It’s not often that I get to mention my favorite World War II aircraft in the pages of a 21st century technology magazine. So I was pleased when Marion C. Blakey, president and CEO of the Aerospace Industries Association (AIA), provided an entrée by comparing the aerospace industry in this current economic crisis to the B-17 Flying Fortress.
As a kid, I pieced together more than one Revell scale model of the indomitable heavy bomber, taking care not to smear glue on the clear plastic bubbles representing the top turret and lower ball turret, where mini machine gun barrels poked through to the sky. One’s imagination was stoked by the black-and-white television series "Twelve O’Clock High" and solemn, documentary accounts of daylight bombing raids on the ball-bearing factories of Schweinfurt, resulting in heavy losses. Engines sputtering, their wings and empennages bitten by German flak and machine-gun fire, B-17s limped home "on a wing and a prayer." "Our industry is a lot like that aircraft," Blakey observed Dec. 10, the occasion of AIA’s 2008 Year-End Review and 2009 Forecast. "We’re resilient and we’re durable in the face of the worst of hardships, and most importantly, we can provide a vital lift at the most opportune time to get our nation back on its economic feet."
This was the second year-end review Blakey delivered as AIA chief executive, the job she took after serving as FAA administrator. You may recall our report of the first such speech, in which Blakey cited the industry’s "remarkable run" since 2003 and predicted continued high growth through 2010.
For reasons apparently rooted in shaky home mortgages and exotic financial instruments, that growth is now compromised. As we report in this issue, the commercial airline and business aviation sectors face a downturn likely starting later this year or next, hence our "Cloudy Skies" theme. Somewhat under the radar of layoffs in the financial sector and among industrial colossals like Dow Chemical, aerospace companies in the United States have been implementing their own job reductions — witness Boeing, Pratt & Whitney, United Airlines, Rockwell Collins.
"These are extraordinary economic times.... We’re in uncharted waters when it comes to the global economy, and we’re not totally sure where it’s headed in the next six months much less the next several years," Blakey advised. "With all that said, the U.S. aerospace industry has a remarkable track record of succeeding in the face of adversity."
Despite ongoing bleak news, the industry is well-positioned to weather the financial storm, Blakey said. Funding levels in the defense and space sectors "are largely set for the next fiscal year," she explained, and given the long lead times of federal budgets, should "remain steady, without any major adjustments for about the next 18 months, some might say even longer."
Civil aviation is a different beast, more susceptible to market trends and fluctuations. But even here, there is reason for confidence. The backlog of Boeing civil transports grew 8 percent from 2007, reaching $293 billion for 3,721 aircraft as of September, AIA says. Foreign buyers represent 80 percent of the backlog value. "The extraordinary, record-breaking orders by commercial airlines over the last four years have created a very healthy backlog for airframers," Blakey said. "Today we have not seen many order deferrals or cancellations."
Overall industry orders cooled, however, from the record set in 2007. The estimated 2008 order value for "aircraft and parts and search and navigation equipment," was $234 billion, down from the previous-year tally of $271 billion.
On the proverbial wing and a prayer, AIA predicts continued growth for the industry in 2009, although it will be more modest than we have become accustomed to. Total aerospace sales are forecast to grow 4.8 percent, from $204.4 billion last year to $214.3 billion. That increase would have been less, Blakey noted, if Boeing had not been interrupted by last year’s machinists strike.
She said the industry resides somewhere between troubled skies and firm ground.
"Our analysis and other research, tells us that we’re somewhere in the middle," Blakey said. "The gang-buster trends of the last few years of our industry are almost certainly over for a while. But we do not anticipate a severe downturn in the near term, either."