AIA Warns 2013 Aerospace and Defense Outlook Threatened by Fiscal Cliff

Arlington, Va. – Warning that “we’re getting closer to a ‘Thelma and Louise’ moment, when we careen off into the void,” AIA President and CEO Marion C. Blakey told attendees at AIA’s Year-end Luncheon today that “the time for real work, real negotiation and a real solution” to sequestration “is now.”

Blakey devoted most of her remarks to 300 members of the news media and industry at the association’s 48th annual Year-end Luncheon to the need for a solution to sequestration. She pointed out that it is extremely difficult to forecast next year’s outlook for the aerospace and defense industry, given the cloud of fiscal cliff uncertainties.

Blakey said although the 2012 numbers for the aerospace and defense industry “remain encouraging despite the headwinds, it is far too easy to conclude that the companies, workers and communities that comprise this industry can withstand anything; that they can adapt to any change, no matter how sudden or harmful.”

2012 aerospace and defense industry sales are projected to increase by 3.8 percent from $210.8 billion in 2011 to $217.9 billion, Blakey reported. The sales increase, along with a healthy expansion of aerospace and defense exports from $85.3 billion in 2011 to an estimated $95.5 billion in 2012, is largely due to strong civil aircraft sales, Blakey noted. The industry’s positive trade balance rose from $55.8 billion in 2011 to an estimated $63.5 billion in 2012, the largest trade surplus of any manufacturing industry.

On the jobs front, aerospace employment increased modestly this year from around 625,000 at the end of 2011 to more than 629,000 in the last quarter of 2012, despite layoffs in some facilities supporting military programs – reflecting the increased output of the industry, particularly in the civil aircraft sector. However, the specter of sequestration cuts could significantly impact the defense, civil space and civil aviation workforce, Blakey observed.

Sequestration’s impact on jobs feeds into larger national security concerns – concerns that will linger even if a deal is reached on the fiscal cliff. “Call it, the ‘day after’ effect of sequestration, or, if you’d prefer, the ‘sequestration hangover,’ ” Blakey said. “What message did sequestration telegraph to the world about our country, our commitment to national security, our commitment to economic prosperity and our commitment to the next generation of defense and aerospace innovation?”

“The fact that the world’s arsenal of democracy has been relegated to the status of political bargaining chip is difficult to fathom,” Blakey continued. “But I am even more concerned about the long-term consequences for our country’s leadership position in terms of global security, technology and economic strength.”

Looking ahead to 2013, Blakey said notwithstanding sequestration, “we have a lot of work to do to ensure the long-term health of our industry. Blakey said among the association’s top policy priorities for next year are promoting the following: implementation of NextGen, export control reform, extension of the R&D tax credit, focused investment in defense procurement and R&D, and progress on NASA’s human space exploration strategy.

“But first, in the short term, we must avoid the fiscal cliff,” said Blakey. A combination of “bipartisanship, collaboration and a finding of common ground” presents the “best chance we have for smartly addressing our country’s current fiscal situation, and for confronting our long-term economic and defense challenges.”