Air 2012 Book

Aerospace Industry Report 3rd Edition
Aerospace
3rd Edition
Industry Report
Facts, Figures & Outlook for
the Aviation and Aerospace
Manufacturing Industry
Facts, Figures & Outlook for the Aviation and Aerospace Manufacturing Industry
Photo courtesy of Northrop Grumman Corporation
Published by the Aerospace Industries Association of America

and the Center of Aviation & Aerospace Leadership
at Embry-Riddle Aeronautical University–Worldwide
Photo Credits:
Chapter 1: Boeing 787 Dreamliner in Production at Seattle. (Credit: The Boeing

Company)
Chapter 2: Boeing 747 Taking Off On-Schedule. (Credit: Yao Meng Peng, Photos.com)
Chapter 3: Taking Off from New York. (Credit: John Foxx, Photos.com)
Chapter 4: The Last Lockheed Martin Raptor. Air Force Magazine. (Credit: Damien
A. Guarnieri, Lockheed Martin)
Chapter 5: FedEx Boeing 777F Undergoing Maintenance, Repair, and Overhaul in

Memphis. (Credit: FedEx Corporation)
Chapter 6: The New Lockheed Martin Joint Strike Fighter. (Credit: Lockheed Martin)
The photos on the front and back of this report are pictures of Northrop Chapter 7: Embraer 175 and ERJ 135 Jets in Production at Sao Jose dos Campos,
Grumman’s X-47B Unmanned Combat Air System (UCAS). Brazil. (Credit: Embraer)
The X-47B is a tailless, intelligent, unmanned aircraft under development for Chapter 8: Keeping America Strong. Senior Airman Christopher Blackstone applies
the U.S. Navy to demonstrate carrier-based launches and recoveries and lubrication to the nose landing gear struts of an A-10 Thunderbolt II at Osan Air
autonomous aerial refueling. Base, South Korea. (Credit: Senior Airman Adam Grant, U.S. Air Force)
The X-47B UCAS is based on the concept of network centric warfare Chapter 9: New Bombardier Global 6000 at NetJets Headquarters. (Credit: NetJets)
where a single controller located anywhere can monitor and control several
aircraft simultaneously. When fully operational, the X-47B will be able to Chapter 10: Qube® Unmanned Aircraft System designed to meet the needs of first
suppress enemy air defenses and conduct deep strike and surveillance responders. (Credit: AeroVironment)
missions within a global command and control network.
Chapter 11: Night time image of the Northern Gulf coast. From 220 miles above
Photo credit: Northrop Grumman Corporation. Earth, one of the Expedition 25 crew members on the International Space Station
shot this image of the northern Gulf coast. (Credit: NASA)
Acronyms and Other Terms: UH-60 Blackhawk helicopter in Kandahar Province,

Afghanistan. (Credit: Sgt. Daniel Schroeder, U.S. Army)
Glossary: SpaceX Dragon Resupplying the International Space Station.

(Credit: NASA)
Appendix: Bell Helicopter 412EP. (Credit: Bell Helicopter)
About the Authors: Air Force Hunter-killer MQ-9 Reaper UAV in Afghanistan.
(Credit: U.S. Air Force)
Acknowledgements: The Ticonderoga-class guided-missile cruiser USS Cowpens

(CG 63) fires Standard Missiles (SM) 2 at an airborne drone during a live-fire
weapons shoot. (Credit: U.S. Navy)
Aerospace Industry Report
Third Edition
Facts, Figures & Outlook for the
Aviation and Aerospace Manufacturing Industry
By
Robert Materna, Ph.D.

Professor of Business Administration
Center for Aviation & Aerospace Leadership
Embry-Riddle Aeronautical University–Worldwide
Brig. Gen. Robert E. Mansfield, Jr. USAF (Ret.)

Executive Director
Frederick W. Deck, III

Senior Director
Aerospace Research Center
Aerospace Industries Association
With contributions by
William A. Chadwick, Jr.

Aerospace & Defense Industry Consultant
Aman D. Gupta, Ph.D.

Program Chair, Master of Science in Logistics
and Supply Chain Management
K. Dunlop Scott
President and Chief Operating Officer
Columbia Partners
Published by:
Aerospace Industries Association Center for Aviation &

of America, Inc. Aerospace Leadership
1000 Wilson Blvd. Embry-Riddle Aeronautical University
Suite 1700 600 South Clyde Morris Blvd.
Arlington, VA 22209-3928 Daytona Beach, FL 32114-3900
Phone: (703) 358-1015 Phone: (770) 726-9987
Web: www.aia-aerospace.org Web: www.erau.edu
The views contained in this document are those of the authors and do
not necessarily represent the official policies or endorsements, either
expressed or implied, of the Aerospace Industries Association or
Embry-Riddle Aeronautical University. This report is for information only
and should not be used for investment purposes.
All rights reserved. No part of this publication may be reproduced

or distributed in any form or by any means, or stored in a database,
network, or retrieval system, or broadcast for distance learning without
the written consent of the Aerospace Industries Association or Embry-
Riddle Aeronautical University. Any quotation must be accompanied by
appropriate bibliographic credit.
© 2013 Embry-Riddle Aeronautical University and the Aerospace Industries Association

of America, Inc.
ISBN 978-0-9881837-1-1
iii
Foreword
Welcome to the second joint publication of

the Aerospace Industries Association (AIA)
and the Center for Aviation & Aerospace
Leadership (CAAL) at Embry-Riddle
Aeronautical University–Worldwide.
Some time ago, both organizations agreed
Marion C. Blakey
to share their resources to produce an President and Chief Executive Officer
authoritative report on the state of aero- Aerospace Industries Association
space manufacturing in the U.S. Now in its

second production, the Aerospace Industry
Report is an all-encompassing source book
designed to help business leaders, opera-
tors, and policymakers make more informed
decisions. The publication will also help
educate students—our next generation of
aerospace professionals.
This edition of the Aerospace Industry Report
includes another new set of statistical data
that quantitatively assess the industry’s
performance along with an even more
focused look at topical issues that face the John R. Watret, Ph.D.
Chancellor
industry. This report’s emphasis on emerg- Embry-Riddle Aeronautical
ing trends is particularly important as the University–Worldwide
industry heads into what appears to be a

time of significant change.
As we deal with the challenges of sequestration and look to the future,
it is clear that we must all work together to maintain America’s lead-
ership role in the aviation and aerospace manufacturing industry. In
addition to our work with large aerospace firms and key government
iv Aerospace Industry Report 3Rd Edition
agencies, it is also clear that we must continue to promote an environ-

ment that supports small to medium-size aerospace manufacturers.
These firms, which are distributed across all 50 states, are a key source
of innovation and jobs that produce over 80 percent of the parts that
go into our aerospace systems.
If you have any questions, please feel free to contact the Aerospace
Industries Association or the Center for Aviation & Aerospace
Leadership at Embry-Riddle Aeronautical University.
Marion C. Blakey John R. Watret, Ph.D.

