Next Quarter: New Look Executive Report

2016 TARC Competitors at Rockets on the Hill Inside this Issue

Q&A with CAE’s Andy Jazwick Technology Innovation Focus Farnborough Air Show Preview ExecuA Quarterly Digest from the Aerospacetive IndustriesReport Association 2nd Quarter 2016 President’s

2016 OFFICERS Marillyn Hewson, Chairman Dennis A. Muilenburg, Vice Chairman David F. Melcher, President & Ginette C. Colot, Secretary & Treasurer AIA’s Agenda for America 2016 EXECUTIVE COMMITTEE The upcoming November 8th election promises to be one of the most consequential William M. Brown Chairman, President & Chief Executive Officer in American history. True to our organizational structure and tradition, AIA doesn’t take Harris Corporation positions on individual candidates or parties. But we do seek to inform the candidates for Wes Bush Chairman, Chief Executive Officer & President elective office about the key issues that will determine our nation’s future course. Northrop Grumman Corporation Unfortunately, up this this point the level of this year’s hyperbole-dominated policy Gerard J. DeMuro President & Chief Executive Officer discourse lacks the substance citizens deserve. And to the extent the candidates for BAE Systems, Inc. MessagePresident and Congress have addressed questions of concern to the aerospace and Scott C. Donnelly Chairman & Chief Executive Officer defense community and the broader citizenry, a more thorough and elevated discussion Textron Inc. would be most welcome. David P. Hess Executive & Chief Customer Officer, Aerospace Yes, we’ve heard support for a strong military, but have the candidates really alerted the United Technologies Corporation public to the fact that defense spending has gone down from an average of 4.4 percent Marillyn Hewson Chief Executive Officer, President & Chairman of the Board of U.S. Gross Domestic Product from 1980-2014, to 3.2 percent of GDP last year and is Lockheed Martin Corporation projected to fall to 2.6 percent of GDP in 2020 despite the growing international threat David L. Joyce environment? And what have we heard about the specific investments in procurement President & Chief Executive Officer GE Aviation and Research and Development that are needed to maintain our technological superiority Thomas A. Kennedy or about the defense acquisition reforms that are required to enable industry to more Chairman and Chief Executive Officer Raytheon Company rapidly produce new systems for our warfighters? Roger Krone True, the candidates have discussed educational achievement and jobs creation. Yet Chief Executive Officer Leidos Corporation we’ve seen a lack of urgency about American students’ trailing performance in STEM Tim O. Mahoney fields—the U.S. ranks at the bottom third of all countries for graduating students with President & Chief Executive Officer Honeywell Aerospace science degrees—and about our industry’s looming skills gap due to the graying of Dennis A. Muilenburg the workforce, with 18 percent of all U.S. aerospace engineers and 24 percent of all Chairman, President & Chief Executive Officer The Boeing Company aerospace manufacturing employees eligible for retirement. Phebe Novakovic And if any of you hear a candidate mention the need to support civil aviation Chairman & Chief Executive Officer General Dynamics Corporation infrastructure modernization and maintain U.S. leadership in space, please tell me. I’d be Kelly Ortberg pleasantly surprised. Chief Executive Officer & President Rockwell Collins As the voice of the American aerospace and defense community, AIA would be remiss Mike Petters if we didn’t propose in detail what needs to be done to make our country stronger, safer President & Chief Executive Officer Huntington Ingalls Industries and more technologically robust. With the help of our policy councils, we’ve developed Anne D. Shybunko-Moore white papers for presidential and congressional candidates on the following subjects: President GSE Dynamics, Inc. Defense; Security Cooperation; U.S. Leadership in Space; the National Aerospace System Robert D. Strain & Next Gen; and the Aerospace Workforce and STEM. President Ball Aerospace & Technologies Corp. The white papers have the overarching recommendation that our leaders must commit Michael T. Strianese to predictable budgets, fund robust investments in the technologies that make America Chairman, President & Chief Executive Officer L-3 Communications stronger, promote innovative partnerships, and repeal the damaging Budget Control

