Is Aerospace Worth Saving?

by George F. McClure

IEEE-USA Policy Forum

The glory days seem to be behind the U.S. aerospace industry. We’ve experienced the Apollo program and moonwalks, the Cold War, precision-guided weapons, remote sensing and surveillance from space, full-time access to communication satellites and the Global Positioning System, and reliable and efficient air travel for passengers and freight. What’s left?

The defense sector, the space sector, and the commercial aviation sector are all subject to wide swings in their economic outlooks. Even so, the aerospace sector accounts for nearly 15 percent of the nation’s Gross Domestic Product. And while direct aerospace employment has fallen from 1.3 million in 1989 to 666,000 this year, the industry indirectly supports 11 million jobs. In addition, it is one of the few industries that allow us to export more than we import; it accounted for $30 billion in trade surplus in 2002.

President’s Commission Established

In 2001, President Bush established the President’s Commission on the Future of the U.S. Aerospace Industry. He directed the group to map out the industry’s role in supporting national goals and identify policy recommendations to aid national interests. Last November, the Commission issued its final report after conducting six public meetings, hearing 61 witnesses, and receiving input from more than 100 organizations.

The Commission saw roles for the aerospace industry in fostering the national economy, national security, and quality of life for our citizens. However, it noted, we cannot assume that U.S. preeminence in aerospace will continue. The industry has consolidated from more than 70 suppliers in 1980 to only five prime contractors today. Further, only one U.S. commercial prime aircraft manufacturer survives, and it has fallen behind in new aircraft orders this year to its primary European competitor.

Airlines in Crisis

The airlines have been in crisis since 2001, with total losses expected to total $18 billion in three years. More than 1,800 aircraft are grounded and 325 have been taken out of service permanently. With fewer passengers flying, carriers have cut schedules by some 20 percent and are canceling or delaying new aircraft orders. Current production rates are down 22 percent for long-range aircraft and 15 percent for regional aircraft.

Beyond the losses for the airlines, aerospace company profits will be down $13 billion for two years by the end of 2003. In general, the industry carries too much debt and has a low return on investment compared with other industrial sectors. In fact, investors have enjoyed better returns recently from government securities than from aerospace.

Commission Recommendations

In shaping its nine recommendations, the Commission recognized the vital role the aerospace industry plays in achieving national goals. Specifically, it recommended:

• Vision - Global leadership in aviation and space is a national imperative. The government must increase and sustain its investment in our national aerospace sector to foster private investment.

• Air Transportation - The U.S. air transportation system must be transformed as a national priority and must include a robust, highly automated air traffic control system, faster system certification, and new airport and runway development.

• Space - To create a U.S. space imperative, the Department of Defense (DoD), industry and the National Aeronautics and Space Administration (NASA) must partner in developing innovative propulsion and power technologies. These technologies will enhance national security; provide spin-offs to the economy, such as fuel cell advances; foster space exploration; and open opportunities for public space travel and commercial space endeavors.

• National Security - We can invigorate and sustain the aerospace industrial base by creating better procurement policies; instituting commercial dual-use of defense technologies; removing barriers to international sales of defense products; supporting critical technologies not underwritten by the commercial sector; and providing stable funding to encourage the best and brightest to pursue aerospace careers.

• Government: Prioritize - A White House policy coordinating council should set up a government-wide management structure to establish funded presidential aerospace initiatives, and to link authorization and appropriations decisions.

• Global Markets - We must reform regulations and policies to permit movement of products and capital across international borders on a fully competitive basis, establishing a level playing field for U.S. industry in global markets.

• Business: New Model - A new business model for a healthy and growing aerospace industry, with government investment and policies, will stimulate the inflow of private capital.

• Workforce: the Future - We must reverse the decline in the U.S. aerospace workforce immediately, and act to preserve America’s intellectual capital and industrial capacity by emphasizing K-12 education in math, science and technology; life-long learning programs; and long-term investments in education and training.

• Research Breakthroughs - We need to increase federal government investment in basic aerospace research, to enhance national security and safe aerospace transportation. Industry will play a leading role in applying the research to product development.

On the Horizon

The average age of today’s aerospace engineers is 54; by 2008, 27 percent of aerospace workers will become eligible for retirement. At NASA, the number of personnel under age 30 is a third of the number over age 60. While aerospace companies employed 20 percent of the nation’s R&D scientists 24 years ago, the level had dropped to 2.4 percent by 2001. Some 40 percent of the graduate students earning science and engineering doctorates in the U.S. are foreign nationals who cannot qualify for sensitive domestic defense and space jobs that require U.S. citizenship.

Further, the last fighter aircraft program, the F-22 Raptor (the Joint Strike Fighter), which Lockheed Martin and Boeing are jointly producing, will also end in 2008. [see http://www.geocities.com/CapeCanaveral/Hangar/2081/]. To keep the labor force “evergreen,” more programs must emerge.

In addition, unless we expand domestic and international airports adequately, our facilities could experience dramatic congestion that limits capacity by 2015. As a result, the airline industry could lose $20 billion in output, and forfeit up to 200 billion passenger miles.

Funding Is Critical

Since 1998, NASA’s and DoD’s combined investment in aeronautics research and technology programs has fallen by a third. Federal R&D investments in aerospace dropped 75 percent from 1987 to 2000. But foreign competitors are not idle. The European Commission (EC) issued A Vision for 2020, establishing a goal for global leadership in civil aviation by 2020. The EC has committed $93 billion to its vision, with government entities funding 30 percent of the continent’s civil aeronautics R&D. By 2018, the European Air Traffic Control Alliance plans to activate the next-generation Air Traffic Management system.

The FY04 budget proposals for NASA and the Federal Aviation Administration (FAA) represent a modest start in addressing federal R&D resource gaps: $959 million for NASA aeronautics technology, and $100 million for FAA’s research, development and engineering requests. Most of the funding will be devoted to civil aircraft safety and structural improvements.

To Dig Deeper

More detail on the Commission’s recommendations, as well as supporting data, are available in the full 319-page report. Go to www.ita.doc.gov/td/aerospace/aerospacecommission/
AeroCommissionFinalReport.pdf.

Other helpful resources include:

• http://clients.biznews24.com/aerospace/ for a 15-minute multimedia briefing on the report.

• www.aia-aerospace.org/stats/aero_stats/aero_stats.cfm for aerospace statistics.

• www.aia-aerospace.org/aianews/speeches/speeches.cfm for 12 March testimony by John W. Douglass, President and CEO of the Aerospace Industries Association of America before the House Science Committee on implementing the Commission's recommendations.

• www.aerospacecommission.gov/states/state_cover.shtml for a state-by-state analysis of the economic impact of the U.S. aerospace and aviation industry.

• “The Aerospace Industry: Technology and Security,” by Bob Johnson, President and CEO of Honeywell Aerospace, in Vital Speeches of the Day, Vol. LXIX, No. 5, 15 December 2002, pages 134-139.

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George F. McClure is chair of IEEE-USA's Career and Workforce Policy Committee and IEEE-USA’s Technology Policy Editor.