President and Chancellor
Chief Executive Officer Embry-Riddle Aeronautical
Aerospace Industries Association University–Worldwide
v
About AIA
The Aerospace Industries Association (AIA) is the most authorita-

tive and influential trade association representing the aerospace and
defense industry. We are the leading voice for the industry on Capitol
Hill, within the administration, and internationally.
In times like these, AIA’s strong representation and advocacy is essen-
tial to protecting the interests of the nation’s aerospace and defense
industry, while helping to establish new opportunities for growth.
AIA represents nearly 380 aerospace and defense manufacturers and
suppliers. We are at the forefront of critical issues, such as advocat-
ing for robust federal budgets for aerospace and defense, a strong U.S.
industrial base, defense modernization, and an efficient acquisition
system. In addition, accelerating deployment of Next Generation Air
Transportation System technologies and equipment, modernizing export
controls, and obtaining additional resources for research and develop-
ment and space exploration are important priorities for the association.
Unlike many other associations, CEOs of our member companies and
their senior managers define and drive our agenda. We work together
to shape regulatory and legislative policies and we are a leader in
developing and publishing national aerospace standards that are used
in aerospace design and manufacturing across the globe.
The aerospace and defense industry supports and drives our nation’s
economy. It fuels innovation, creates competition, and employs
millions of Americans. We are proud to represent our members and
our nation. To learn more about AIA and the benefits of membership,
please visit www.aia-aerospace.org.
vii
About Embry-Riddle
Aeronautical University
Embry-Riddle Aeronautical University was founded in 1925, just 22

years after the Wright brothers’ first flight. Today, the University and
its graduates have built an enviable record of achievement in every
aspect of aviation and aerospace. At Embry-Riddle, our mission
is to teach the science, practice and business of aviation and aero-
space, preparing students for productive careers and leadership roles
in service around the world. The curriculum covers the operation,
engineering, research, manufacturing, marketing, and management of
modern aircraft and the systems that support them. The University
also engages in extensive research and consulting that addresses the
unique needs of aviation, aerospace, and related industries.
Residential campuses in Daytona Beach, Florida and Prescott, Arizona
provide education in a traditional setting. The residential campuses
also have over 90 instructional aircraft and offer FAA approved
programs in flight and flight dispatch. Flight programs include private,
commercial, instrument, multi-engine, flight instructor, and instrument
flight instructor ratings.
The Worldwide campus provides instruction at over 150 locations in
the United States, Canada, Europe, the Middle East, and Asia, with
more than 27,000 students.
Combined annual enrollment for all three campuses is more than
34,000. Embry-Riddle now has over 100,000 alumni.
Embry-Riddle Aeronautical University is an independent, nonsectar-
ian, not-for-profit, coeducational university that is accredited by the
Commission on Colleges of the Southern Association of Colleges
and Schools.
ix
About CAAL
The Center for Aviation and Aerospace Leadership (CAAL) was founded
in 2008 to capture, create, and share information on leadership related
to the aviation and aerospace industry. The Center’s vision is to prepare
aviation and aerospace leaders for tomorrow’s world. To accomplish its mission,
the Center for Aviation and Aerospace Leadership conducts research on
how leaders are dealing with specific challenges and publishes articles and
reports on topics that are important to the industry.
This report, which is published in partnership with the Aerospace
Industries Association, is a product of the Center. CAAL also offers
leadership development programs to individuals and teams in aviation,
aerospace, and related industries, and is actively involved in promoting
programs that teach science, technology, engineering, math, and manu-
facturing (STEM+M). CAAL is continuously developing new case
studies, professional development courses and material for Embry-
Riddle Worldwide’s Master of Science in Leadership program.
CAAL is located in Embry-Riddle Worldwide’s College of Business.
It operates under the direction of a permanently staffed management
committee, and has been designed to leverage Embry-Riddle’s world-
wide network of practitioners, scholars and alumni to address key
leadership issues related to the industry. For more information, please
contact CAAL at the following:
Phone: (770) 726-9987
E-mail: AllenL4@erau.edu
Web: http://worldwide.erau.edu/caal/
xi
The CAAL Manufacturing Initiative
The CAAL Manufacturing Initiative is one of several programs

designed to serve the aviation and aerospace industry. One of the
primary purposes of the initiative is to provide aerospace manufactur-
ers and service providers of all sizes with additional resources to help
us all understand what can be done to make the U.S. aerospace indus-
try more competitive.
This report is one of the core products of the CAAL Manufacturing
Initiative, which focuses on the status of aerospace manufacturing
in the United States. The report includes a review of major trends
affecting the industry, sales across the various sectors of the industry,
employment trends, international trade statistics, industry financial
statements, and a forecast for the future based on an assessment of
what the government and industry are saying—along with AIA and
Embry-Riddle’s own analysis. In addition to the core product, tailored
reports can be prepared for states, regions, or countries upon request.
The initiative also includes an annual Aviation and Aerospace Industry
Manufacturing Summit. This event gathers leaders and experts in a
variety of fields to discuss topics of relevance to the aviation and aero-
space manufacturing and service community. Related services include
seminars and tailored presentations for specific customers and markets.
The information provided in this report is intended to help inform
business planning, strategy, and decision-making. For more informa-
tion about this report, the manufacturing summit, or other services,
please visit the CAAL website, send us an e-mail, or give us a call using
the information on the previous page.
xiii
Table of Contents
Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
About AIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
About Embry-Riddle Aeronautical University. . . . . . . . . . . . . . . . . . . vii
About CAAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
The CAAL Manufacturing Initiative. . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Chapter 1 n The Return of American Manufacturing—
Opportunities and Challenges for U.S. Aerospace Manufacturers. . 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Return of Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Manufacturing and the Economy. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Aerospace Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Benefits of Aerospace & Defense Manufacturing . . . . . . . . . . . . 8
Research and Innovation in the Aerospace Industry. . . . . . . . . 10
Global Research and Development. . . . . . . . . . . . . . . . . . . 11
Research and Development in the United States. . . . . . . . 12
Programs that Promote Manufacturing and Innovation. . . 15
Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Chapter 2 n The National Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Economic Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Recovery Continues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Money Multiplier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reserve Balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Velocity of Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
xiv Aerospace Industry Report 3Rd Edition
Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Producer Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Industrial Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Capacity Utilization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Manufacturing Output per Worker. . . . . . . . . . . . . . . . . . . . . 28
Unemployment Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Civilians Unemployed 15 Weeks or More. . . . . . . . . . . . . . . 29
Initial Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Number of Manufacturing Employees . . . . . . . . . . . . . . . . . 30
Corporate Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Employment Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fixed Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
National Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Gross Domestic Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Chapter 3 n The International Economy. . . . . . . . . . . . . . . . . . . . . . . 39
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
The State of the World Economy. . . . . . . . . . . . . . . . . . . . . . . . . . 39
GDP Growth Forecasts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
OECD Leading Indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Exchange Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Dependency Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
International Manufacturing Competitiveness . . . . . . . . . . . . . . 48
Chapter 4 n Aerospace Manufacturing in the United States. . . . . . 53
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Aerospace Sales, Orders, and Backlog. . . . . . . . . . . . . . . . . . . . 53
Federal Outlays for DOD Aircraft and Missiles. . . . . . . . . . . 56
Civil and Military Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Civil Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Military Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Table of Contents xv
Rotorcraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
General Aviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Missiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Chapter 5 n Maintenance Repair and Overhaul . . . . . . . . . . . . . . . . 69
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Commercial Aircraft MRO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Scale and Scope of the Market. . . . . . . . . . . . . . . . . . . . . . . . 70
Distribution by Type and Geography. . . . . . . . . . . . . . . . . . 72
Military Aircraft MRO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Scale and Scope of the Market. . . . . . . . . . . . . . . . . . . . . . . . 74
Distribution by Type and Geography. . . . . . . . . . . . . . . . . . 74
Trends and Challenges in MRO. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Chapter 6 n The Global Aerospace Marketplace. . . . . . . . . . . . . . . 79
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
U.S. Aerospace Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
U.S. Military Aerospace Exports . . . . . . . . . . . . . . . . . . . . . . . 82
U.S. Aerospace Imports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
U.S. Military Aerospace Imports. . . . . . . . . . . . . . . . . . . . . . . 87
U.S. Balance of Trade in Aerospace Products and Parts . . . . . . 87
Regional Aerospace Exporting Trends. . . . . . . . . . . . . . . . . . . . . 90
Pacific Region Aerospace Exports. . . . . . . . . . . . . . . . . . . . . 90
Mountain Region Aerospace Exports. . . . . . . . . . . . . . . . . . 93
South-Central Region Aerospace Exports . . . . . . . . . . . . . . 95
North-Central Region Aerospace Exports . . . . . . . . . . . . . . 97
South-Atlantic Region Aerospace Exports. . . . . . . . . . . . . . 99
Mid-Atlantic Region Aerospace Exports. . . . . . . . . . . . . . . 102
New England Region Aerospace Exports . . . . . . . . . . . . . 104
Export-Import Bank of the United States. . . . . . . . . . . . . . . . . . 106
xvi Aerospace Industry Report 3Rd Edition
Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Chapter 7 n Aerospace and the BRICs . . . . . . . . . . . . . . . . . . . . . . . . 111
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
For More Information on Doing Business in Brazil. . . . . . . 114
Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
For More Information on Doing Business in Russia. . . . . . 119
India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
For More Information on Doing Business in India. . . . . . . 124
China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
For More Information on Doing Business in China. . . . . . 129
Chapter 8 n The Aerospace Workforce. . . . . . . . . . . . . . . . . . . . . . . 133
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Employee Productivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133
Workforce Challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Employment Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
The Workforce as a Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . 141
Creative Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Business and Industry STEM Education Coalition . . . . . . . 143
Team America Rocketry Challenge . . . . . . . . . . . . . . . . . . . 143
Real World Design Challenge. . . . . . . . . . . . . . . . . . . . . . . . 144
Manufacturing Skills Certification Program. . . . . . . . . . . . . 144
Other Ideas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Table of Contents xvii
Chapter 9 n Finance and Capital Markets. . . . . . . . . . . . . . . . . . . . . 149

