This makes the U.S. aerospace industry one of the most competitive in the world. Its positive trade balance of $44 billion - the largest trade surplus of any U.S. manufacturing industry - has not been overlooked by the Obama administration.
"The U.S. aerospace industry is a strategic contributor to the economy, national security, and technological innovation of the United States," comments Francisco Sánchez, Under Secretary of Commerce for International Trade. "The industry is essential for achieving the President's goals of doubling exports by the end of 2014."
According to a 2011 year-end review by the Aerospace Industries Association (AIA), the aerospace industry performed well in 2011. Despite sluggish economies around the world, annual U.S. sales were about $220 billion. Strong aircraft orders and rollout of major new products toward the end of 2011 strengthened the industry's performance. For example, Aeroflot, Russia's state-owned airline, ordered eight 777s from Boeing valued at $2.1 billion. The U.S. aircraft manufacturer also announced significant production increases for all its commercial aircraft models, including 737s and 787s; production of the 787 will climb to 10 a month by 2013, up from the current rate of 2 per month.
In 2011 companies invested more in civil and military aircraft, as well as the space sector, compared to the previous year. This created a surge in the maintenance, repair, and overhaul (MRO) sector, which is expected to increase by 3.8 percent over the next five years, according to AIA.
Another bright spot is the sale of larger business jet aircraft, especially to China, India, and other developing countries. The leading manufacturer of business jets, Bombardier, is boosting business jet production with planned deliveries of 180 aircraft in 2012, up from 163 delivered in 2011.
"We're off to a good start in 2012 with 40 orders and options and many more campaigns in the pipeline," says Pierre Beaudoin, president and CEO of Bombardier Inc. Its new CSeries of airliners appears to be a big winner - the 200 firm orders already received represent the first 2-3 years of production. The company's research and development investment will reach a record high $2 billion in 2012 as the company moves toward first flights for the Learjet 85 and CSeries CS100 aircraft. The Learjet 85 is manufactured in a state-of-the-art, 1.24-million-square-foot production facility in Wichita, Kansas; 19 states provide components for the CSeries, including engines, braking systems, hydraulic systems, fuel systems, avionics, and interiors.
Defense Cuts Will Hurt
Lockheed Martin, Boeing, and Northrop Grumman have received the most U.S. defense contracts over recent years. With deep military and space budget cuts looming, however, major companies will try to offset these losses with increased sales to other countries. The AIA indicates Near-Eastern and Middle-Eastern governments have steadily increased purchases of U.S. military aircraft. The sale of 24 refurbished F-16C/Ds to Indonesia, along with the possibility of other sales, was the result of President Obama's announcement that the United States will expand its military ties in Southeast Asia. The UAE has stepped up purchases to secure its borders against Iran. Saudi Arabia also bought 85 F-15E fighter jets valued at $29.4 billion and Iraq will purchase 18 U.S. F-16 fighters.
Nailing down future deals with countries won't be easy, however; America's top companies face increasingly tough private-sector competition from China, India, and Russia.
U.S. firms will also remain on the lookout for mergers and acquisitions that fit their short-term and long-term strategies. Zacks Equity Research indicates Boeing has been especially busy, "having acquired Argon ST, a premier developer of intelligence equipment; Narus, a provider of real-time network traffic and analytics software; and CDM Technologies, a software engineering company that specializes in real-time transportation and logistics planning systems for the U.S. military."
Best R&D in the World
Rising fuel prices are creating demands for new fuel-efficient aircraft. The United States is the world leader in aerospace manufacturing and technology, including alternative aviation fuel research and development - a huge growth market. U.S. producers have successfully completed test flights using fuels from different feedstocks and are moving toward commercial production.
AIA's 2012 forecast predicts significant growth in almost every aerospace category - from civil aviation to space. This is great news for hundreds of U.S. manufacturers in aerospace supply chains that are eager to expand production and hire more workers. Increased aerospace production not only will help major clusters thrive, but also boost economies in smaller towns across the country. Over 90 percent of U.S. exporters of aerospace products are small and medium-sized firms - many of them located in communities like Spokane, San Antonio, or Meridian, Mississippi, that aren't part of big clusters.
Rob Akers, CEO of the National Tooling and Machining Association (NTMA), a national organization that represents the custom precision manufacturing industry, indicates big companies like Boeing are just as likely to contract with smaller companies if they can meet their production demands. "And if OEM engineers need to be heavily involved in component design, this sometimes drives the decision to work with local suppliers as well," says Akers.
"Aerospace was continually on the leading edge of processing, materials, and quality issues in the manufacturing sector," adds Doug Woods, president of the Association for Manufacturing Technology (AMT). "This drew tier-one and tier-two companies into those clusters. Today, however, you are just as likely to find the best blade-grinding provider in Michigan as in California or New England. In fact, aerospace component providers have spread across the United States and into Mexico, from where we're importing a significant amount of aerospace components."
New innovations in manufacturing technology enable faster component production, which means faster delivery times can be achieved. "Coming out of the recession, our challenges are being driven by the original equipment manufacturers," says Akers. "They require more aggressive delivery times because they don't want to carry inventory. Our manufacturers are extremely competitive, diverse, adaptive, and can rise to the next level."