Aerospace industry expects growth

After 3 record years, more forecast for '07

December 14, 2006|By Allison Connolly | Allison Connolly,Sun Reporter

ARLINGTON, Va. -- The aerospace industry, a big driver of Maryland's economy, is about to close out its third year of record growth, with civilian and military orders up, and officials expect more of the same for 2007, according to an annual forecast by the Aerospace Industries Association released yesterday.

Sales climbed $14.3 billion to $184.4 billion this year and are projected to rise to $195.4 billion next year, the forecast said. The industry is benefiting from a substantial increase in commercial orders, which are expected to outpace military sales next year, $54.6 billion to $53.5 billion respectively.

Commercial sales would have been even higher next year had Europe's Airbus not delayed production of the world's largest airliner, the A380, a double-decker that can carry up to 800 passengers. A number of U.S. companies supply parts to Airbus, said AIA President and Chief Executive Officer John Douglass, who presented the 42nd forecast to association members and the media at the Crystal Gateway Marriott hotel here.

The industry added 23,000 jobs, for a total of 635,000 this year. But profits appear to have slipped slightly, from $12.6 billion to $12.4 billion, largely because of tighter margins on government contracts and increasing competition for commercial ones, Douglass said.

Maryland is home to the nation's largest defense contractor, Bethesda-based Lockheed Martin Corp., as well as thousands of employees at the NASA Goddard Space Flight Center in Greenbelt, AAI Corp. in Hunt Valley and the state's largest private, for-profit employer, Northrop Grumman Corp., whose Electronic Systems sector in Linthicum makes aircraft radar and employs 10,100 statewide. There also are many subcontractors.

"The Maryland economy will continue to outperform the rest of the country because of the cluster of government services and defense here," said economist Richard B. Clinch of the University of Baltimore's Jacob France Institute.

The industry should be buoyed by orders for the F-35 Lightning II Joint Strike Fighter, which is being built by Lockheed Martin for the U.S. Air Force, Navy and Marine Corps and for eight foreign countries.

Exports are way up, with projected sales of $81.8 billion this year, compared with less than $70 billion last year.

Douglass said exports could be bolstered if the government would change what he called anti-competitive regulations that require defense contractors to use only U.S.-made materials.

He also said he was optimistic that incoming Defense Secretary Robert M. Gates would be more receptive to meeting with the industry than departing Secretary Donald H. Rumsfeld.

"If we don't see some major changes in the next year, it's going to be an election issue because it's about jobs," Douglass said.

While Douglass said he did not foresee any push by presidential candidates for big cuts in defense spending, he lamented cuts for the National Aeronautics and Space Administration, which is responsible for much of the innovation in military and commercial aviation. He said the government has yet to fulfill its commitment to fund the Next Generation Air Transportation System, known as NextGen, to modernize the air traffic system.

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