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Financial Overview of the U.S. Aerospace Industry. . . . . . . . . 149
Changing Market Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Yield on the U.S. Treasury 10-Year Bond. . . . . . . . . . . . . . . . 153
Aerospace and Defense Bond Yield Spread. . . . . . . . . . . 154
Traditional Lending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Loan Value Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
New Commercial and Industrial Loan Value. . . . . . . . . . . . 154
Small Business Loan Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Small Business Loan Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Increased Willingness to Lend. . . . . . . . . . . . . . . . . . . . . . . . 156
Smaller Lenders Not Lending . . . . . . . . . . . . . . . . . . . . . . . . 157
Alternative Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Asset-Backed Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Cash Flow Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
The CDO/CLO Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
State of the Equity Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Stock Market Performance of Aerospace Companies. . . 164
Price-to-Earnings Comparisons. . . . . . . . . . . . . . . . . . . . . . . 165
Mergers and Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Chapter 10 n Topics to Watch in 2013 and Beyond. . . . . . . . . . . . . . 171
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
The Benefits of Aerospace Clusters . . . . . . . . . . . . . . . . . . . . . . 171
Clusters are Important. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
The Role of Location in a Networked World . . . . . . . . . . . 174
America’s Leading Aerospace and Defense Clusters . . . 175
Cluster Registry Formed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
The Path to Regional Innovation . . . . . . . . . . . . . . . . . . . . . 178
Guidelines for Building Effective Regional Clusters. . . . . 179
xviii Aerospace Industry Report 3Rd Edition
Collaboration Strategies for the Aerospace Industry. . . . 181

The State of Small and Medium-Size U.S. Aerospace
Manufacturers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Challenges Facing Aerospace Suppliers . . . . . . . . . . . . . . 188
Opportunities and Challenges in Civil Space. . . . . . . . . . . . . . 189
Restoring Human Access to Space . . . . . . . . . . . . . . . . . . . 189
Maintaining Leadership in Space Science and
Earth Observation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Preserving Weather Satellite Capabilities. . . . . . . . . . . . . . 190
Integrating UAS into the U.S. National Airspace. . . . . . . . . . . . 191
Recent Legislation and Anticipated Applications. . . . . . . 191
Need for a National Plan and Benefits of Integration. . . . 192
Managing Risk in Aerospace Supply Chains. . . . . . . . . . . . . . . 193
Why Risk is an Issue in Supply Chain Networks. . . . . . . . . 193
Examples of “Risk Events” and Their Impact. . . . . . . . . . . . 194
Risk Management Concepts. . . . . . . . . . . . . . . . . . . . . . . . . 195
Characteristics of Aerospace Supply Chain Risk. . . . . . . . 196
Lessons Learned in Aerospace Supply Chain
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Best Practices in Managing Risk . . . . . . . . . . . . . . . . . . . . . . 198
Developing an Adaptive Enterprise . . . . . . . . . . . . . . . . . . 201
The Continuing Threat of Counterfeit Parts . . . . . . . . . . . . . . . . 202
Performance, Reliability, Safety and Security Threatened . . 202
Scale, Scope, and Primary Source of the Problem . . . . . . 202
Industry Actions to Address the Issue . . . . . . . . . . . . . . . . . 202
Rare Earth Elements and the Aerospace Industry. . . . . . . . . . . 203
Rare Earth Applications for Aerospace and Defense. . . . 203
DOD’s Response and Other U.S. Actions . . . . . . . . . . . . . . 204
Impact on Small to Medium Aerospace Manufacturers. . 205
Options for Dealing with Rare Earth Element Issues. . . . . 205
Outlook for Rare Earth Elements in the Foreseeable
Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
International Specifications for Technical Documentation . . . 206
Lead-Free Electronics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Table of Contents xix
Cyber-Warfare and the U.S. Aerospace and Defense Industry. . 209

Primary Aggressors and Main Areas of Interest . . . . . . . . 210
Impact on Small to Medium-Size Aerospace
Manufacturers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Best Practices in Data Protection and Due Diligence
for Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Fuel Efficiency and the Aviation Industry . . . . . . . . . . . . . . . . . . 212
Commercial Aviation’s Strategy to Reduce Global
CO2 Emissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
International Coordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
Greenhouse Gas Emissions. . . . . . . . . . . . . . . . . . . . . . . . . . 217
The Impact of Sequestration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Chapter 11 n Industry Forecasts and Outlook. . . . . . . . . . . . . . . . . . 229
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
General Aviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Commercial Aviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Large Commercial Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Regional Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Civil Cargo Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
Unmanned Aircraft Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Military Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Civil and Commercial Systems. . . . . . . . . . . . . . . . . . . . . . . 248
Commercial Space. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Commercial Space Outlook . . . . . . . . . . . . . . . . . . . . . . . . . 254
The Implications of Commercial Space for the
Aviation and Aerospace Industry. . . . . . . . . . . . . . . . . . . . . 261
Outlook for 2013 and Beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Challenges in the Short-Term. . . . . . . . . . . . . . . . . . . . . . . . . 263
Opportunities in the Long-Term . . . . . . . . . . . . . . . . . . . . . . 264
General Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Acronyms and Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
xx Aerospace Industry Report 3Rd Edition
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285
Summary Aerospace Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . 286
Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Missiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Air Carriers, Traffic Statistics, and Fuel Costs . . . . . . . . . . . . . . . 322
General Aviation Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330
Landing Facilities by State and Type. . . . . . . . . . . . . . . . . . . . . . 332
Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
Foreign Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .341
Employment, Earnings, and Other Workforce Statistics . . . . . 352
Income Statement, Balance Sheet, and Other
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
Key Operating Costs for Selected Aerospace
Manufacturing Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
Major DOD and NASA Contractors. . . . . . . . . . . . . . . . . . . . . . . 371
About the Authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
Robert Materna, Ph.D. CPL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
Robert E. Mansfield, Jr., Brig. Gen., USAF (Ret.) . . . . . . . . . . . . 374
Frederick W. Deck, III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Figures
Figure 1.1 Average Hourly Wages and Benefits for
Manufacturing Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 1.2 U.S. Manufacturing Jobs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 1.3 U.S. Manufacturing Output Index. . . . . . . . . . . . . . . . . . . . . 4
Figure 1.4 Index of Manufacturing Output per Person,
Durable Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 1.5 Manufacturing Output for Selected Countries. . . . . . . . . . 5
Figure 1.6 Average Hourly Wages and Benefits for
Aerospace Production Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 1.7 U.S. Aerospace Manufacturing Jobs . . . . . . . . . . . . . . . . . . 7
Figure 1.8 Aerospace Manufacturing Output. . . . . . . . . . . . . . . . . . . . 8
Table of Contents xxi
Figure 1.9 Aerospace Exports for Selected States in 2012. . . . . . . . 10