Cover: AIA’s Bob Durbin and David Melcher (far left front) with Team America Rocketry Challenge competitors showcasing their handiwork in the Rotunda of the Russell Senate Office Building. Photo Credit: Dan Stohr/AIA. DEPARTMENT OF DEFENSE DISCRETIONARY BUDGET AUTHORITY AS A FUNCTION OF GDP Fiscal Years 2001-2021 (In Billions of Dollars) Credit: AIA (defense chart), NASA (SLS/Orion). AIA’s White Papers call for a goal of spending four percent of U.S. GDP on defense and for fully funding NASA’s Space Launch System and Orion Multipurpose Crew Vehicle. “The white papers have the overarching recommendation that our leaders must commit to predictable budgets, fund robust investments in the technologies that make America stronger, promote innovative partnerships, and repeal the damaging Budget Control Act of 2011, along with working toward meaningful tax and entitlement reforms that will allow for adequate investments in long term national needs.” Act of 2011, along with working toward meaningful tax and Unmanned Aircraft Systems and commercial spacecraft into entitlement reforms that will allow for adequate investments our National Airspace. in long term national needs. The white papers can be found • For STEM and workforce, we need legislation and regulatory on our web site at: http://www.aia-aerospace.org/blog/view_ actions to create and expand access to STEM careers and our_campaign_position_papers. the promotion of education and immigration policies that Some specifics include: help build and retain a strong STEM-skilled work force. • For defense, the next President must set a goal for spending Our white papers have already drawn the attention of the of four percent of U.S. GDP or risk having forces that are presumptive presidential nominees of the Republican and under-equipped, lacking vital technology, and stretched Democratic Party. They led directly to a meeting with Donald dangerously thin. We also need a better balance between Trump in New York City on June 9th. I represented the aerospace current readiness and investments in the future force and to and defense industry at this meeting alongside senior executives advance significant acquisition policy reforms that encourage from a number of aerospace and defense companies. We have innovation to support the warfighter. also reached out to Secretary Hillary Clinton’s campaign and • On security cooperation, we need a National Security received a positive response about the opportunity to brief her. Cooperation Strategy that – among other priorities – aligns Please take the time to read through these position papers. U.S. industry programs and technology development with We need your help to drive continued interest in these issues strategic security cooperation priorities and streamlines the in the presidential and congressional campaigns. The only way technology review and approval process for priority security to demonstrate widespread support for these positions is for cooperation transactions. our industry’s leaders, managers and workers make the effort • In space, we must restore American access to space by fully to contact candidates for office. I urge you to do so. Talk to funding the Space Launch System and Orion Multipurpose them about what matters most to our industry and the future Crew Vehicle and NASA’s Commercial Crew and Cargo of our country. We’re counting on you to take our message to programs, while developing new missions to expand the the candidates at this time when our voices need to be heard. frontiers of science. • With regard to civil aviation, we should give FAA long-term capital planning and budgetary flexibility to effectively implement complex infrastructure programs like NextGen, David F. Melcher and accelerate reasonable rules to safely integrate President & Chief Executive Officer

EXECUTIVE REPORT  3 with Andy Jazwick Q&A Vice President, Strategic Development & Washington, DC Operations CAE

AIA: How important is it for a company like yours, which is headquartered in Canada but has a major American subsidiary company, to be involved with AIA? Jazwick: Even with our Canadian affiliation, we view the U.S. as a critical market for our simulation products and training services. In fact, 58 percent of the global defense training market comes out of the U.S. As it relates to AIA, the association is renowned for its services, advocacy and support for association

members, not just here in Washington, but globally. It’s important for us as a Credit: CAE company to be able to access key decision makers, whether it’s on Capitol Hill or in the government agencies, and we’ve been very pleased to have joined AIA earlier this year for this purpose.

AIA: What policy issues that AIA addresses are most important to your company? Jazwick: W e, like many companies, are concerned about budget issues. As a business we do our best to plan and reduce risk, so it would be nice to have regular budgets submitted and passed through the Congress in a timely fashion. This also enables the Defense Department to better plan requirements and acquisition priorities. Our military’s ultimate objective is readiness to perform whatever mission they may be asked to do. Simulation-based training offers a very compelling value proposition for cost-effectively maintaining readiness, so as budgets become tighter we are continually looking for ways to communicate that simulation is part of the solution to lowering costs without sacrificing readiness or capability. We want to make sure that readiness and training continues to receive the necessary funding in future budgets, and organizations like AIA help do that.

