Compiled by: Economic Data Service Aerospace Research Center Aerospace Industries Association of America, Inc. Director, Research Center David H. Napier Editorial Consultant David A. Lombardo Design Kathy Keler Graphics Published by: Aerospace Industries Association of America, Inc. 1250 Eye Street, N.W., #1200 Washington, D.C. 20005-3924 FAX (202) 371-8470 For information about orders, call (202) 371-8407 For information about content, call (202) 371-8563 Copyright © 1999 by Aerospace Industries Association of America, Inc. Library of Congress Catalog No. 46-25007 International Standard Serial No. 0898-4425 ACKNOWLEDGMENTS Air Transport Association of America Council of Economic Advisers Export-Import Bank of the United States Exxon lntetpational Company General ~v iation Manufacturers Association Helicopter Association International International Civil Aviation Organization National Aeronautics and Space Administration National Science Foundation Office of Management and Budget U.S. Department of Commerce (Bureau of Economic Analysis; Bureau of the Census; International Trade Administration) U.S. Department of Defense (Air Force; Army; Ballistic Missile Defense Organization; Comptroller;·Oirectorate for Information, Operations, and Reports; Navy) U.S. Department of Labor (Bureau of Labor Statistics) U.S. Department of Transportation (Federal Aviation Administration, Office of Airline Statistics) 3 CONTENTS Foreword . .... ....... .. .... .... 6 I Aerospace Summary . ... ... .. ... ...... 8 Aircraft Production . .. .... ....... ... ... .. 26 Missile Programs ... .. ... .. .. .. .. .. .48 Space Programs ... ...... .. ..... .. 58 Air Transportation .. ......... .. ........ 72 Research and Development . .. .. .. .. 98 Foreign Trade . .. ... .... .. .... .. .. 112 Employment . ... ....... .. .. .. .. .. 134 • Finance .... .. ...... .. ....... ... 148 ' G lossary . ........... ........ .. .157 Index ...... .. ..... .... .. .. 164 FOREWORD The U.S. aerospace industry generated record sales, profits, and net exports in 1998-topping 1997's records. Commercial sales soared having recovered from the recession that struck the industry in the early 1990's. In other good news, manufacturers added 34,000 workers to their rolls. Total aerospace sales increased 13% percent in 1998, reach­ ing $148 billion. A dramatic 28% boost in sales to non-U.S. government customers, mainly airlines, was largely responsible for this marked increase. Of special note in the 1998 sales figures is the strong market for civil transport aircraft, which accounted for 86% of the value of civil aircraft shipments. The industry delivered 559 jetliners (185 more than the previous year) for a total of $36 billion in sales. The backlog for civil transports also increased to a total of 1,786 planes on order. The industry's performance in international trade is also noteworthy. Aerospace exports jumped by 27%, reaching an all-time high of $64 billion. Exports outpaced imports resulting in a positive trade balance of $41 billion, a 27% gain over last year's record. This is even more extraordinary given the fact that the United States posted a record merchandise trade deficit of $231 billion in 1998. The U.S. aerospace industry remains the leading net exporter of manufactured goods. There were also signs-a projected federal budget surplus with a growing clamor against the 'Procurement Vacation' -that the long slide in defense spending has bottomed out and now is on the rise. Despite the adminis­ tration's request for lower defense spending in the current budget, Congress has exercised its authority over spending by adding funding for procurement and Research, Development, Testing, and Evaluation (RDT&E). While RDT&E remains steady, defense procurement is projected to rise steadily from Fiscal Year (FY) 2001 thr ugh FY 2004. The space. market enjoyed a fourth year of steady growth, with $32 billion in sales of space systems and services. Demand for telecommunications and the desire to bypass building a costly, terrestrial infrastructure, fueled orders for satellites and launch services. The unfilled order backlog grew to record levels. Despite the good news, there are several warning signs on the horizon. For example, net new orders declined for the second year in a row. New orders for military aerospace systems fell $9 billion, bringing overall orders down 7%. Although civil orders rose by $1.6 billion, their growth slowed to 2% from 11% in 1997. The Asian economic crisis that surfaced in late 1997 has reduced demand. This has led to postponed or canceled orders for commercial and military aircraft. Neverth ~less, the industry is well positioned to weather these storms. The,industry's profit reached a record $7.7 billion. New orders totaled $111 billion, higher than at any time during the industry's 1992-1995 recession. The unfilled order backlog represented 1.7 years of sales. The industry business base is now broader, making it less dependent on individual programs, or on its single largest customer-the Department of Defense. Defense spending