Figure 1.10 Global R&D and Innovation. . . . . . . . . . . . . . . . . . . . . . . . 12
Figure 1.11 U.S. R&D as Percentage of GDP. . . . . . . . . . . . . . . . . . . . . 13
Figure 1.12 Defense and Non-Defense R&D. . . . . . . . . . . . . . . . . . . . 13
Figure 1.13 Percentage Change in R&D Funding Since 2009. . . . . . 14
Figure 1.14 Domestic R&D Expenditures by Size of Firm . . . . . . . . . 14
Figure 1.15 Domestic R&D Expenditures for Aerospace. . . . . . . . . . 15
Figure 2.1 M1 Money Multiplier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Figure 2.2 Reserve Balances with Federal Reserve Banks. . . . . . . . 23
Figure 2.3 Velocity of the M2 Money Stock . . . . . . . . . . . . . . . . . . . . 24
Figure 2.4 U.S. 10-Year Treasury Constant Maturity Rate. . . . . . . . . . 25
Figure 2.5 Producer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Figure 2.6 Industrial Production in Manufacturing. . . . . . . . . . . . . . . 27
Figure 2.7 U.S. Manufacturing Capacity Utilization. . . . . . . . . . . . . . . 27
Figure 2.8 Manufacturing Output per Worker . . . . . . . . . . . . . . . . . . 28
Figure 2.9 Unemployment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Figure 2.10 Civilians Unemployed 15 Weeks or More . . . . . . . . . . . 30
Figure 2.11 Four-Week Moving Average of Initial Claims. . . . . . . . . 30
Figure 2.12 Number of Manufacturing Employees . . . . . . . . . . . . . . 31
Figure 2.13 Corporate Profits After Tax. . . . . . . . . . . . . . . . . . . . . . . . . 32
Figure 2.14 Employment Cost Index, Wages, and Salaries
for Private Industry Manufacturing Worker. . . . . . . . . . . . . . . . . . . . . 33
Figure 2.15 Private Nonresidential Fixed Investment. . . . . . . . . . . . . 33
Figure 2.16 Federal Government Debt . . . . . . . . . . . . . . . . . . . . . . . . 34
Figure 2.17 Gross Domestic Product . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Figure 2.18 Percentage Change in GDP from Previous Quarter. . . 35
Figure 3.1 Actual and Projected GDP Growth Rates 2008–2015. . . . 40
Figure 3.2 CLIs for the U.S., Europe and Japan. . . . . . . . . . . . . . . . . . 42
Figure 3.3 CLIs for Brazil, Russia, India, and China. . . . . . . . . . . . . . . 42
Figure 3.4 Long-Term Interest Rates for Selected Countries. . . . . . 43
Figure 3.5 U.S. Dollar Amount per Unit of Foreign Currency. . . . . . 44
Figure 3.6 Projected Average Growth Rates in GDP . . . . . . . . . . . . 46
Figure 3.7 Projected Average Current Account Balances . . . . . . . . 46
xxii Aerospace Industry Report 3Rd Edition
Figure 3.8 Dependency Ratios for Selected Countries . . . . . . . . . . 47

Figure 3.9 Global Manufacturing Competitiveness Rankings. . . . . 49
Figure 4.1 Aerospace Industry Sales by Product Group . . . . . . . . . 54
Figure 4.2 Aerospace Industry Sales by Customer. . . . . . . . . . . . . . 55
Figure 4.3 Aerospace Orders, Shipments, and Backlog. . . . . . . . . . 55
Figure 4.4 Federal Outlays for Aerospace Products and Services. . . 56
Figure 4.5 Military Outlays by Functional Title . . . . . . . . . . . . . . . . . . 57
Figure 4.6 Civil Aircraft Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Figure 4.7 Shipments of U.S. Large Civil Transport Aircraft. . . . . . . . 58
Figure 4.8 Military Aircraft Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Figure 4.9 DOD Outlays for Aircraft Procurement by Agency. . . . . 59
Figure 4.10 NASA Outlays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Figure 4.11 DOD Outlays for Missile Procurement by Agency . . . . 65
Figure 5.1 Estimated Global Commercial Aircraft MRO
Market, 2012–2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Figure 5.2 Commercial Aircraft MRO Spending by Region, 2012 . . 72
Figure 5.3 Commercial Aircraft MRO Spending by Activity, 2012. . . 73
Figure 5.4 Estimated Global Military Aircraft MRO Market,
2012–2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Figure 5.5 Military Aircraft MRO Spending by Region, 2012 . . . . . . 75
Figure 5.6 Military Aircraft MRO Spending by Activity, 2012 . . . . . . 76
Figure 6.1 U.S. Exports of Aerospace Products and Parts. . . . . . . . . 80
Figure 6.2 Map of U.S. Aerospace Export Countries. . . . . . . . . . . . . 81
Figure 6.3 Trends in Top U.S. Aerospace Export Markets. . . . . . . . . 82
Figure 6.4 National Defense Total Obligation Authority. . . . . . . . . . 83
Figure 6.5 Military Aerospace Exports. . . . . . . . . . . . . . . . . . . . . . . . . 84
Figure 6.6 Imports of Aerospace Products and Parts. . . . . . . . . . . . 84
Figure 6.7 Map of U.S. Aerospace Import Countries. . . . . . . . . . . . 85
Figure 6.8 Trends in Top U.S. Aerospace Import Markets. . . . . . . . . 86
Figure 6.9 Military Aerospace Imports into the United States. . . . . 87
Figure 6.10 Balance of Trade Aerospace Products and Parts. . . . . . 88
Figure 6.11 Map of U.S. Aerospace Trade Balances. . . . . . . . . . . . . . 88
Figure 6.12 Trade Balance for Selected Products, 2012. . . . . . . . . . . 90
Figure 6.13 Pacific Region Aerospace Exports to World . . . . . . . . . 91
xxiii
Figure 6.14 Trends in Pacific Region Aerospace Exports by State. . . . 92

