Aerospace Leaders Warn Against Impact of U.S. Budget Cuts

 - September 19, 2011, 10:30 AM

The Aerospace Industries Association (AIA) hosts a Christmas-season luncheon each year at which it reports on the state of the industry and forecasts future performance. This year, AIA feels pressed to state its case by November 23, the date a 12-member “super committee” of the U.S. Congress is due to recommend ways to curb government spending by $1.5 trillion. AIA brought members of its governing board to Washington, D.C., last week to argue that further defense budget cuts and reductions to civil aviation and manned spaceflight programs will threaten hundreds of thousands of jobs and undermine the leadership position of the US aerospace industry.

According to the association, aerospace directly employs 800,000 highly skilled people, supports two million more related jobs and consistently produces America’s largest manufacturing trade surplus. The industry posted $214.5 billion in sales in 2010 and has continued expanding through the recession.

In launching the “Second to None” campaign on September 14, AIA board members led by Jim Albaugh, Boeing Commercial Airplanes CEO, said indiscriminate federal budget cuts will lead to reduced investment in research and development, eroding the industry over time. “The super committee is going to look at budget cuts without the Pentagon having done the evaluation of what those impacts might be,” Albaugh said. “To me, the threat environment, the security environment and the capabilities that are necessary to defend this country ought to drive the budget process instead of the budget process driving what we can afford.”

Albaugh fended off observations by reporters that the industry is doing well financially. “On the commercial side, times are pretty good,” he acknowledged. “We’ve got [an order] backlog at Boeing of over seven years of production. We think that over the next 20 years, there will be a market for over 33,500 airplanes. But it’s a market that is going to be crowded. In the future, it won’t be just the United States and Europe competing for that marketplace. It will also be the Brazilians, the Canadians, the Russians and the Chinese, and we need to ensure we have a level playing field on which to compete.”

He used as an example Boeing’s challenges in developing and delivering the 787 Dreamliner. “We had trouble with the 787 because we hadn’t done a development program since the 777 in the early nineties,” Albaugh said. “We forgot how.”