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Civil Aircraft
high and variable fuel prices. The introduction of new aircraft has also created demand in the commercial segment. The U.S. large commercial aircraft market continues to ramp up at a respectable pace, yet sagging airline demand in the U.S. and Europe means that manufacturers will necessarily depend more heavily on exports to Asia, the Mideast, and other fast-growth markets. The U.S. civil industry will be lifted as Boeing ramps up 787 and 747-8 production, now that the two new aircraft have entered into service over the past few months. The key market driver in 2012 will be the price of fuel. High fuel prices create demand for new fuel-efficient aircraft, while at the same time eroding airlines ability to purchase new planes. This situation places renewed emphasis on developing commercially viable alternative fuels, which could potentially dampen the volatility of fuel costs faced by operators while lessening the global airline industrys environmental impact. The U.S. is a leader in alternative aviation fuel research and development, and U.S. producers have successfully completed test flights using fuels from a variety of feedstocks and are moving toward commercial production.
After a disappointing 2010, the U.S. civil aircraft sector returned to a growth position. U.S. civil aircraft sales are expected to total $49.7 billion in 2011, a 3.2 percent annual increase. Looking forward, the sector is likely to grow at a CAGR of some 3.4 percent during 2011-2013. Orders for civil aircraft are expected to rise sharply in 2011, reaching nearly $107 billion, a gain of 23 percent. The amount is far below the recent high of $224 billion in 2007, but is well ahead of the 2009 low of $23 billion. Industry drivers in 2011 include several factors that have influenced the market for a number of years, such as the aging U.S. regional jet fleet and a growing demand for fuel-efficient aircraft that has been driven by persistently
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The U.S. civil rotorcraft market is diverse, with the bulk of new deliveries coming from mature production lines. The market encompasses emergency medical service (EMS) providers, offshore oil and gas exploration, and law enforcement applications. Following two years of significant decreases in sales, U.S. civil helicopter shipments are expected to increase to 454 aircraft in 2011, representing an annual increase of 5.3 percent. This upward trajectory is expected to continue into 2012 as demand deferred during the economic downturn reaches the market.
Future sales also look promising, as exemplified by the $35 billion contract awarded to Boeing to build 179 KC46A refueling tankers. While 2011 was a strong year for military aircraft, domestic purchases are expected to decline in the coming years due to federal deficit reduction measures. These measures are likely to become even more significant factors as much of the U.S. military aircraft fleet nears maximum service-life limits. Anecdotally, ground crews have pointed out that todays pilots are now flying the exact same equipment as did their fathers. The recent grounding of several combat wings due to equipment stress is impacting U.S. combat readiness. The current U.S. Air Force fleet, whose planes are on average more than 23 years old, is the oldest in USAF history. Many transport aircraft and aerial refueling tankers are more than 40 years old, and it is expected that some may reach the 70-80 year mark before they are finally retired.
Military Aircraft
The U.S. military aircraft sector expanded by nearly 6.7 percent over last year, with sales estimated at $66.51 billion. The Department of Defense ordered more F/A-18 E/F Hornets and V-22s for the Navy and Marine Corps.
As the U.S. increasingly seeks foreign buyers of military aircraft, it faces competition from other nations that are targeting the same opportunities. A case in point is the
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Related Products & Services Space Missiles Military Aircraft Civil Aircraft
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$25.1
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$54.7 $58.9 $62.4
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$48.2 $51.3 $48.2 $49.7 $51.7
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recent India fighter competition. That the U.S. entrants failed to win the competition is a sure sign of how effective competitors in this market can be.
Trade
two years. The increase is due primarily to strengthened civil exports, which are expected to grow by 14 percent in 2011, reaching nearly $77 billion. U.S. aerospace imports are also expected to increase in 2011, driven primarily by increased purchases of foreign aircraft engines and engine parts. Overall, aerospace-related imports are expected to reach $29.6 billion, an increase of 12 percent. In recent years, Near- and Middle Eastern governments have steadily increased purchases of U.S. military aircraft. Most recently, the sale of 24 refurbished F16-C/ Ds to Indonesia, along with the possibility of other sales, came out in President Obamas announcement that the U.S. will expand its military ties in Southeast Asia. As tensions rise with Iran and Syria, the UAE has stepped up purchases to secure its borders and maintain the ability to deliver its recent $304 million purchase of bunker busting weapons in response to Irans nuclear program. Additionally, Saudi Arabia bought 85 F-15E fighter jets valued at $29.4 billion and the Iraqi government has agreed to purchase 18 U.S. F-16 fighters, worth about $3 billion.