Figure 6.15 Trends in Pacific Region Top Aerospace Export
Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Figure 6.16 Mountain Region Aerospace Exports to World . . . . . . 93
Figure 6.17 Trends in Mountain Region Aerospace Exports
by State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Figure 6.18 Trends in Mountain Region Top Aerospace
Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Figure 6.19 South-Central Region Aerospace Exports to World. . . 95
Figure 6.20 Trends in South-Central Region Aerospace
Exports by State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Figure 6.21 South-Central Region Top Aerospace Export Markets. . . 97
Figure 6.22 North-Central Region Aerospace Exports to World. . . 97
Figure 6.23 Trends in North-Central Region Exports by State
(Part I). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Figure 6.24 Trends in North-Central Region Exports by State
(Part II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Figure 6.25 Trends in North-Central Region Top Aerospace
Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Figure 6.26 South-Atlantic Region Aerospace Exports to World . 100
Figure 6.27 Trends in South-Atlantic Region Aerospace
Exports by State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Figure 6.28 Trends in South-Atlantic Region Top Aerospace
Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Figure 6.29 Mid-Atlantic Region Aerospace Exports to World. . . 102
Figure 6.30 Trends in Mid-Atlantic Region Aerospace Exports
by State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Figure 6.31 Trends in Mid-Atlantic Region Top Aerospace
Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Figure 6.32 New England Region Aerospace Exports to World. . 104
Figure 6.33 Trends in New England Region Aerospace
Exports by State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Figure 6.34 Trends in New England Region Top Aerospace
Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Figure 6.35 Export-Import Bank Authorizations . . . . . . . . . . . . . . . . 107
Figure 6.36 Export-Import Bank Exposure by Industry. . . . . . . . . . 108
Figure 7.1 Brazilian GDP and Unemployment Trends. . . . . . . . . . . 112
xxiv Aerospace Industry Report 3Rd Edition
Figure 7.2 Aerospace Trade Trends with Brazil. . . . . . . . . . . . . . . . . 112

Figure 7.3 Russian GDP and Unemployment Trends. . . . . . . . . . . . 116
Figure 7.4 Aerospace Trade Trends with Russia. . . . . . . . . . . . . . . . 118
Figure 7.5 India GDP and Unemployment Trends. . . . . . . . . . . . . . 121
Figure 7.6 Aerospace Trade Trends with India. . . . . . . . . . . . . . . . . 122
Figure 7.7 China GDP and Unemployment Trends. . . . . . . . . . . . . 127
Figure 7.8 Aerospace Trade Trends with China . . . . . . . . . . . . . . . . 128
Figure 8.1 A&D Hiring Needs, 2012–2016 . . . . . . . . . . . . . . . . . . . . . . 135
Figure 8.2 Percentage of Workforce Eligible to Retire. . . . . . . . . . 135
Figure 8.3 Employment in the U.S. Aerospace Industry
by Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Figure 8.4 Top 10 States for Aerospace Employment. . . . . . . . . . . 137
Figure 8.5 Average Annual Wages for Functional Managers,
Lawyers, and Specialists in Aerospace. . . . . . . . . . . . . . . . . . . . . . . 137
Figure 8.6 Number of Functional Managers, Lawyers, and
Specialists in Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Figure 8.7 Average Annual Wages for Engineers in Aerospace. . 138
Figure 8.8 Number of Engineers in Aerospace . . . . . . . . . . . . . . . . 139
Figure 8.9 Average Annual Wages for Production Workers
in Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Figure 8.10 Number of Production Workers in Aerospace. . . . . . . 140
Figure 8.11 Age Distribution for Aerospace Products and
Parts Manufacturing Workforce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Figure 8.12 Supply Chain Model of STEM Graduates. . . . . . . . . . . 141
Figure 9.1 Aggregate Level of Commercial and Industrial
Loans at all Commercial Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Figure 9.2 Yield on 10-Year Constant Maturity Bond. . . . . . . . . . . . 153
Figure 9.3 Aerospace & Defense Bond Yield Spread. . . . . . . . . . . 154
Figure 9.4 Total Value of Loans Outstanding. . . . . . . . . . . . . . . . . . . 155
Figure 9.5 Total Value of New C&I Loans. . . . . . . . . . . . . . . . . . . . . . 155
Figure 9.6 Total Value of Small Business Loans. . . . . . . . . . . . . . . . . 156
Figure 9.7 Small C&I Loan Balances. . . . . . . . . . . . . . . . . . . . . . . . . . 157
Figure 9.8 Net Percentage Tightening Standards for C&I Loans. . 157
Figure 9.9 Change in Asset-Based Credit Commitments. . . . . . . . 159
Figure 9.10 New CLO Issuances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
xxv
Figure 9.11 Price Comparison S&P 500 Index vs. iShares

Dow Jones Aerospace & Defense Index Fund. . . . . . . . . . . . . . . . 164
Figure 9.12 Price-to-Earnings Ratios for Selected Corporations. . 165
Figure 9.13 Number of Aerospace & Defense M&A Deals . . . . . . 167
Figure 9.14 Aerospace & Defense M&A Transactions by
Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Figure 10.1 Benefits of Aerospace Clusters . . . . . . . . . . . . . . . . . . . 173
Figure 10.2 Percentage Change in Share of National Cluster
Employment 1998–2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Figure 10.3 Path to Regional Innovation. . . . . . . . . . . . . . . . . . . . . . .179
Figure 10.4 Number of Employees and Size of Firm. . . . . . . . . . . . 184
Figure 10.5 Index of Net Sales by Size of Aerospace
Manufacturer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Figure 10.6 Income from Operations Ratio. . . . . . . . . . . . . . . . . . . . 185
Figure 10.7 Net Income After Tax Ratio. . . . . . . . . . . . . . . . . . . . . . . .185
Figure 10.8 Total Current Assets to Total Current Liabilities. . . . . . . 186
Figure 10.9 Total Cash, U.S. Government and Other Securities
to Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Figure 10.10 Days Beyond Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Figure 10.11 Model of Supply Chain Risks and Consequences. . . 196
Figure 10.12 Risk Management Process Model. . . . . . . . . . . . . . . . 197
Figure 10.13 Percentage Change in Key Performance Areas. . . . . 199
Figure 10.14 Approaches to Supply Chain Risk Management. . . . 199
Figure 10.15 Rare Earth Element Reserves. . . . . . . . . . . . . . . . . . . . . 206
Figure 10.16 Lead-free Electronics Operating Environment. . . . . . 208
Figure 10.17 Key Drivers of Emissions Reduction. . . . . . . . . . . . . . . 214
Figure 10.18 Fuel Efficiency Gains Since the Early Jet Age. . . . . . . 214
Figure 10.19 Congressional Budget Office Estimated Impact
of Sequestration on GDP Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
of Sequestration on Unemployment. . . . . . . . . . . . . . . . . . . . . . . . . 221
Figure 11.1 Worldwide GA Shipments and Billings. . . . . . . . . . . . . 231
Figure 11.2 Comparison of Shipments and Billings for Q1 2012
to Q1 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Figure 11.3 Active U.S. General Aviation Aircraft by Type, 2010 . . . 232
xxvi Aerospace Industry Report 3Rd Edition
Figure 11.4 Global Market Distribution of General Aviation

