AIA: backlogs for airliners will buoy industry during U.S. crisis

By Stephen Pope

July 15, 2008
Air Transport and Cargo

The hundreds of billions of dollars worth of airliner orders now on the books will help insulate aerospace manufacturing companies from the industry crisis now facing U.S. airlines, according to an aerospace manufacturing trade group based near Washington, D.C.

Aerospace Industries Association president Marion Blakey said although U.S. airlines are asking manufacturers to defer orders as they curtail services and lay off workers, foreign carriers have stepped in to occupy those production slots, softening the blow of the industry downturn.

“There is a reason for real concern and pain in the U.S. airline industry, and to an extent worldwide,” she said. “But from a manufacturing aspect, a broad picture is emerging of a strong market with the backlog of orders holding pretty well.”

U.S. airlines account for only about 10 percent of Boeing’s order backlog, as carriers in fast-growing regions like India, China and the Middle East purchase the bulk of new airplanes. But Blakey, the former head of the Federal Aviation Administration, said U.S. carriers eventually will need to replace their aging airplanes with newer models to remain competitive in the face of rising fuel costs. “There is real demand for more fuel-efficient, high-tech aircraft, and that will favor manufacturers,” she said.

AIA has close to 300 members, and counts among its ranks Boeing, Lockheed Martin, Northrop Grumman and scores of other companies exhibiting here at Farnborough this week. The association has a chalet at the show site and is serving as the lead exhibitor at the U.S. Pavilion in Hall 2. 

The headwinds buffeting the airline industry aren’t expected to abate unless fuel prices retreat from their current record highs. As the situation now stands, they are predicted to go higher still. Besides engine efficiency gains, Blakey also pointed to the so-called NextGen overhaul of the U.S. air traffic control system as a way to cut fuel costs. Scheduled for rollout in phases over the next 15 years, NextGen will leverage satellite navigation and other technologies to provide more direct routes and smoother traffic flows into large airports. But the program could cost an extra billion dollars a year in infrastructure costs.

Blakey’s official stance with regard to aviation user fees has turned to opposition after spending her last months at the FAA championing the concept as the best way to spread the costs of ATC services among all users and pay for NextGen upgrades.

AIA, she noted, is “clearly opposed” to user fees, a position she has adopted as the association’s head. She pointed to a plan in the U.S. Senate that calls for an increase in aviation fuel taxes as a good compromise that provides for additional funding yet doesn’t impose fees. Airlines strongly support user fees as a way to spread the cost of ATC modernization to other aviation users, particularly business aviation.     

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