Market Report: Aerospace Businesses Looking for New Opportunities

{{RELATEDLINKS}}The aerospace end of the transportation sector has been a bit on edge, with all of the recent Washington debate about budget cuts and sequestration. “In the aerospace world, whither goes defense, there goes aerospace in general,” says Lou Crenshaw, principal at Grant Thornton and national industry partner for aerospace and defense. But that axiom may not hold true forever. “Many aerospace companies have begun to look at insulating themselves from defense cuts by looking at other opportunities and spinning off businesses they think could be losers.”

Many of those other opportunities could be in the commercial aviation sector, where rising fuel costs are causing increased interest in the purchase of new, more efficient planes. The Kiplinger Washington Editors’ April forecast expects commercial orders for aerospace products to be healthy, enough so that they’ll more than make up for the expected decline in U.S. military orders caused by budget cuts.

“The trend is going to be to buy new,” Crenshaw says. “There are pretty strong orders in the commercial sector and they’re trying to get rid of dinosaurs. Airlines are trying to figure out how they can get more efficiencies. The demand for new aircraft will stay strong.” That’s not just in the United States, either. Crenshaw says overseas sales in aerospace were more than $40 billion in 2011, and the figures from the first half of 2012 matched that figure in half the time.

There’s been a lot of debate in political circles about military drones, but Crenshaw says there are lots of opportunities ahead in the manufacture of unmanned aircraft for non-military uses. “Unmanned aerospace has been hot in the U.S.,” he says. “More and more we’re going to see the civilian sector picking up on that. It appears restrictions are being lifted against some types of surveillance.”

All of this spells potential growth in aerospace — but where? “A lot of employers on the manufacturing side are doing near-shoring,” Crenshaw says. “Certainly in aerospace, near-shoring is going to have some significant impact. Mexico is going to become extremely attractive.”

One challenge facing the sector is labor availability, he says. “The skilled work force tends to be in shortage, and I believe that shortage has been more in the commercial side.” Here are a few highlights from the aerospace world:

A $600 million investment in Mobile, Alabama, by the European aircraft maker Airbus is worth about 1,400 jobs. It will be the company’s first U.S. production facility, intended to build the A320 single-aisle jet.

In West Palm Beach, Florida, a $63 million expansion at the Pratt & Whitney aircraft engine plant includes construction of a new building and improvements at another.

Rockford, Illinois, has been preparing for takeoff in the aerospace business. Last year Woodward, Inc. announced it would add to its existing facilities there by investing $200 million to build a second campus as part of its aircraft turbine systems business. Creation of the Rockford Area Aerospace Network has led to thousands of additional aerospace jobs and greater visibility, including an upcoming presence at the International Paris Air Show.