Aircraft, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Figure 11.5 Boeing’s Drivers of Air Travel. . . . . . . . . . . . . . . . . . . . . . 234
Figure 11.6 Projected Worldwide RPK Growth, 2012–2013 . . . . . . . 235
Figure 11.7 Fleet Development 2011–2031 . . . . . . . . . . . . . . . . . . . . . 236
Figure 11.8 Boeing’s Estimate of New Deliveries by 2031. . . . . . . . 236
Figure 11.9 Airbus Predicted Demand for 2012–2031. . . . . . . . . . . . 237
Figure 11.10 GDP Comparison Between Large Urban Centers
and Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Figure 11.11 New Aircraft 2012–2031. . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Figure 11.12 Regional Fleet Size, 2011 to 2031. . . . . . . . . . . . . . . . . . . 241
Figure 11.13 Boeing Air Freighter Forecast . . . . . . . . . . . . . . . . . . . . 242
Figure 11.14 Airbus Freighter Forecast Growth, 2012–2031 . . . . . . . 243
Figure 11.15 Common Elements of an Unmanned Aircraft System. . 244
Figure 11.16 DOD Categories of UAS. . . . . . . . . . . . . . . . . . . . . . . . . 246
Figure 11.17 DOD UAS Inventory by Model and Group. . . . . . . . . 247
Figure 11.18 Total Forecasted Launches. . . . . . . . . . . . . . . . . . . . . . . 254
Figure 11.19 Total Forecasted Payloads. . . . . . . . . . . . . . . . . . . . . . . 255
Figure 11.20 Forecasted GSO Launches. . . . . . . . . . . . . . . . . . . . . . . 255
Figure 11.21 Forecasted GSO Payloads. . . . . . . . . . . . . . . . . . . . . . . 256
Figure 11.22 Forecasted NGSO Launches by Type . . . . . . . . . . . . . 256
Figure 11.23 Forecasted NGSO Payloads by Type . . . . . . . . . . . . . 257
Figure 11.24 Space Foundation Indexes versus S&P 500 . . . . . . . . 259
Tables
Table 3.1 Actual and Projected GDP Growth Rates 2008–2015 . . . . 40
Table 6.1 U.S. Exports of Aerospace Products and Parts . . . . . . . . . 81
Table 6.2 Percent GDP Spent on Military, 2012. . . . . . . . . . . . . . . . . . 82
Table 6.3 U.S. Imports of Aerospace Products and Parts. . . . . . . . . 86
Table 6.4 Balance of Trade in Aerospace Products and Parts. . . . . 89
Table 6.5 Pacific Region Aerospace Exports by State . . . . . . . . . . . 91
Table 6.6 Mountain Region Aerospace Exports by State. . . . . . . . 93
Table 6.7 South-Central Region Aerospace Exports by State. . . . . 96
Table 6.8 North-Central Region Exports by State . . . . . . . . . . . . . . . 98
xxvii
Table 6.9 South-Atlantic Region Aerospace Exports by State. . . . 101

Table 6.10 Mid-Atlantic Region Aerospace Exports by State . . . . 103
Table 6.11 New England Region Aerospace Exports by State . . . 105
Table 7.1 Aerospace Trade Statistics with Brazil. . . . . . . . . . . . . . . . 113
Table 7.2 Aerospace Trade Statistics with Russia. . . . . . . . . . . . . . . 118
Table 7.3 Aerospace Trade Statistics with India. . . . . . . . . . . . . . . . 122
Table 7.4 Aerospace Trade Statistics with China . . . . . . . . . . . . . . . 128
Table 9.1 Summary Income Statement, Operating Ratios and
Balance Sheet Ratios for Aerospace Manufacturers in 2012 . . . . . 150
Table 9.2 Number of Small Business Loans Outstanding From
Depository Lenders by Lender Size . . . . . . . . . . . . . . . . . . . . . . . . . 158
Table 9.3 Dow Jones Aerospace & Defense Index Fund
Operating Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Table 9.4 Dow Jones Aerospace & Defense Index Fund
Market Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Table 9.5 Top Aerospace & Defense M&A Deals in 2012. . . . . . . . 166
Table 10.1 Aerospace Vehicles and Defense Clusters, Top 15
Economic Areas by Employment, 2010 . . . . . . . . . . . . . . . . . . . . . . . 174
Table 10.2 Aerospace Engine Clusters, Top 15 Economic Areas
by Employment, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Table 11.1 Airbus Forecast of Top 10 Countries in New Passenger
Aircraft Deliveries, 2012–2031. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Table 11.2 Embraer Outlook for 30–120 Seat Commercial Jet
Delivery by Seat Segment, 2012–2031 . . . . . . . . . . . . . . . . . . . . . . . . 239
Table 11.3 Embraer Outlook for World Fleet in Service by
Seat Segment and Type of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Table 11.4 Tauri Group Forecasted SRV Demand and Revenue . . 258
1
The Return of American

Manufacturing—Opportunities
and Challenges for U.S.
Aerospace Manufacturers
Introduction
In 2011, the Aerospace Industries Association (AIA) launched a
campaign called Second to None. The campaign sought to educate the
general public and elected leaders about the importance of the aero-
space and defense industries to the U.S. economy and national defense.
A second objective was to provide information about the negative
impact of sequestration on national security, the defense industrial base,
other important government functions, and the overall economy.
Despite the best efforts of many to avoid the cuts mandated by
sequestration, on March 1, 2013, the automatic budget enforcement
procedures were implemented. In general terms, this means that
defense and non-defense programs will be cut by approximately
2 Aerospace Industry Report 3Rd Edition
$1.2 trillion between the time sequestration was enacted and the end
of Fiscal Year 2021. While the full impact of these cuts has yet to be
determined, AIA and Embry-Riddle Aeronautical University remain
committed to ensuring that the U.S. aviation, aerospace, and defense
industries remain second to none.
This chapter addresses the role of manufacturing in the economy, the
benefits of aerospace and defense manufacturing, the link between
manufacturing and innovation, and programs that promote manufac-
turing and innovation.
The Return of Manufacturing

The nascent return of manufacturing to the shores of the United
States has been promoted by the government, praised by the press and
encouraged by industry leaders—but that was not always the case.
In 2009, Pisano and Shih published an article in the Harvard Business
Review that raised questions about the decline of America’s industrial
base and the ability of U.S. firms to develop and produce high-technol-
ogy products in the future.1 Pisano and Shih describe how decades of
outsourcing can not only destroy a firm’s ability to develop new prod-
ucts, but can also damage its network of suppliers and service provid-
ers. This article helped trigger an important dialogue in the United
States because manufacturing is the key to innovation and a major
contributor to the long-term economic viability of the nation.2
Fortunately, there is evidence which suggests that at least some of the
jobs that have been offshored to China, India, Mexico and other coun-
tries over the past 20 years may be slowly, but steadily, returning. The
findings from a 2012 Boston Consulting Group (BCG) survey indi-
cated that more than a third of large U.S. manufacturers plan to reshore
some manufacturing work back to the United States over the next
several years. Even though only about 50,000 factory jobs have been
reshored since 2010,3 the number of jobs returning to the United States
is expected to accelerate around 2015. Major factors driving these
decisions include changing labor costs, stable energy prices, high prod-
uct quality, ease of doing business, intellectual property protection,
less supply chain risk, and the transformation of U.S. manufacturing.4
Manufacturing and the Economy

In late 2011, the Council on Competiveness released a report on the
state of manufacturing in the United States.5 This report confirmed that
as the economy recovers, manufacturing may be more important than
The Return of American Manufacturing 3
ever. As stated in the report, manufacturing contributed $1.7 trillion to

the U.S. economy in 2010. The recovery of the manufacturing sector is
particularly significant because it has a higher multiplier effect than any
other sector of the economy. The report claims that “for every $1 in
manufacturing value added, $1.4 in additional value is created in other
sectors.” The latest figures indicate that manufacturing employs over 11
million people directly and an additional seven million indirectly.6
At an average hourly rate of $29.75, manufacturing jobs tend to pay
more than non-manufacturing jobs. When company benefits are
added, the number increases to $38.27 per hour (see Figure 1.1).
Figure 1.1 Average Hourly Wages and Benefits for Manufacturing Workers
Hourly Rate Wages & Salaries Benefits

