Aerospace Industry Flying High
30 Apr, 2007By: John W. Douglass
The U.S. aerospace industry is building on an extremely strong showing last year toward a near future marked by strength in every segment – commercial airliners, defense, and space. The industry was highly successful in 2006, with total deliveries projected to surpass $184 billion, up more than 8 percent from last year’s $170 billion. While sales increased across the board for nearly all product and customer categories, most notable was a surge in the civil aircraft sector of 21 percent. Once again the aerospace industry was a major contributor to the nation’s trade balance, with exports jumping to $85.3 billion. Combined with relatively flat imports of aerospace products, the net trade surplus for the sector should surpass $54.8 billion.
AIA projects aerospace industry sales will grow another $11 billion to over $195 billion next year, as the Defense Department’s purchases and the space sector increase slightly while commercial aircraft, engines and parts deliveries jump another 15 percent.
Civil Aircraft Sales
Shipments of complete civil aircraft will increase sharply in number and in value in 2006, owing in large part to a roughly one-third increase in both volume and value of commercial jetliner deliveries. With just more than 400 large commercial aircraft deliveries, value of shipments will reach $28 billion. General aviation aircraft shipments also will register solid gains, with 418 more deliveries than 2005, while billings will jump 17 percent to $9.8 billion. Adding in helicopters, engines and related components, the civil aircraft sector deliveries for 2006 should total around $47.5 billion, and continue that upward trend in 2007.
Military Aircraft Sales
Sales of military aircraft, engines, parts, and services were relatively flat from 2005 levels, with a projected increase of around 5.5 percent to $52.8 billion in 2006. Increased foreign deliveries of military helicopters, transports, aircraft engines and parts account for much of the increase. New Foreign Military Sales this year would imply a continued boost to this sector in the next two or three years.
Space sector sales will increase a modest 3 percent, or $1.2 billion, to $38.5 billion in 2006. NASA and other non-DoD federal agencies, the private sector, and DoD and exports all contributed to that increase.
Exports of aerospace products will soar to nearly $85.3 billion in 2006, while imports remain relatively flat at a bit under $30.5 billion, producing a record trade balance for the aerospace industry of $54.8 billion. This continues the track record of the industry as a major net export earner for the U.S., helping to offset the overall chronic trade deficit.
Orders and Backlog
Total orders will rise by $20 billion, or 9 percent, to $239 billion in 2006. With shipments totaling $177.5 billion, the order backlog will increase by $42 billion to $294 billion. The backlog is primarily driven by the sharp increase in orders for commercial jetliners. As of Sept. 30, a total of 2,231 commercial transport aircraft remained in the unfilled order backlog. Foreign customers held orders for 1,400 of those airliners or about two-thirds of the value of the backlog. This obviously reflects the fact that the major U.S. legacy carriers have not been placing orders to recapitalize their fleets since the post 9/11 downturn.
Aerospace industry employment will continue to increase for the third consecutive year, with the total workforce averaging some 630,000 for the year and ending up at 635,000. While the increase in overall employment was only around 23,000, or 3.7 percent, the increase for production workers was around 63,000, or 23 percent.
AIA forecasts U.S. aerospace industry sales to grow 6 percent, or $11 billion, to a record $195.4 billion in 2007. Once again, the increase will be driven primarily by increased delivery of civil aircraft, engines, and related parts and components. Deliveries of civil transports will likely reach nearly 450 aircraft, for a value of $32 billion, and general aviation, particularly business jets, will add another $11.2 billion to sales. Looking beyond 2007, the current backlog of commercial aircraft orders gives us confidence that the civil aircraft sector will continue on an upward trajectory for at least an additional three or four years. On the other hand, sales to the Defense Department will show modest gains in 2007 from funds already appropriated.
Obviously a new Congress, events in Iraq, and new management at DoD will affect the composition and value of defense programs in fiscal ’08 and beyond. Finally, it would appear that we are on a modest upward cycle for the space sector, particularly as demand for commercial satellites is on the increase.