Pressure on spending for military and space products and services more than offset solid demand for commercial aircraft leading to a slight reduction in overall United States aerospace sales in 2013 but demand is expected to pick up leading to a solid gain for the aerospace industry in 2014, according to the Aerospace Industries Association (AIA).

AIA President and CEO Marion Blakey. Photo: AIA

AIA said that overall sales will hit $220.1 billion this year, down just less than a percent from $222 billion in 2012, before rebounding to $232.1 billion in 2014, a five percent uptick. The expected sales for 2013 are below the nearly $224 billion AIA had forecast a year ago, but that estimate excluded the impact of sequestration, which went into effect in March and forced the Pentagon and federal civilian agencies to cut billions of dollars from their budgets in FY ’13.

The 2014 estimate factors in a pending congressional budget deal that is expected to soften the blow to the defense industry during the next two years from the ongoing sequester, Marion Blakey, president and CEO of AIA, told Defense Daily yesterday following her presentation of AIA’s 2013 Year-End Review and Forecast.

While the budget deal is a positive, Blakey said in her remarks that the reality of sequestration remains a threat to the health of the nation’s defense industrial base in terms of employment and investing in needed military capabilities.

In 2013, aerospace employment is expected to contract by 2 percent, going from 631,400 jobs a year ago to 618,200 this year, AIA said. AIA maintained a constant drumbeat this year warning about the potentially devastating impacts to the defense industrial base from sequestration and Blakey said that going forward she’s “not going to walk away from the tenor and tone of those remarks.”

AIA warns that while the impacts of sequestration are felt at all levels of the defense industrial base, the risks to small and medium-size companies are greater. Amid sequestration, an already constrained spending environment, and uncertainty about future budgets, suppliers have lost sales, seen contracts canceled, and implemented layoffs and hiring freezes, AIA said.

Despite the flattish sales in 2013, the aerospace industry remains the backbone of U.S. exports, with the balance of trade in aerospace products expanding 12 percent to $73.5 billion on the strength of the commercial aircraft business and space. Blakey said the balance was the best in history for the aerospace industry.

AIA said that civil aircraft, engines and parts make up 88 percent of aerospace exports.

AIA is optimistic about the strength of defense exports due to recent reform measures to loosen export controls on commercial satellites and some technology found in military aircraft and military aircraft engines. Defense exports are a “priority” for industry given as domestic defense spending declines, AIA said, adding that the government and industry must partner on a “National Defense Export Strategy that supports U.S. national security, foreign policy and economic interests.”

Civil aircraft growth in 2014 is projected to grow nearly 8 percent to $72.1 billion after a similar rise in 2013 to $67 billion, AIA said. Gains in both years are being driven by higher shipments of passenger and cargo planes, helicopters and general aviation aircraft.

In 2013, military aircraft sales are projected to be about $56 billion, a 6 percent decline from 2012, according to AIA’s preliminary expectations. In 2014 military aircraft sales are projected to rise nearly 3 percent to $57.6 billion.

After a 4 percent decline in 2013, missiles sales are expected to rebound in 2014 with a 3 percent gain to $22.1 billion, still $300 million off of 2012 levels. AIA estimated that space related sales in 2014 will be up 5 percent to $47.1 billion from $44.8 billion, which would put them ahead of the $46.4 billion in 2012.