$45.00
$38.27
$40.00
$32.84
$35.00
$8.52
$30.00 $5.37
$25.00
$20.00
$15.00
$29.75 $27.47
$10.00
$5.00
$0.00
Manufacturing Non-Manufacturing
Source: U.S. Department of Commerce, The Benefits of Manufacturing Jobs, 2012.
The rebound in manufacturing is also important because, as illustrated

in Figure 1.2, manufacturing jobs in the United States have declined
over the past 20 years—and the decline accelerated during the 2007–
2009 recession.
Fortunately, the decline in jobs reversed itself as the country came out
of the recession. By October 2012, the index of manufacturing output
had increased to 101—slightly below its pre-recession high of 104.5
in October 2007 (see Figure 1.3). However, the tendency to assume
that the economy is in full recovery must be balanced by information
from other sources. At the end of 2012, for example, the Institute for
Supply Management’s Purchasing Managers’ Index (now referred to as
the PMI) was at 50.2 percent, which indicated that the economy was
neither expanding nor contacting.7 As stated on the Federal Reserve’s
website, a PMI reading above 50 percent indicates that the manufactur-

ing economy is generally expanding, while a reading below 50 percent
indicates that that it is generally declining. This message was reinforced
by the National Association of Manufacturers/Industry Week Survey of
Manufacturers which reported that manufacturers’ optimism declined
to slightly above 50 percent in the fourth quarter of 2012 over concerns
about the fiscal cliff, slowing sales, and the impact of sequestration.8
Figure 1.2 U.S. Manufacturing Jobs
Thousands of Persons
19,000
18,000
17,000
16,000
15,000
14,000
13,000
11,951
12,000
11,000
10,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: Federal Reserve Bank of St. Louis, March 2013.
Note: The shaded vertical bars on many of the figures in this report represent the dates of official U.S. recessions.
Figure 1.3 U.S. Manufacturing Output Index
Index 2005 = 100

110
101
100
90
80
70
60
50
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Output was able to increase even as jobs were being cut because the
productivity of the American worker continued to go up as companies
invested in new equipment, new technologies, and process changes.
Figure 1.4 is an index of output per person for the production of
durable goods for October 1990 through October 2012.
Figure 1.4 Index of Manufacturing Output per Person, Durable Goods
Index 2005 = 100

130
124.2
120
110
100
90
80
70
60
50
40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Figure 1.5 Manufacturing Output for Selected Countries
Billions of U.S. Dollars

2,000
Brazil China India Russia United States Japan 1,832
1,800
1,600
1,506
1,400
1,200
1,000
800 944
600
400
200
0
1990 1993 1996 1999 2002 2005 2008 2011
Source: United Nations (UN) Statistical Division, National Accounts Database, March 2013.
Note: this chart is in constant (2005) U.S. dollars.
Even though U.S. manufacturing output has generally increased over

the years, China’s manufacturing output increased at a faster rate as
depicted in Figure 1.5. In 2011, the United States, Japan, and China
continued their upward trend while Russia, India, and Brazil remained
relatively flat.
Figure 1.5 shows manufacturing output in U.S. dollars, based on data
published by the UN. While these numbers represent the absolute
value of manufacturing output, when measured on a per capita basis,
China’s manufacturing output per capita is well below Japan, Germany,
the United States and other western countries.
When measured by Manufacturing Value-Added (MVA), China actu-
ally displaced the United States as the world’s largest manufacturing
nation in 2010. China’s MVA totaled $1.92 trillion in 2010 while U.S.
manufacturing value-added was $1.86 trillion.9
With respect to Manufacturing Value-Added, Lawrence Summers, past
president of Harvard and former Secretary of the Treasury, observed
that the key to protecting our lead against Chinese manufacturers is to
“create a climate that fosters growth in manufacturing while protecting
U.S. innovation and technology.” Summers continued by saying “while
emerging economies are important markets for U.S. manufacturers, these
exchanges should not become opportunities to misappropriate U.S.
companies’ intellectual property.”10 This is certainly true for the design
and production of state-of-the-art commercial and military aircraft.
Aerospace Manufacturing
While compensation for manufacturing workers tends to be higher
than that for non-manufacturing workers, the compensation for aero-
space production workers is even greater. As stated earlier, the mean
hourly wage for manufacturing workers is $29.75 and $38.27 when
benefits are added. However, the average, hourly wage for employ-
ees working in the production of aircraft is $34.50, and if the same
ratio for benefits is used, their total hourly compensation would equal
$44.38 as shown in Figure 1.6.
By the end of 2012, the U.S. Bureau of Labor Statistics estimated that
over 500,000 people were employed in the production of aerospace
parts and components (see Figure 1.7). This is roughly three percent
more than were employed at the same time in 2011 and 4.5 percent
more than 2010.
Figure 1.6 Average Hourly Wages and Benefits for Aerospace Production Workers
Hourly Rate Wages & Salaries Benefits

$50.00
$44.38
$45.00
$38.27
$40.00 $9.88
$35.00 $8.52
$30.00
$25.00
$20.00
$34.50 $29.75
$15.00
$10.00
$5.00
$0.00
Aircraft Manufacturing All Manufacturing
Source: Aerospace Industries Association, Average Hourly Wage data for aircraft production workers,
2011; and U.S. Department of Commerce, The Benefits of Manufacturing Jobs, 2012.
Figure 1.7 U.S. Aerospace Manufacturing Jobs
Thousands of Employees
900
800
700
600
501
500
400
300
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Bureau of Labor Statistics, March 2013.
In a manner similar to that of the overall manufacturing sector, as the

number of aerospace jobs declined over the years, aerospace manufac-
turing output continued to increase (see Figure 1.8).
Figure 1.8 Aerospace Manufacturing Output
Aerospace Manufacturing Output per Hour Index (2002 = 100)

120
113
110
100
90
80
70
60
1990 1993 1996 1999 2002 2005 2008 2011
Source: U.S. Bureau of Labor Statistics, March 2013.
As we discover more about the complex ways manufacturing

contributes to society, it is clear that maintaining a core manufactur-
ing capability is essential to the health and well-being of the United
States. Moreover, given the growing scale and scope of threats facing
the United States and its allies, maintaining a healthy aerospace and
defense (A&D) industry may be more important than ever. Some of
the benefits associated with A&D manufacturing are highlighted in the
following section.
Benefits of Aerospace & Defense Manufacturing

In March 2012, the Aerospace Industries Association (AIA) released
a study, conducted by Deloitte, which quantified the economic value
of the A&D industry in the United States. The study summarized its
findings at both the national and state level. At the national level, the
findings from the study indicate that in 2010:11
■■ The U.S. A&D industry directly employed 1.05 million workers.
Of this total, 480,668 were employed in aerospace manufacturing.
■■ U.S. A&D workers generated an additional 2.48 million jobs for
a total of over 3.5 million jobs—not including federal workers or
those employed by the airlines.
■■ U.S. A&D workers earned over $84 billion in wages. Aerospace