AIA: Does AIA’s work on expanding opportunities for companies to sell abroad help you out? Jazwick: With respect to international marketing, we’ve had great meetings and interactions that have been hosted by AIA with our U.S. government officials overseeing cooperative security activities. As a truly global company with operations and training centers in 35 countries, we bring value to AIA’s work on expanding international opportunities while also leveraging AIA contacts and relationships where we might need assistance. Also, AIA has been front and center at all the key international airshows like Paris, Farnborough, Singapore and Dubai. What your team does to facilitate interactions, exchanges, and activities not only with foreign government officials, but also with the U.S. delegations that attend those events, and importantly, our industry “competimates,” is most useful. AIA serves as a sort of Embassy when you go to these foreign venues. It’s very beneficial having the AIA team there to support you in a variety of ways as our “industry ambassadors”. I’ve been with CAE for just a little over a year, and it was great to be at the Dubai Air Show last year and see friendly faces such as Bridge Littleton (Vice President for Membership) and the other members of the AIA team. I also want to emphasize the importance of AIA in helping companies like ours navigate the waters of Washington. We’re a medium sized training business and we’re just now opening up a Washington office. I’ve been in Washington over 30 years and I know how critical it is to have access to individual subject matter experts. On Foreign Military Sales it has been great to have Remy Nathan (Vice President, International Affairs) helping us work with the State and Commerce Departments and the hard-working people at the Defense Security Cooperation

4  AEROSPACE INDUSTRIES ASSOCIATION “We want to make sure that readiness and training continues to receive the necessary funding in future budgets, and organizations like AIA help do that.”

Agency and the Pentagon. Having that network of subject matter experts enables me to make a phone call and say I need help on something and then get the support needed on finding answers and solutions. That, frankly,

doesn’t exist in anything else in the aerospace and Credit: CAE U.S. Air Force MQ-1 Predator and MQ-9 Reaper aircrews receive defense business that I’ve seen before. classroom, simulator and live-flying training.

AIA: How much does innovation feed into what your company does? Jazwick: In the training and simulation business, you can imagine innovation, R&D and technology are all foundational elements to our business. Particularly as live training becomes more and more costly, governments are looking to cost effective solutions to make sure their fighting force is at its most ready state possible. From a training and simulation perspective, virtual training is becoming a larger component of readiness issues. There will always be live training, but the virtual component becomes more and more important. When a government buys the F-35 aircraft, those aircraft are really for operational purposes. You want to minimize the amount of flying that is done on an incredibly expensive aircraft for training purposes. So the virtual training capability, not just for the F-35, but other platforms in the land, naval and air domains becomes more and more critical. From an innovation and technology perspective, we’re always looking at ways in which you can create a more realistic and immersive virtual environment for training. You want the synthetic environment to look and feel as much like the real world as you can. In the military market, the networking and interoperability of training systems is required to perform realistic mission training, so as a company we are focusing a significant amount of R&D into making integrated live-virtual-constructive training a reality. Credit: CAE Credit: CAE Simulator training for C-130J Hercules aircraft. U.S. Navy’s P-8A flight simulators.

