Compiled by: Economic Data Service Aerospace Research Center Aerospace Industries Association of America, Inc. Director, Research Center David H. Vadas Manager, Economic Data Service David H. Napier Editorial Consultant James J. Haggerty Design Rings-Leighton, Ltd. 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) 371-8561 For information about content, call (202) 371-8563 Copyright © 1996 by Aerospace Industries Association of America, Inc. Library of Congress Catalog No. 46-25007 International Standard Book No. 0898-4425 Air Transport Association of America Council of Economic Advisers Export-Import Bank of the United States Exxon International Company General Aviation 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; Directorate 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) FOREWORD 6 AEROSPACE SUMMARY 8 AIRCRAFT PRODUCTION 26 MISSILE PROGRAMS 48 SPACE PROGRAMS 58 AIR TRANSPORTATION 74 RESEARCH AND DEVELOPMENT 100 FOREIGN TRADE 116 EMPLOYMENT 138 FINANCE 154 GLOSSARY 164 INDEX 171 AlA MEMBERS 176 nnovative engineering and quality manufacture are consistently on display in "U.S.-made" aircraft, space vehicles, and other aero­ space products in service around the globe. Exports-once a neg­ Iligible source of income- provide about one-third of all sales for U.S. aerospace manufacturers. Exports are also a significant source of jobs for U.S. aerospace workers-and workers in related industries. Despite years of painful adjustments to chang ed economic conditions, the U.S. ae rospace industry continues to look forward and to push the boundaries of technology and quality. The industry is poised to take full advantage of the growing commercial space market and the resurgence in demand for commercial aircraft. In the world marketplace of the nineties, U.S. aerospace products repre­ sent American industry at its best. he a_erospace ~ear 1995 was something of a paradox, a year of contrnued declrne in industry activity but at the same time a year of auspicious signals heralding improved business Tprospects in the years to come. J Analysis of the indicators prompted an Aerospace Industries Associ~tion (AlA) year-end statement that the long aerospace recessron was bottoming out, that the industry was in the early stages of a new business upturn, and that the activity curve was expected to continue upward. However, the expected business resurgence affects only one of the industry's three main areas of activity: civil aircraft manu­ facture. Government-funded activities in de­ fense and civil space will remain areas of uncertainty and provide only moderate levels of industry workload into the new century. In 1995, sales, earnings, and employ­ ment, the primary yardsticks of industry work­ load, were all substantially below the previous year's level. The aerospace work force was fur­ ther reduced by seven percent, to a level almost 40 percent below the industry employ­ ment peak of 1989. Aerospace exports and trade balance also declined, but the industry's performance in inter­ national trade was considered excellent in view of a generally depressed global market. The principal indicator of activity upturn was the flow of new orders in 1995. Total orders increased by roughly 20 percent over the previous year's level. That brought a slight (one percent) but very welcome increase in the industry's overall backlog, the first upturn in six years. However, the backlog was predominantly orders for civil systems, which constituted more than 60 percent of the total. Looking to the next decade, AlA sees sharply different levels of activity among its three principal workload areas. Defense is the most uncertain and most troublesome area. Defense procurement funding was still on a downward curve in 1995 and it was not expected to bottom out until Fiscal Year (FY) 1997. Funding for modernization of the downsized defense force has fallen victim to the dictates of reducing the national budget deficit, with the result that the main thrust of modernization pro­ curement has been deferred until FY 2000-2001. Since it often takes two to five (or more) years from the place­ ment of an initial order to delivery of an aerospace system, the industry will have to cope with the uncertainties of defense con­ tracting for some years to come. By the best scenario, we can expect to see in place by 2005 an adequately funded defense mod­ ernization program and a stable production effort of moderate scale. The space outlook is also mixed but on the whole optimistic. Administration projections contemplate continuing decline in gov­ ernment funding for civil space activities through 2000, but the out­ look is brighter for commercial space. Driven principally by rapidly expanding activity in satellite communications, commercial space has been growing at a 20 percent-a-year rate in the 1990s. Analysts expect continued growth. AlA believes that commercial space gains over the 1995-2005 decade will at least offset the indicated decline in government funding and that the net result will be a slightly climb­ ing curve. The brightest outlook among the industry's main workload areas is for commercial aircraft manufacture, where a consensus of industry projections indicates a total market of more than $1 trillion over the 20-year span from 1995 to 2015. From the standpoint of jetliner sales (which generally lag two to four years behind orders), AlA envisions the start of an upswing in 1996, followed by gradual annual increases. In the first decade of the new century, the indus­ try's output will reach record levels-levels that could eventually be as high as double the average for the past 20 years. When the industry is able to solidify the still-important defense element of its business and can officially declare the difficult period of industry transition ended, the industry that emerges will be quite different from the defense-oriented industry of the Cold War. The U.S. aerospace industry will be smaller, leaner, and more efficient; financially and technologically sound; driven primarily by commer­ cial rather than defense workload; and still the leader of the aero­ space manufacturing world. All that will happen only if our companies successfully manage the remaining transitional years, maintain their technological capa­ bilities, and continue to improve their collective competitiveness. The effective manner in which they have coped with a decade of transition inspires the belief that they will meet those challenges. Don Fuqua President Aerospace Industries Association n terms of sales, 1995 was one more year of decline for the aerospace industry-the fifth in a row when sales are calculated in inflation­ adjusted constant dollars. However, the industry experienced a large Iincrease in new orders despite continuing decline in military contract awards. Significant orders for commercial jetliners indicated that the re­ cession in the commercial transport sector had ended and that com­ mercial sales would turn up in the near future. Here is a breakdown of the industry's 1995 performance: Sales. Overall industry sales amounted to $1 06.3 billion, which compares with $110.6 billion in the previous year. Even after eight straight years of declin­ ing defense sales, the De­ partment of Defense (DoD) re­ mained the aerospace indus­ try's principal customer with more than 38 percent of total sales. Defense sales amount­ ed to $41.3 billion, down from $43.8 billion in the previous year. Sales to non-U.S. gov­ ernment customers came to $36 billion, down from 1994's $36.4 billion. As usual, aircraft sales predominated in a breakdown of sales by product group. Sales of aircraft, engines, and parts, civil and military combined, totaled $55.1 billion, or 52 percent of total sales; the figure compares with $57.6 billion in 1994. The aircraft sales total was compounded of $31 .1 billion for military aircraft and $24 billion for civil aircraft. The only product group to record an increase in 1995 was space systems, with sales of $27.3 billion or 25.7 percent of the total. Space sales were up slightly from 1994's $26.9 billion. Sales of missile systems, parts, and services continued on the downward trend in evidence since 1990, down to $6.3 billion from $7.6 billion in 1994. Sales of "related products and services" came to $17.7 bi llion, down from $18.4 billion. For 1995, aerospace industry sales amounted to 1 .5 percent of the Gross Domestic Product (down from 1.6 percent) and 3 percent of total sales by all U.S. manufacturing industries (down from 3.3 percent). Earnings. In 1995, the aerospace industry reported net income after taxes of $4.6 billion, down from $5.7 billion recorded in the previ­ ous year. Year-to-year comparability is difficult, however, because of the many factors that have impacted net income such as: company consol­ idations, accounting changes, tax adjustments, and lower rates of in­ vestment in R&D and plant and equipment. As a percentage of sales, the profit amounted to 3.8 percent, com­ pared with the average for all U.S. manufacturing industries of 5.7 per­ cent and with the industry's 1994 aerospace profit-to-sales ratio of 4.7 percent. As a percentage of assets, the 1995 figure was 3.5 percent, down from 4.3 percent in the previous year.