Civilian market drives record industry sales in ’06

 - December 21, 2006, 10:24 AM

The U.S. aerospace industry posted record sales last year, boosted by a surging civil aircraft market fueled in part by general aviation aircraft shipments. The Aerospace Industries Association (AIA) sees sales growing by another $11 billion this year.

Total sales increased by $14 billion, reaching $184.4 billion, a record level for the third year in a row, according to preliminary figures. That represents a jump of 8.4 percent over 2005’s final sales total.

Presenting AIA’s 42nd Year-End Review and Forecast last month in Washington, association president and CEO John Douglass noted that aerospace also logged a “remarkable” $52 billion positive trade balance, a “vivid reminder” of the industry’s strength in the international marketplace.

“The increasing trade surplus in the industry shows its importance on the global stage and positive impact on the U.S. economy,” he said. “It would be hard to overstate aerospace’s positive contributions to our national economy, as evidenced by these very strong indicators.”

Most of the major AIA statistical categories showed growth last year. Military aircraft increased $2.8 billion, to $52.8 billion; space jumped $1.3 billion, to $38.6 billion; and related products went up $2.4 billion, to $30.7 billion. But the civil aircraft category stood out, increasing $8.3 billion to hit a total of $47.5 billion. Strong future orders and backlog point to a thriving civil market for years to come.

Shipments of complete civil aircraft increased sharply in number and in value last year, owing in large part to a roughly one-third increase in volume and value of jetliner deliveries. With just over 400 large commercial aircraft deliveries, value of shipments reached $28 billion.

General aviation aircraft shipments also registered solid gains, with 418 more deliveries than in 2005, while billings jumped 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 this year.

Even Better Years Ahead

AIA forecasts U.S. industry sales to grow 6 percent this year, or $11 billion, to $195.4 billion, for another record year. But Douglass optimistically predicted it will be even higher. “Once again, the increase will be driven primarily by increased delivery of civil aircraft, engines and related parts and components,” the AIA forecasters said. “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.”

AIA said total orders rose by $20 billion, or 9 percent, to $239 billion last year. With shipments totaling $177.5 billion, the order backlog increased by $42 billion to $294 billion. The backlog is driven primarily by the sharp increase in orders for jetliners. As of September 30, a total of 2,231 commercial transport aircraft remained in the unfilled order backlog.

Foreign customers held orders for 1,400, or about two-thirds, of those airliners. “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,” AIA said.

The industry also added about 23,000 new jobs, reaching a total of 635,000. While that increase in overall employment was only 3.7 percent, the increase for production workers was around 63,000, or 23 percent.

Foreign sales of aerospace products jumped sharply for a second year, totaling nearly $82 billion, an increase of $15 billion over last year’s $67 billion. The increase is dominated by civil aircraft exports, particularly commercial transports, which increased from $28 billion to nearly $38 billion. General aviation aircraft exports also enjoyed another good year, increasing by a third to $3.2 billion and setting a new record.

“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,” AIA said. “On the other hand, sales to the Defense Department will show modest gains in 2007 from funds already appropriated.”

AIA said that the new Congress, events in Iraq and the “new management” at DOD will affect the composition and value of defense programs in Fiscal Year 2008 and beyond.

Industry agenda

Aerospace Industries Association president and CEO John Douglass used the year-end review to discuss two AIA initiatives for this year. One is a revamp of export control regulations that hamper foreign trade of both civil and military products. Today’s rules are outdated and need to be modernized, he said, to increase cooperation with allies and improve the industry’s positive effect on the U.S. economy.

The other issue is to continue progressing with the international ethics and business practices initiative announced in July. AIA is working with counterparts in Europe, Japan, Brazil and Canada to ensure that high standards of business ethics are employed around the world.