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Thursday, December 15, 2011

AIA: Economy, Defense Cuts to Hit Aerospace

AIA President
Marion Blakey
Despite a sluggish overall economy and major cuts looming in the defense sector, the U.S. aerospace industry saw its eighth straight year of growth in 2011, with annual sales of $218 billion, according to the Aerospace Industries Association’s (AIA) year-end forecast and review. However, 2012 is expected to bring changes.

The forecast, issued on Dec. 14, projected civil aircraft sales of $49.7 billion in 2011, an increase of 3.2 percent. For 2012 and beyond, AIA sees sales growing 3.4 percent per year during the 2011-2012. However, cuts to the U.S. defense budget, economic uncertainty and the budgetary questions in Washington will stymie growth in the coming years, according to the report. Rising commercial aircraft sales (up 7.5 percent year-over-year through September 2011) could offset the downward pressure from cuts in U.S defense spending and may spur the commercial aviation sector to increase capital spending on new equipment, according to the report.

“Annual sales are going to be up across the board in 2011,” AIA President and CEO Marion Blakey told a Washington, D.C., audience. “But in 2012 we expect things to begin to change.”

The forecast for military spending looks less rosy, according to the report. U.S. military sales increased 6.7 percent in 2011, with sales estimated at $66.51 billion. “While 2011 was a strong year for military aircraft, domestic purchases are expected to decline in the coming years due to federal deficit reduction measures,” AIA said.

The sluggish global economy and the uncertainty created by the current budget process in Washington are hitting the aerospace industry, the association said. “We need a resolution,” Blakey said. “Our only option for 2012 is to keep fighting. That means new rallies, more outreach and ongoing efforts to educate policymakers and stakeholders across the country about the disastrous consequences of gutting the U.S. defense and aerospace industry.”

Orders for civil aircraft are seen jumping 23 percent to $107 billion in 2011, boosted by the aging U.S. regional fleet, growing demand for fuel efficient aircraft and the introduction of new aircraft. The order book hit a recent high of $224 billion in 2007. (The low was just $23 billion in 2009.) In 2011, the U.S. aerospace industry contributed $87 billion in export sales to the U.S. economy, up 12 percent, after falling during the two previous years. The industry’s positive trade balance of $57.4 billion is the largest trade surplus of any manufacturing industry, according to AIA.

Additionally, growing demand for air travel in the coming years will boost interest in new aircraft. By 2029, the world’s airlines will take delivery of 29,000 commercial aircraft with a total value of $3.2 trillion, according to the report.

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