has bottomed out and is projected to grow steadily. Demand for satellites and launch services remain at record level. The economic crisis in Asia appears to be abating. The U .S. aerospace industry manufactures high-quality products key to national defense and quality of life, invests heavily in research and development (R&D) to hone its technological edge, and battles aggressively in an increasingly competitive environment. The U.S. government must increase investment in aerospace R&D, improve access to the global market, and fight against barriers to fair competition. Working togethet; the U .S. government and its aerospace industry will be prepared f r the economic and technological challenges ahead. John W. Douglass President and Chief Executive Officer, Aerospace Industries Association AEROSPACE SUMMARY The U.S. aerospace industry enjoyed a strong 12.8% overall increase in sales in 1998, surpassing 1997's gain of 12.6%. This boost was fueled by sales in the "other customers" category, which was up a remarkable 28% and includes sales to air carriers, corporations, and foreign governments. Sales in the "related products and services" category also rose 12.8%, while sales to U.S. government agencies fell 1.1%. By nearly 50%, civil aircraft sales exceeded military aircraft sales in 1998. Here are the highlights of the industry's 1998 performance: Sales Overall industry sales amounted to $148 billion, compared with $132 billion in 1997. U.S. government sales reached $56 billion, down $0.6 billion from the previous year. The "other customers" category jumped to $68 billion in sales, up from $53 billion in 1997. As usual, aircraft sales led all other product groups. Sales of aircraft, engines, and parts (civil and military combined) totaled $84 billion, compared with $71 billion in 1997. Total aircraft sales break down into $50 billion for civil aircraft and $34 billion for military aircraft, with civil aircraft sales dominating military sales for the second time since 1993. Sales of space systems grew for the fourth year in a row, reaching $32 billion, up from $31 billion in 1997. There was also a gain in the sales of "related products and services," where sales reached $25 billion, up from $22 billion the previous year. Missile systems sales declined to $7.6 billion, down from $8 billion. For 1998, aerospace industry sales amounted to 1.7% of the Gross Domestic Product and 3.7% of total sales by all U.S. manu­ facturing industries, rising from 1.6% and 3.3% respectively in 1997. Earnings Net income after taxes was $7.7 billion, up from $7.2 billion in the previous year. As a percentage of sales the industry's profit amounted to 5.0%, a drop from the 1997 aerospace profit-to-sales ratio of 5.2%. By comparison, the average of all U.S. manufactur­ ing industries was 6.0%. As a percentage of assets, aerospace earnings amounted to 4.8%; as a percentage of equity, 18.0%. The aerospace balance sheet showed net working capital of $11 .5 billion, down from $14.2 billion in 1997. Stockholders' equity grew from $39.3 billion in 1997 to $43.1 billion in 1998, while total assets climbed substantially from $150 billion to $160 billion. Orders and Backlog Net new orders for aerospace systems fell 6.6% to $111 billion, down from $119 billion in 1997, marking the second year of decline following three years of growth. The decrease was due to a drop in military orders from $48 billion in 1997 to $38 billion in 1998. Orders in tqe civil sector actually rose from $71 billion in 1997 to $73 billion in 1998. The industry's backlog at year-end 1998 was $207 billion, down from $219 billion in the previous year. Of that, 66%, or $137 billion, was in orders for non-military products. The backlog for military systems was $70 billion, down from $79 billion the previous year. Civil Aircraft Production Data compiled by the Aerospace Industries Association (AlA) shows that U.S. manufacturers shipped 3,135 civil aircraft in 1998 with a total value of $41.4 billion. That represents a gain of 846 units and $9.6 billion over 1997 levels. Civil transport production-559 aircraft valued at $35 .5 bil­ lion-accounted for 86% of the total in dollar value terms; the fig­ ures compare with 374 aircraft worth $26.9 billion in 1997. Production of civil helicopters jumped to its highest level since 1991, reaching 363 units (up 17) valued at $252 million (up $21 million). General aviation sales increased in units to 2,213 (up 644 units) and in dollar value to $5.6 billion (up $l.O ~ illion). This sales level marked another record year for general aviation. Military Aircraft Production The Census Bureau reported 1998 sales of complete military aircraft and parts, including engines, to be $23.2 billion. That figu e compares with $23.9 billion in 1997. The industry produced 419 military aircraft, 269 of them exported either through Foreign Military Sales arrangements or through direct company-to-foreign-customer sales; 150 were deliv­ ered to U.S. military agencies. The comparable figures for 1997 were 488 total, 337 exports, and 151 for the U.S.