EXECUTIVE REPORT  5

AIA’s Remy Nathan Testifies on Need to Improve FMS Process emy Nathan, AIA’s Vice President for International Affairs, Rin May 11th testimony before the House Armed Services Subcommittee on Oversight and Investigations, urged Congress to improve the way the U.S. government manages the Foreign Credit: CSPAN Military Sales (FMS) process. our partners’ preferences for Firm Fixed Price contracts as “Industry is not calling for reforms that are simply going opposed to Fixed Price Incentive Fee contracts that require a to change ‘No’ to ‘Yes’ answers during reviews of potential commitment of up to 10 percent in additional “excess funds.” defense exports,” said Nathan. “If the answer is ‘no’, we’re ok Second, contracting officers should definitize FMS contracts “Let’s also have a sense of urgency for the yes calls so a potential partner turns to the U.S. first, and not to countries like Russia and China, which increasingly use defense exports to advance their strategic geopolitical objectives.” with that. However, let it be a quick and early ‘no’ with industry- within 180 days of a qualifying proposal submission in order government consultation to develop alternative proposals to to eliminate lengthy delays that “place an unnecessary and meet our partners’ needs and advance U.S. national security burdensome level of risk on the U.S. foreign contractor and objectives.” Nathan added, “Let’s also have a sense of urgency foreign customer.” And third, the Defense Department should for the yes calls so a potential partner turns to the U.S. first, continue efforts to make determinations about whether a and not to countries like Russia and China, which increasingly technology is releasable to a foreign partner “more predictable, use defense exports to advance their strategic geopolitical efficient, and transparent.” objectives. If we do this, industry will be better positioned During the hearing, subcommittee chairwoman Rep. Vicky to make timely and correct investments and business Hartzler (R-Mo.) said, “It is vital to provide the opportunity for development decisions to best support our warfighters and our allies to acquire military equipment and services to bolster our allies and partners.” their security needs. It’s also important to note the benefits Nathan called for three specific reforms and improvements the United States realizes from our allies’ collective safety, to the FMS system: First, the government should honor especially as threats to democracy and freedom expand.” Study Shows Robust Impact of A&D Industry IA in partnership with business information group IHS Inc., has released a study that quantifies the economic contribution A the aerospace and defense industry makes to the U.S. economy and provides an enhanced understanding of the industry’s extensive supply chain, by economic sector at the national and state level. The study, which is part of AIA’s effort to expand its data and analytical offerings, found that despite a complex mix of economic headwinds, the U.S. A&D industry in 2015: • Supported 1.7 million workers in the industrial base, or 13 percent of the nation’s manufacturing base, with about 531,000 jobs in the industry’s commercial aerospace segment (e.g. civil and general aviation aircraft, helicopters and space systems) and 511,000 jobs in the defense and national security segment of the industry (e.g. military aircraft, ground and sea systems, armaments and space systems). • Produced an average labor income approximately 44 percent above the national average – $93,000 average labor income per job – reflecting the highly skilled nature of the workforce. • Generated $307 billion in economic value, representing 1.8 percent of total nominal Gross Domestic Product in the U.S., and 10 percent of total U.S. manufacturing output. • Generated $605 billion in sales revenue in 2015 – a one percent increase since 2013.

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TECHNOLOGY INNOVATION FOCUS Commercial Network Tracks Submarine Launched UAS’s Space Debris Threats New to U.S. Arsenal fforts to track satellite orbits and potentially harmful E debris in space are being aided by the commercial space industry. AIA member Analytical Graphics, Inc. (AGI) established two years ago a Commercial Space Operations Center, which was subsequently incorporated as its affiliate ComSpOC Corp. ComSpOC fuses satellite-tracking measurements from a geographically diverse set of optical, passive RF, radars and other sensors to generate Space Situational Awareness (SSA) data products. ComSpOC customers include multiple commercial and US government entities, including the U.S. Air Force, which is receiving orbital data to complement their space surveillance data sets, and The Boeing Company, which used the data services to support early operations of the ABS-3A and Eutelsat 115 West B communications satellites. ComSpOC has a growing ground based sensor network of more than 70 optical sensors, long and short baseline RF Credit: AeroVironment interferometric sensor networks on three continents, and two The Blackwing tube-launched UAS. phased array radars. Aided by a 46-meter radio astronomy antenna in Canada, ComSpOC will be able to track geostationary he U.S. Navy is deploying small Unmanned Aircraft Systems resident space objects down to 10 centimeters in size. AGI T (UAS) from submarines and undersea robotic vehicles. is confident ComSpOC will grow to track the same number of After a decade of experimentation, the Navy has selected the objects in space as can be found in the public space catalog “Blackwing” miniature tube-launched UAS, manufactured by by the end of this year. AeroVironment, for use as “eyes and ears” for the Navy surface “The burgeoning space environment requires commercial fleet over highly defended waters and coastal areas as part of services to develop informed and responsible behavior for its “anti-access area denial” strategy. The Navy has requested all space actors,” said Paul Graziani, AGI chief executive funds in its fiscal year 2017 budget to buy 150 Blackwings, officer. “The services ComSpOC provides are foundational to which have the advanced electronics typically found in much the resurgence of commercial activity in space, and fill an larger UASs: electro-optical and infrared sensors, selected important role in the overall fabric of SSA.” availability anti-spoofing module GPS and a secure digital data link. “In addition to operating from undersea vehicles, Blackwing can also be integrated with and deployed from a wide variety of surface vessels and mobile ground vehicles to provide rapid response reconnaissance capabilities,” said Kirk Flittle, AeroVironment vice president and general manager of unmanned aircraft systems. The Blackwing UAS builds upon AeroVironment’s 30 years of experience adapting small UAS such as the Raven, Wasp, Puma and Switchblade for use by U.S. infantry units in finding Credit: Analytical Graphics Inc. ComSpOC-determined orbits of active GEO satellites over the Americas. and striking targets.

