The Aerospace Industries Association called for renewed efforts to modernize the U.S. civil air transportation system at its 38th annual Year-End Review and Forecast luncheon today. AIA President and CEO John W. Douglass said that the decline in air passenger traffic and the resulting business crisis for the airlines was masking a long-term problem in civil aviation. Additionally, he said, 2002 saw a deep drop in commercial space launch activity. Douglass described these problems as a “creeping crisis” that will impact economic growth in the future.
Speaking to 350 representatives of the media, industry and government, Douglass said that because air traffic delays have abated, public pressure to modernize air traffic control, build new runways and install new equipment has dissipated. “The good news is, we know that air traffic will return to former record levels and continue to grow. The bad news is, the old problems of cancellations and delays will too.” Douglass asked the aerospace community to support the recommendations in the final report of the Commission on the Future of the U.S. Aerospace Industry. The report, he said, focuses on the hurdles the U.S. aerospace industry must overcome if it is to remain ‘cutting edge’ in an increasingly competitive global market. “A modern transportation infrastructure is the cornerstone of economic growth,” he said, “If the U.S. is to remain competitive in the global market, we must design and build an air traffic management system that goes well beyond the OEP (Operational Evolution Plan).”
Douglass said the airline industry’s financial crisis had severe ramifications for aircraft manufacturers, as the commercial transport manufacturing industry struggled with a sharply contracting market-production of commercial jetliners was down to 380 in 2002, from 526 in 2001. He said the impact of the events of 9/11 will continue to be felt through the next year, as aerospace sales are expected to decline $9.7 billion, to $138 billion in 2003. He said that increased sales to the Defense Department in 2003 of $4.4 billion to a total of $58 billion would partially offset the decline in civil sales.
In civil space, Douglass said that commercial launches had dropped dramatically as a result of capacity and demand mismatch. He said that the U.S. continues to lose access to markets as demand decreases and international competition increases. He said that space sector sales decreased marginally to $31 billion in 2002. NASA and other non-DoD federal agencies
decreased their space spending by $1 billion to $13.5 billion, while DoD’s space spending
increased by approximately $0.6 billion. Commercial space sales, at an estimated $3.4 billion, increased slowly in 2002, but remain substantially below prior expectations and levels witnessed in the mid-to-late 1990s.
On a positive note, Douglass said that despite declining civil aerospace sales, the U.S. aerospace industry posted a $31 billion trade surplus, an increase of $4.6 billion from 2001’s balance. Aerospace manufacturers also posted their highest level of profits in three years, he said, as profits rose to an estimated $9 billion in 2002.
Douglass also said that sales of military aircraft, engines, parts, and services strongly increased in 2002 to $37 billion. “Substantially increased DoD procurement and RDT&E (Research, Development, Test, and Evaluation) spending were responsible for the military aircraft sector’s sales growth during the year,” he said.
Aerospace employment fell sharply in 2002, he said, down 72,000, to a total of 702,000. “This is the lowest level of employment in the aerospace sector since the end of World War II,” he said. “The challenge of attracting young engineering students to the aerospace sector during these trying times and keeping them is one of the most serious issues facing the industry. We face a graying of the industry, as the average age of aerospace engineers is 54 and the average for blue-collar workers is 51.” Douglass said the future of the industry would depend on whether or not it can attract creative young minds today. The aerospace commission’s report also addresses the workforce issue, he said, and has some interesting ideas for industry and government to encourage young people to consider aerospace as a career.
He added that the aerospace commission was going to be different from other commissions. “When 600 million Americans fly every year, there has got to be accountability,” he said. “We are going to let Congress and the administration know that these problems are there and that the nation will hold them accountable if nothing is done.”
A transcript of Mr. Douglass’ remarks will be posted after 10 a.m. December 12, 2002.