The U.S. aerospace industry continued to show reasonable international strength in 2011 despite the lingering effects of the global economic downturn. In 2011, the industry contributed $87 billion in export sales to the domestic economy. The industrys positive trade balance of $57.4 billion places aerospace in the lead, representing the largest positive trade balance of any manufacturing industry. U.S. aerospace exports are expected to increase to nearly $90 billion in 2011, up 12 percent after falling for
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2011 IMPORTS 29.6
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Space
Budget cuts will continue to menace the U.S. space industrial base, and an anticipated increase in competition from Indian, Chinese and Russian space programs will exacerbate the situation. Likely impacting U.S. industrys competitive stance is the U.S. governments increasing dependence on commercial systems to enhance U.S. space programs and launch capabilities, fostering new opportunities for the private sector.
This year has been a particularly challenging one for the U.S. space industry. Developments in 2011 that have directly impacted the industry include: retirement of the space shuttle, which caused the loss of thousands of high-tech industry jobs; the near cancellation of the James Webb Space Telescope; and reductions in NOAA polar orbiting weather satellites and national security space programs. Despite these roadblocks, there were some bright spots including an agreement on a way forward for an important new NASA exploration initiative, the Space Launch System, which will develop a new launch system to enable human exploration beyond Earth orbit.
General Aviation
As in 2010, 2011 proved to be a challenging year for general aviation. Lingering effects of the financial crisis of 2008 and the European banking crisis continue to
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SHIPMENTS 184.2
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restrict financing for the sector. Further, several initiatives are under consideration that are tied to new taxes and increased regulations that may limit the sectors growth. However, bright spots do exist, including a strong demand for new equipment by regional airlines operating in developing airline service markets. As private air travel becomes more commonplace, larger business jet aircraft are leading market sales within the sector, particularly in Southeast Asia. China represents another growing market, and it has been estimated that by the end of the decade the nation will account for 20 percent of global business jet deliveries, up from todays 7 percent. Light and medium business jets remain an area of concern, with a three-year downturn threatening to extend into 2012, and deliveries depressed for several key U.S. companies.
Employment
Aerospace employment is likely to register a slight increase in 2011, as the hardest-hit sectors of the industry find firmer footing. Total year-end employment is expected to be 624,400, up from 624,000. According to a recent study by the U.S. Department of Commerce, aerospace supports more jobs through exports than any other industry. The U.S. aerospace industry directly employs about 500,000 workers in scientific and technical jobs across the nation and supports more than 700,000 additional jobs in related fields.
Aerospace Employment
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EMPLOYEES (THOUSANDS)
800 700 600 500 400 300 200 100
Search, Detection & Navigation Instruments Guided Missiles, Space Vehicles & Parts Aircraft, Engines and Parts
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Looking forward to 2012, aspects for growth are positive in commercial aerospace and neutral in the defense sector. That said, both the commercial and military sectors remain vulnerable to numerous variables that are capable of overturning current expectations and trends. A mounting sense of urgency to address high levels of deficit spending by the U.S. is expected to induce cuts to the U.S. defense budget. However, rising commercial aircraft sales (up 7.5 percent year-over-year through September 2011) could offset these drags on the market and may spur the commercial aviation sector to increase capital spending on new equipment. Volatile fuel prices continue to spur world airlines to replace older, less fuel-efficient aircraft with newer models. This demand, combined with rapid growth in air travel in Asia and the Middle East, continues to feed a growing demand for new aircraft. Moreover, the global air traffic market is expected to increase annually at a rate of 4.9 percent over the next 20 years, considerably higher than the global GDP growth rate. Consequently, in order to keep pace with the growing demand for air travel, estimates predict that by the end of 2029, the worlds airlines will take delivery of 29,000 commercial aircraft with a total value of $3.2 trillion. Order books at Boeing and Airbus contain six to seven years of commercial aircraft production at current levels. Both companies have announced significant production rate increases that began late last year and stretch through 2014. It is expected that the business jet market, which has been battered both by difficult market conditions and political headwinds, will improve modestly in 2012. The aftermarket parts and service business for business jets and large commercial airplanes is staging a solid recovery, driven by increased flight hours for both categories.
