The U.S. aerospace industry is showing resiliency in trying economic times, ending 2008 with modest growth and expecting to continue prospering this year, according to the U.S. Aerospace Industries Association (AIA).

But AIA President and CEO Marion Blakey added: “these are extraordinary economic times both here in the United States and around the world. We are in unchartered waters when it comes to the global economy. We’re not totally sure where we’re headed in the next six months, much less years into the future.” Blakey believes we are in “extremely volatile” economic times that could alter positive sales predictions for the coming year.”

Indeed, The Boeing Company has lowered its 2009 earnings outlook to reflect weakening economic conditions, saying it plans to slash some10,000 jobs. At the end of 2008 Boeing’s commercial backlog grew about seven percent to 669 planes, with an unspecified number of cancellations and deferments. (See related story below) For 2009, the company forecasts commercial deliveries in the range of 480 to 485 aircraft.

Boeing plans to cut 4,500 jobs related to commercial airliner production this year.And the company delayed deliveries of its long-awaited 787 Dreamliner for a fifth time because of problems with its supply chain and labor unrest. In addition to the 787, Boeing announced delays in its 747 deliveries.

Boeing faces a potential hike in canceled/deferred orders this year as the world’s air carriers cope with a drop in travel and tight credit. Almost a third of the world’s carriers are likely to defer deliveries this year, up from eight percent three months ago, a UBS Investment Research survey projects.

The aircraft maker is carrying development costs on the delayed Dreamliner, which won’t reach its first customer until early 2010 – two years later than planned.

The company delivered 50 aircraft in the quarter, 70 fewer than planned, hurting revenue by $4.3 billion and setting it further behind rival Airbus Industries.

It wasn’t all gloom and doom for U.S. aerospace giants.

General Dynamics reported earnings of $620 million from continuing operations in the fourth quarter of 2008, compared to 2007 fourth-quarter earnings from continuing operations of $578 million. Earnings for the full year of 2008 were $2.5 billion, an increase of 19.1 percent over 2007 full-year earnings from continuing operations of $2.1 billion.

AIA says overall aerospace sales reached $204 billion in 2008, an increase of 2.1 percent over the previous year ($200.3 billion) and a record sales figure for the industry for the fifth consecutive year. “The aerospace industry is in a good position to weather the financial storm,” Blakey believes.

The industry saw modest growth in every sector – civil aircraft, military aircraft, missiles, space and related products. U.S. aerospace firms showed strength in shipments and backlogs. Shipments totaled $197 billion for the year, up from $184 billion. The backlog was also strong, totaling $404 billion, an increase from $368 billion in 2007.

But Blakey said orders slipped to $234 billion for the year, down from $271 billion in 2007. “That change is partially reflective of the number of orders for civil aircraft in 2007, which was by far a record. Even with the decrease, 2008 was the third-highest year ever for orders in our industry by value,” she noted.

The record breaking orders for commercial transports over the last four years created very large backlogs for airframers. “To date, we have not seen many orders deferrals or cancellations,” she said. “In fact, some airlines are still ordering new planes. It looks like the backlogs will provide a buffer should the financial situation lead airlines to defer or cancel orders.”

Employment remains solid with 655,500 U.S. aerospace workers at year-end, a tick below the 657,700 on the job last September. But the average was about 10,000 more than the average for 2007.

“Obviously, in a year that saw thousands of Americans lose their jobs, we consider ourselves fortunate at this point,” she said. “We are watching this statistic very carefully since our industry has not been totally spared bad employment news in the last few month.”

AIA forecasts modest sales growth in 2009, with sales industry-wide reaching $214 billion, a figure that is about 2.2 percent more than the total the industry would have achieved this year had the Boeing Commercial Aircraft work stoppage not impacted the 2008 bottom line.

Looking specifically at civil aircraft sales, the industry trade group reports that the civil sector saw moderate growth in 2008, up almost $400 million to $80.6 billion. Transport aircraft made up the most significant portion of civil aircraft sales by value in 2008, but dipped temporarily due to the Boeing work stoppage. Helicopters and general aviation aircraft shipments were up considerably over previous years, resulting in a net positive trend.

“The U.S. civil aviation market has grown tremendously in recent years on the strength of global economic expansion, world trade, and aircraft innovations,” the U.S. trade group said, adding an ominous warning. “However, airlines worldwide are facing an increasingly difficult business environment. While strategies such as cutting capacity and increasing ticket prices have positioned airlines to meet current economic troubles, the market conditions forebode weakening demand for air transportation,” the U.S. trade group warns.”

AIA says “international and domestic passenger traffic has slid in recent months, with the global economic upheaval effecting even booming markets like China and the Middle East. Air transportation, strongly correlated with economic growth, is clearly poised for long term expansion, but the near-term may bring difficult times as passengers struggle with overall poor economic conditions.

“Airlines have tempered their fleet replacement and expansion plans due to softening demand, bringing new aircraft orders down significantly and extending delivery dates. Orders began to slow in early 2008, and as the year progressed, rapidly deteriorating market conditions hastened the decline. Slumping corporate profits and customer financing problems have impacted short-term demand for business jets.

“Large civil aircraft are also affected, with airlines facing tighter credit terms. However, aircraft backlogs provide a measure of longer-term optimism for the industry; Boeing alone has a backlog approximately seven times the current production rate, AIA noted.

Boeing Reveals Cancellations