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Aerospace Flies High

After years of slow recovery, the industry has taken off, with strong domestic and international growth.

Jun/Jul 06
The aerospace industry is soaring into record profits in all three of the industry's main sectors: civil/commercial, military/defense, and space. This recovery has been fueled, in large part, by overseas sales, a boost in the military/defense markets, the air freight industry, and a renewed commitment to space travel. Worldwide travel has also rebounded, and many countries around the globe are responding with the purchase of new airplanes.

"Most of the growth in 2006 is related to the rapid expansion and recovery of the civil aviation sector of our aerospace economy," says John Douglass, president and CEO of the Aerospace Industries Association (AIA). "This is good news for our national security, it's good news for U.S. workers, and it's good news for the American economy."

The industry outlook for the next few years is anticipated strong domestic and international growth, with passenger traffic expected to grow 4.8 percent per year, worldwide economic growth expected to average 2.9 percent per year, and cargo traffic growth averaging 6.2 percent per year, according to Boeing. David Napier, research director for the AIA, says the outlook overall for 2006 is calling for 8.2 percent growth to $184 billion.

"While we are enjoying the good times, we are not losing site of the longer term," says Lori Gunter, 787 program communications spokesperson for Boeing. Some of this growth, according to Gunter, is attributed to startup airlines, both nationally and abroad, as well as the replacement of aging aircraft.

Civil/Commercial Aviation
According to the AIA, civil aviation sales - including commercial jets, general aviation aircraft, helicopters, engines, and parts - led all sectors, increasing 20 percent to $39 billion. Orders increased 15 percent to $187 billion, and for the second year, the number of commercial jetliners delivered grew. The backlog of commercial jetliners jumped 39 percent to $98 billion.

In 2005, the U.S. aerospace industry generated a record $170 billion in sales, and profits rose to an estimated $11 billion, a record level. The AIA projects that aerospace industry sales will continue to grow another $14 billion to $184 billion in 2006, as the Defense Department's purchases enter their eighth year of growth and commercial transport sales take off. Finally, civil helicopter sales surged from $515 million to a record $750 million, and civil helicopter exports reached record levels, increasing 57 percent to $490 million.

Driving some of the civilian aerospace growth is Boeing's new 787 Dreamliner, the most successful program launch in history, according to Boeing. "Out of the box, before we even have an airplane built, we have more orders than for any of our other programs," says Boeing's Gunter. Boeing currently has 345 firm orders and commitments worldwide, with the airplane first scheduled to enter commercial service in 2008. "We're sold out until 2010 and 2011 is going fast. We are actually looking to see if it would be prudent to increase capacity," she says.

According to Gunter, Boeing's 787 Dreamliner will use 20 percent less fuel than today's airplanes of comparable size and will provide operators with up to 45 percent more cargo revenue capacity. Passengers will enjoy an innovative new interior environment with wider seats and aisles and larger windows, greatly improving the overall flying experience.

"The 787 has increased cargo space, and cargo on a flight can sometimes mean the difference between that flight being profitable or not," says Gunter. "The cargo market is growing faster than the passenger market, so we [now experience] stand-by cargo. The first airplane with open space gets the cargo."

AIA's Douglass is sold on the Dreamliner. "The 787 is going to be a terrific airplane; it's going to be something that the airlines are going to buy in large quantities for a number of years to come," he says. "And we're going to begin to see a burgeoning number of orders for 787s coming from our own domestic industry."

Robust defense spending in the past year has translated into record sales of military aircraft, engines, parts, and services, according to the AIA. Military aircraft sales increased seven percent to $50 billion, missile sales rose four percent to $15.3 billion, and space sales grew 3.8 percent to $37 billion. The sales for general aviation, helicopters, military aircraft, space, and related products and services are all new records.

"This is good news for our economy," says Douglass. "Our industry is vitally important to national security, and the strong defense sales are a reflection of that fact."

He adds, "Somewhere around 40 percent of everything produced in the American aerospace and defense industry is exported outside the United States. That means good, reliable jobs for Americans, and it means that we have the ability to maintain our technological manufacturing base over the long haul."

Northrop Grumman, which has operations in all 50 states, reported revenues in 2005 at $30.7 billion and is expecting revenues of $31 billion in 2006, making it the third-largest defense contractor in the United States. The company has currently signed a $1.94 billion contract for the refueling and overhaul of the aircraft carrier USS Carl Vinson and a $3.2 billion multiyear contract with Boeing to continue as subcontractor to the F-18 Super Hornet, according to Gustav Gulmert, manager of corporate and international communications. Northrop Grumman will also be the prime contractor for the U.S. Air Force's next generation air refueling tanker.

Rockwell Collins, a worldwide leader in communication and aviation electronics for commercial and government customers, has been selected to provide training modifications and support for the Air Force's B-1B Training System. The six-year contract is worth $95 million. The U.S. Navy has also awarded Rockwell Collins the contract for its MH-60 Weapons Load Trainer (WLT) program. The program, valued at $26 million, calls for Rockwell Collins to modify an existing H-60F trainer and build four new H-60 WLTs.

Space is also playing a significant role in economic growth for the aerospace sector, according to Douglass. "We believe that there is plenty of money in the economy to meet the needs of NASA's space exploration program and support a robust aeronautics program as well," he says. Northrop Grumman has partnered with Boeing to compete against Lockheed Martin for NASA's new Crew Exploration Vehicle (CEV) contract. The program encompasses development of the CEV, two new launch vehicles, and other hardware that NASA will utilize to return to the moon by 2020. "This [program] will continue NASA's vision to get us back to the moon and potentially, in time, to Mars," says Gulmert.

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