As for the defense segment, both the FY2012 base and supplementary (OCO) defense budgets authorize funding for aerospace and defense procurement at increasing rates. In addition, the aging of conventional military equipment such as planes, ships and tanks necessitates equipment replacement and repair. However, the magnitude of cuts to global defense budgets is still uncertain as the U.S. Congress and national legislatures around the world attempt to reduce deficits and overall governmental spending. While the U.S. defense industry remains very concerned about potential budget cuts, 2011 deliveries reflect the strength of previous years budgets. While outlays are currently positive for military fixed-wing aircraft and rotorcraft programs, funding for new program starts is highly uncertain. Missile and munition demand also looks vulnerable, as weapons stockpiles are often cut first when combat operations and defense budgets trend downward. In space, the market continues on a reasonable plateau, driven by ongoing satellite replenishment and launch services demand. While cuts to NASAs FY2012 budget will have a negative impact, they were less severe than those advocated by some policymakers. The U.S. aerospace industry continues to provide significant contributions to the countrys economy and provides capabilities vital for national security. With employees in every state of the union, it generates the highest positive trade balance of any U.S. manufacturing sector. This is particularly relevant given the nations challenges of high unemployment, a stagnating economy and a crippling national deficit. AIAs 2011 Year-End Review and 2012 Forecast reports increases in almost every category from civil aviation to space. In the years following 2012 our industry will face significant challenges, particularly in the defense sector, as the government seeks solutions to an ongoing budget crisis. Our position has been firmly established we will continue to educate the public and elected officials on the need to maintain an aerospace industry that is Second to None in the world.
Table I
Calendar Years 2001-2012
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AIRCRAFT
Total Civil Military Missiles Space
Year
Source: Aerospace Industries Association (AIA), based on company reports; The Budget of the United States Government, National Aeronautics and Space Administration (NASA), U.S. Department of Commerce, and Department of Defense. a. Based on AIAs aerospace composite price deflator, (2000=100). E. Estimate. P. Preliminary.
Other Customers
$61.90 53.17 41.51 42.04 46.68 59.10 65.33 60.58 61.95 58.33 59.30 61.51
Source: Aerospace Industries Association (AIA), based on company reports; The Budget of the United States Government, National Aeronautics and Space Administration (NASA), U.S. Department of Commerce, and Department of Defense. a. Beginning in 2005, NASA sales were reported separately from other agencies. b. Based on AIAs aerospace composite price deflator, (2000=100). E. Estimate. P. Preliminary.
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As of End-of-Year 1992-2011
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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(P)
Shipments
$137,114 123,850 112,511 110,928 110,840 132,787 150,077 152,728 144,740 153,571 140,889 135,955 145,305 152,081 165,652 202,723 211,943 207,585 187,909 184,158
Orders
$118,369 100,815 98,621 115,279 134,142 143,071 138,407 140,329 165,994 146,444 132,271 137,455 152,437 214,099 248,546 316,361 257,096 126,226 196,324 204,809
Backlog
$220,233 197,198 183,308 187,659 210,961 221,245 209,575 197,176 218,430 211,303 202,685 204,185 211,317 273,335 356,229 469,867 515,020 433,661 442,076 462,727
Source: U.S. Census Bureau, Manufacturers Shipments, Inventories, and Orders and AIA estimates. Notes: Not seasonally adjusted; includes aircraft engine and parts manufacturing. Includes both Civil and Defense Data P. Preliminary.
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2009
2010
2011a
583 24 28 73 138
567 17 28 79 132
471 14 25 51 132
543 12 20 32 157
755 11 19 59 157
Source: Aerospace Industries Association, based on company reports. a. As of end of third quarter.
