The aerospace and defense industry is on pace for a fourth straight year of record shipments of commercial and military products, although orders and backlog so far this year have declined compared to the first nine months of 2014, the Aerospace Industries Association (AIA) reports in its annual year-end summation on the state of the industry.
Unlike past years when AIA provided current year sales estimates and revenue forecast for the next year, the association is just reporting facts as they stand and no outlook for 2016. That means full-year 2015 figures will be published sometime in the first quarter of 2016.
Dave Melcher, president and CEO of AIA, offered a long-term forecast for expected outcomes by the time the United States hits its 250th birthday in 2026.
“I’m happy to predict that with a robust aerospace and defense industry leading the charge, NASA will be fully engaged with the work of planning for the first human expedition to Mars,” Melcher said at AIA’s Annual Year End Review luncheon. “We’ll enjoy the bounty of the burgeoning unmanned aircraft system economy. There will be beneficial applications well beyond the packaged deliveries that everyone’s talking about today. Your next local or transoceanic flight will always be in the network, will smoothly avoid potential weather hazards, be routed more efficiently, taxi more quickly, and fly with a significantly reduced carbon footprint. And with our industry’s unwavering support America’s men and women in uniform will remain the best trained, best equipped and best prepared fighting force in the world.”
Through the first three quarters of 2015, aerospace manufacturers tallied $230.2 billion in shipments, up 9 percent from the same period in 2014. Total shipments for all of 2013 and 2014 were $247.9 billion and $262 billion respectively, according to AIA’s figures.
The $230.2 billion in shipments through September includes $187 billion in aircraft and parts manufacturing and $39.7 billion in search and navigation equipment manufacturing.
Despite the increasing shipments, net orders so far this year are well-off last year’s intake, down 32 percent through September to $210.3 billion due to a 40 percent decline in non-defense aircraft and parts manufacturing to $165.2 billion while orders for defense aircraft and parts and search and navigation equipment were flat at $41.6 billion.
Backlog through the first nine months of the year was down due to lower amounts in aircraft and parts manufacturing.
Melcher applauded the recent two-year budget deal between the Obama administration and Congress for enabling “more leeway in making prudent investments in our national security, civil aviation, and space capabilities,” noting that how money is divvied up in FY ’16 must still be determined.
Melcher, who joined AIA in June after leading aerospace and defense contractor Exelis before its acquisition in May by Harris Corp. [HRS], cautioned that the outlook for spending in the defense investment accounts are weaker. He said that “we remain concerned that the Pentagon may allocate a smaller share in its fiscal 2017 budget request to procurement and research and development.”
With the rise of the Islamic State, Russian aggression in parts of Eastern Europe, and China building up its military capacity in the South China Sea, Melcher said that “Clear, there is a serious mismatch between the national security threat environment and the resources we’re devoting to defense.”
As in 2015, AIA next year plans to work toward five policy goals to strengthen the United States’ aerospace and defense industry, Melcher said. First is to press for “robust, balanced and stable U.S. defense spending” and for a “thoughtful technology investment strategy to beef up homegrown space capabilities and continue the development of vital weather satellites.”
Second, Melcher said, is a focus on improving the nation’s aerospace and defense infrastructure, including implementing the NextGen air transportation system, and shoring up the industrial base with exports a key component of this in light of federal budget austerity.
In 2014 the U.S. aerospace and defense industry’s trade balance achieved a record $61.9 billion and through the first nine months of 2015 exports of manufactured goods totaled $92 billion, up nearly 6 percent versus the same period in 2014, AIA said. Exports so fare this year include $81.3 billion of civil aircraft, engines, parts and space systems, and $10.7 billion of military aerospace systems.
Related to the export focus is a third goal aimed at achieving “a level playing field for U.S. industry in the global marketplace,” Melcher said, including lobbying for passage of the Trans-Pacific Partnership trade deal and a possible Transatlantic Trade and Investment pact. AIA will also help the U.S. government with its presence at major international air shows in 2016 and encourage a “Team USA approach to promoting the sales of our superior products at these high profile events.”
A fourth goal is continue ongoing work to help the industry improve the safety and security of the American people, including better use of cyber security practices, and protect the environment, Melcher said.
Finally, AIA will engage with a broad range of industry stakeholders in business, academia, think tanks, and at the local level to “be their community of choice when issues arise affecting our mutual interests,” Melcher said.
AIA said that the aerospace workforce in the United States continues to decline, with preliminary estimates for the first nine-months of this year showing a 1 percent drop to 604,700 workers. Between 2010 and 2015 the average annual decline in the workforce has been just over a half-percent with the losses driven by the search, detection, and navigation sub-sector, AIA said.
Despite employment declines, the good news for aerospace and defense workers is that average annual wages have grown by more than 3 percent since 2010 to a total of $98,507 in 2014, AIA said.