By Calvin Biesecker
The aerospace industry is on its way toward posting modest growth this year, driven by strong military sales and a slight improvement in civil aircraft business, but the outlook for 2010 is basically flat as further increases in military business will largely be offset by a decline in commercial aerospace, the Aerospace Industries Association (AIA) said yesterday.
And, in 2011, the overall aerospace sector will experience a decline as a drop-off in civil business due to worsening prospects for helicopters, business and regional aircraft will outweigh further improvement in defense purchases, Marion Blakey, president and CEO of AIA, said at the group’s annual year-end review.
But the outlook isn’t as dire as previous downturns in the aerospace sector, she said.
“We believe the valley at the bottom of this cycle will be relatively shallow,” Blakey said. “Why? The pipeline is primed.”
At the front of that pipeline is the Boeing [BA] 787 Dreamliner passenger aircraft, Blakey said. The 787 program, which just began a nine-month flight-test program on Tuesday, is a “game changer,” she said.
Other factors that will mitigate the downturn in aerospace include strong demand for single-aisle passenger planes, “pent up” demand to replace aging aircraft, recovery of airline passenger traffic, and on the defense side expectations of a “large-scale recapitalization” of current systems that have been, and continue to be, used extensively in ongoing war operations, Blakey said.
Blakey also pointed to initiatives before Congress that could accelerate the aerospace recovery, in particular expediting the implementation of the Next Generation Air Transportation System. This is a “shovel ready” project, she said.
“With all the talk about creating jobs, we believe our industry is being overlooked as a job generator,” Blakey said. “NextGen airborne infrastructure could be manufactured today and quickly put into place.”
This year, aerospace industry sales are expected to increase 4 percent to a record $214.1 billion, with the 2010 estimate pegged at $214.4 billion, AIA said. If the preliminary 2009 estimates hold, that would mark six straight years of growth.
The increased military business is being driven by higher fighter, missile, rotorcraft and space sales. Missile sales will be up 11 percent in 2009 and aircraft, which account for the largest segment of the military aerospace sector, will be up 8 percent.
On the commercial front, the main reason for a 2 percent uptick in growth is a year of continuous aircraft production at Boeing, which suffered from a two-month long labor strike in 2008 that, in turn, dampened the company’s sales. The growth in large passenger jets is being partially offset by a downturn in civil helicopter and general aviation shipments, in particular for business jets.
Inventories of business jets appear to have stabilized but remain near record levels and prices keep falling, AIA said.
The difficult economic climate is taking its toll on new business. AIA said that orders in 2009 will be down for the second straight year, tumbling about 33 percent to $155 billion. Backlog will fall to abut $356 billion from last year’s record $402 billion, marking the first drop since 2003.
The global economic downturn has also affected international aerospace sales, both exports and imports. Exports were down 17 percent and imports off about 34 percent, resulting in a foreign trade balance of $53.9 billion this year versus $57.4 billion in 2008, AIA said.
Blakey said that despite shrinkage in the trade balance, the overall positive balance demonstrates the health of the aerospace industry.
Aerospace employment will also drop this year, again the first time this has happened since 2003. Blakey noted that the drop from last year to the third quarter of 2009 is 4 percent, which isn’t bad considering that all manufacturing job losses fell almost 12 percent in the same period.