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Transport Aircraft
Helicopters
General Aviation
Number of Aircraft Shipped 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(P) 2012(E) Value (millions of dollars) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(P) 2012(E) $43,043 35,450 27,833 27,815 31,424 37,085 42,431 38,910 39,884 36,217 37,211 39,576 $34,155 27,574 21,033 20,484 21,941 25,875 29,160 24,076 29,695 27,350 28,783 30,862 $247 157 366 515 816 843 1,330 1,486 1,107 992 972 1,043 $8,641 7,719 6,434 6,816 8,667 10,367 11,941 13,348 9,082 7,875 7,456 7,670 3,575 2,904 2,935 3,445 4,094 4,443 4,729 4,538 2,630 2,227 2,065 2,132 526 379 281 285 290 398 441 375 481 462 471 490 415 318 517 805 947 898 1,009 1,084 564 431 454 486 2,634 2,207 2,137 2,355 2,857 3,147 3,279 3,079 1,585 1,334 1,140 1,156
Source: Aerospace Industries Association, based on company reports, data from the General Aviation Manufacturers Association (GAMA) and AIA estimates E. Estimate. P. Preliminary.
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2010
2011(P)
AEROSPACE EXPORTS:
Current Dollars Constant Dollarsa $97,224 79,421 $95,082 74,889 $81,166 62,402 $77,503 58,863 $86,982 64,843
AEROSPACE IMPORTS:
Current Dollars Constant Dollarsa $36,610 29,906 $37,694 29,688 $25,132 19,322 $26,351 20,013 $29,573 22,046
Source:Aerospace Industries Association, based on data from the U.S. Department of Commerce and AIA estimates. Note:Trade balances may not equal the difference between exports and imports due to rounding. a. Based on AIAs aerospace composite price deflator, (2000=100). P. Preliminary.
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Aircraft Engines
Turbine Piston Aircraft and Engine Parts Spacecraft, Missiles, Rockets, and Parts
3,880
3,812 69 18,528
4,328
4,195 133 19,989
3,752
3,616 136 11,383
3,799
3,700 99 12,498
4,358
4,289 68 14,919
905
896
698
1,013
1,205
Source: Aerospace Industries Association, based on data from the U.S. Department of Commerce and AIA estimates. Notes: Import data include non-military aircraft parts and aerospace products previously exported from the United States. Totals may not equal sum of terms due to rounding. a. Includes used aircraft, gliders, balloons and airships. P. Preliminary.
28,469 13 811
30,777 25 535
$13,246
4,174 789 791 2,303 119 172 414 277 137
$12,819
4,520 1,548 300 1,930 590 152 423 344 80
$10,666
2,325 276 520 1,208 93 228 517 381 137
$10,375
1,742 140 832 432 43 294 357 271 86
$10,293
1,622 457 537 459 20 149 533 435 98
Source:Aerospace Industries Association, based on data from the U.S. Department of Commerce and AIA estimates. Note: Totals may not equal sum of terms due to rounding. P. Preliminary. D. Civil aerospace export data suppressed by U.S. Census Bureau beginning first quarter 2009.
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Source:Aerospace Industries Association, based on data from the Bureau of Labor Statistics (BLS). a. Starting in 2008, the production workers series does not include: Search, Detection, and Navigation Instruments. P. Preliminary.
Table X
Calendar Years 1992-2011(P)
Dollars
(In Millions)
Assets
1.0 2.9 5.8 6.2 6.5 6.6 6.1 6.1 5.9 0.8 2.9 4.7 6.5 6.9 7.6 6.7 3.8 4.3 6.6 8.0
Equity
2.6 8.1 15.6 16.2 16.8 16.6 15.7 16.5 15.2 1.9 7.7 12.2 15.9 16.4 17.5 31.2 8.8 10.4 15.1 17.8
(1,836) 4,621 5,655 4,633 7,150 7,221 7,701 10,214b 7,260 6,565 6,547c 7,243 9,504 12,573 14,106 18,715 14,568 16,344 16,475 18,396
Source:Bureau of the Census, Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations and AIA estimates. a. Reflects unusually large non-operating expenses totaling $3.4 billion and $8.7 billion in 1991 and 1992, respectively, due to restructuring charges and the implementation of a change in accounting for future retirement benefit costs. b. Includes non-operating income (less interest expense) totaling $4.4 billion. c. Includes non-operating expenses (less interest expense) totaling $3.5 billion. P. Preliminary. ( ) Denotes net loss.
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