is hoping the anger of the Germans and French over the GEC Marconi deal will cool, as it would still like to do a deal with Dasa of Germany in particular.

The logic of this is inescap-able, but no move is likely in the short term. BAe argues that it kept Marconi out of the hands of the Americans, thereby preserving European consolidation hopes, but this will not cut much ice with the Europeans who thought Marconi fitted better with CSF Thomson of France.

An American deal is considered necessary to secure an entry into the US defence market. So far, non-US companies do not get a look-in for strategic reasons. The ice is beginning to crack, but there will probably always have to be significant US content to any future contract.

BAe is playing a long game, but the stakes are high and it now has a commanding position in the industry. If it plays its cards carefully - and that will be difficult given the sensitivities of the parties concerned - it could in time emerge as the European leader.