EXECUTIVE REPORT  7 Executive Report Changes Coming “new” Executive Report is coming this fall. With a first time to help our members and other interested parties Acompletely revised and expanded layout, the Executive reach other A&D companies and decision makers here in Report will help our ability to get AIA’s message out to the Washington D.C. with their direct messages. And to expand broader aerospace and defense community. our reach across communications platforms, the Executive Please contact us with story ideas about member company Report will contain ties to our new website, while the website innovations, people that are making a positive difference in will include a novel electronic version of the Executive Report. our industry, or a guest editorial or advocacy column. You can We’re excited to bring you a more dynamic Executive Report. send your ideas to: [email protected]. We hope you will look forward to the next issue! Our expanded magazine also will include advertising for the TARC Champs Headed to International Rocketry Challenge n July 14-15, the Odle Middle School “Space Potatoes” curtesy of TARC’s Diamond Sponsor, the Raytheon Company. Orocketry team from Bellevue, Wash., champions of the Lockheed Martin Corporation, Thales USA and 19 other 2016 Team America Rocketry Challenge, will take on contestants AIA member companies also sponsor AIA’s signature STEM from Great Britain, France, and for the education program. first time Japan, in the International Space Potatoes member Stephanie Rocketry Challenge at the Farnborough Han is already considering a career in International Airshow. Sponsored by rocketry and says the team’s careful AIA and the National Association of gathering of data throughout the year Rocketry, this year’s TARC competition and preparing for TARC, “enabled us featured 789 teams from all 50 states, to assume the performance of the Credit: Keith Mordoff/AIA the District of Columbia and the U.S. The Space Potatoes receive the TARC rocket when we were in a rush at the Virgin Islands. Nearly 5,000 students championship trophy. finals.” Speaking like a true mission participated in TARC throughout the year. The Space Potatoes, controller, team captain Mikaela Ikeda says her role is to comprised of Mikaela Ikeda (12), Larry Jing (14), Karl Deerkop “keep everyone in check. When people are getting worried, I (14), Srivatshan (Sri) Sakthinarayanan (14) and Stephanie Han have to be the sane one and make sure everyone does their (13), were awarded more than $20,000 in scholarships and jobs.” We know they will, and wish the Space Potatoes much funds for their school and an all-expense paid trip to London success at Farnborough! AIA Gearing Up for Farnborough Airshow t this summer’s Farnborough International Airshow AIA will convene a number of roundtables with senior A(July 11-17) AIA is sponsoring a number of events government officials in the Boardroom of our Operations Center highlighting the robust global partnerships taking flight which throughout the week. We will also host member companies help strengthen U.S. national security and ensure our industry and distinguished guests at our President’s Reception on remains competitive in the increasingly competitive global Sunday, July 10th at Grosvenor House, JW Marriott Hotel and marketplace. during the U.S. Industry Reception at the U.S. Ambassador’s Symbolic of these partnerships, for the first time at residence in London on Tuesday, July 12th. AIA members Farnborough, an F-35 Lightning II advanced technology fighter interested in attending these receptions should contact: aircraft manned by U.S. Marine Corps and British Royal Air Force [email protected]. Farnborough attendees crews will make an appearance. are also welcome to stop by AIA’s booth in the U.S. Pavilion.

AEROSPACE INDUSTRIES ASSOCIATION 1000 Wilson Blvd. #1700 Arlington, VA 22209-3928 Phone 703.358.1000 www.aia-aerospace.org

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