manufacturing accounted for almost 48 percent of the total or
slightly over $40 billion in wages.
■■ The average annual wage for U.S. A&D workers was $80,175 and
the average annual wage for aerospace manufacturing workers was
$83,985—more than twice the national average of $41,410.
■■ The average annual revenue generated per employee in the U.S.
A&D industry was $308,364.
■■ U.S. A&D companies paid over $14 billion in federal, state, and
other taxes.
■■ U.S. A&D employees paid $23.7 billion in federal, state, and
other taxes.
■■ U.S. A&D exports totaled $89.6 billion and imports totaled $47.5
billion for a positive trade balance of $42.2 billion.
■■ Direct U.S. A&D industry sales accounted for 2.23 percent of the
Gross Domestic Product (GDP) of the United States.
At the state level, the study revealed that:
■■ California led all states in direct A&D employment with 162,162
employees, followed by Washington and Texas with 93,925 and
87,781 employees respectively.
■■ California, Washington and Texas also had the highest A&D
payrolls per state at approximately $15.3 billion, $8.4 billion, and
$7.2 billion respectively.
■■ Kansas had the largest percentage of its economy tied to the
industry, with 10.4 percent of its GDP coming from aerospace
and defense, followed by Washington and Arizona with 9.63
percent and 5.91 percent respectively.
Figure 1.9 shows that Washington, California, and Connecticut led in
aerospace exports in 2012.
Figure 1.9 Aerospace Exports for Selected States in 2012
Washington 37.11
California 7.96
Connecticut 6.99
Florida 5.90
Ohio 5.64
Texas 5.63
Georgia 5.47
Kentucky 3.84
Arizona 2.58
New York 2.51
- 10 20 30 40
Source: TradeStats Express, International Trade Administration, U.S. Department of Commerce, March 2013.
In addition to the contributions highlighted above, the Deloitte study

recognizes that the A&D industry:12
■■ Plays a critical role in national defense.
■■ Enables safe and efficient air travel.
■■ Increases communication and the dissemination of knowledge.
■■ Contributes to increased consumerism and the globalization of
supply chains.
■■ Is a major source of innovation and technological advancements.
Research and Innovation in the

Aerospace Industry
Research and development (R&D) is one of the principal drivers of
innovation, and innovation is the lifeblood of growth.13 Innovation
leads to increased competitiveness and increased competitiveness leads
to more jobs at higher wages, the launch of new businesses and, in
some cases, the creation of entirely new industries.14
When most people think about innovation in the aerospace industry,

they think about new aircraft, spacecraft, missiles, display systems,
software applications, unmanned aerial aircraft systems or similar
new capabilities. However, as pointed out in a recent Charles River
Associates report, the design and deployment of evolutionary or
disruptive products demand the following:15
■■ The flexibility to adapt to changing customer needs.
■■ The willingness to take risks by undertaking complex projects with
uncertain outcomes.
■■ The provision of adequate resources through the raising of capital
and investing in R&D.
■■ The structuring of organizations to promote the development of
new technology.
■■ The attraction of top talent who bring a fresh perspective and
new ideas.
Innovation can also occur in the form of new and pioneering ways to
transform the manufacturing process itself. The next section focuses
on R&D funding and the steps that are being taken to stimulate manu-
facturing and innovation.
Global Research and Development

Figure 1.10 highlights the relative amount spent on R&D for selected
countries. The size of the circle represents the Gross Expenditures
on Research and Development (GERD). The X and Y axes represent
R&D as a percent of GDP and the number of scientists and engi-
neers per million people. This figure is similar to that used by Battelle
in their annual Global R&D Funding Forecast, and was developed by
Battelle specifically for this report.16
For the countries portrayed in Figure 1.10, the United States has the
highest levels of gross R&D expenditures and the largest number of
scientists and engineers per million people; while Japan is spending
the most in terms of R&D, as a percent of GDP. However, a recent
report by the Congressional Research Service warns, “U.S. manufac-
turers spend far more on research and development than those in
any other country, but manufacturers’ R&D spending is rising more
rapidly in China, Korea, Mexico, and Taiwan.”17
Figure 1.10 Global R&D and Innovation
7,000
United States
6,000
Scientists & Engineers/Million People
5,000
Japan
4,000
France
Russia
Germany
3,000
UK
2,000
China
1,000 Brazil
India
0
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
-1,000
R&D as % of GDP
Source: Martin Grueber, Research Leader, Battelle, based on information from Battelle, R&D Magazine,
the International Monetary Fund, World Bank, CIA World Factbook, and the OECD, 2011.
Research and Development in the United States

U.S. manufacturers have a long and distinguished record of developing
breakthrough products to support the aviation and aerospace indus-
tries. However, such breakthrough products almost always depend on
extensive R&D which has historically been sustained by both federal
and non-federal R&D dollars and related tax incentives.18 Figure 1.11
is a graph of U.S. R&D funds as a percentage of GDP from 1990
through 2012. As indicated in this figure, the ratio of R&D spending
to the U.S. GDP remained relatively stable during this period.
Even though the United States remains a leader in overall R&D, by
mid-2012, many industry observers were becoming concerned about
the future of U.S. R&D due to anticipated reductions in federal and
corporate funding and recent failures to adjust R&D tax credits.19
As indicated in Figure 1.12, total R&D funding began to decline in
2010, driven primarily by a reduction in R&D funding for defense, but
is estimated to increase slightly in FY 2013 due to an increase in non-
defense R&D spending.
Figure 1.11 U.S. R&D as Percentage of GDP
Percent
3.00
2.90
2.85
2.80
2.70
2.60
2.50
2.40
2.30
2.20
2.10
2.00
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012(E)
Source: Battelle 2012 Global R&D Funding Forecast. R&D Magazine, December 2011. E = estimate.
The percentage changes in defense and non-defense R&D funding

over the past five years are illustrated in Figure 1.13. If recent trends
continue, the impact on military aerospace R&D could be significant,
including the loss of innovation and jobs that accompany such actions.
Figure 1.12 Defense and Non-Defense R&D
Millions of U.S. Dollars Defense Non-Defense Total

160,000
147,318 147,139
142,714 138,869 140,820
140,000
120,000
100,000
84,646 84,456 81,581
80,000 77,020 75,895
62,672 62,683 61,133 61,849 64,925
60,000
40,000
20,000
0
2009 2010 2011 2012(E) 2013(E)
Fiscal Year
Source: Office of Science and Technology Policy, R&D Budgets, 2008–2013. E = estimate.
Figure 1.14 illustrates domestic R&D expenditures by size of firm

in 2009. This figure reveals that, while large firms spent the most
on domestic R&D, firms with less than 1,000 people accounted for
almost 25 percent of the total.
Figure 1.13 Percentage Change in R&D Funding Since 2009
Percent Change
15.0
Non-Defense Defense
+9.0%
10.0
5.0
0.0
-5.0
-10.0
-10.0%
-15.0
2009 2010 2011 2012(E) 2013(E)
Fiscal Year
Source: Office of Science and Technology Policy, R&D Budgets, 2008–2013. E = estimate.
Figure 1.14 Domestic R&D Expenditures by Size of Firm
34,769 Number of Employees

5–99
12,747
100–249
11,204
250–499
10,119
500–999
169,546
1000–4999
44,008
5000 and Above
Millions of U.S. Dollars

Source: The National Science Foundation, 2012.
Figure 1.15 shows that domestic R&D spending in aerospace was

increasing prior to the recession, but began to decline shortly thereafter.
Figure 1.15 Domestic R&D Expenditures for Aerospace

40,000
34,554
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: U.S. Census Bureau and the National Science Foundation, 2012.
Despite anticipated reductions in R&D funding, numerous actions

are underway to continue transforming manufacturing in America. A
number of these are addressed in the following section.
Programs that Promote Manufacturing and Innovation

A number of programs and new initiatives have been implemented
that have the potential to transform aerospace manufacturing in the
United States. Some of these programs are highlighted in the follow-
ing paragraphs.
Advanced Manufacturing Partnership

The Advanced Manufacturing Partnership (AMP) was initiated in
response to the need to create more high-paying jobs by helping U.S.
manufacturers reduce costs, improve quality, and accelerate product
development.
According to the AMP website:20
The U.S. manufacturing sector now faces enormous
challenges, and American leadership and competitiveness
in manufacturing are at risk. After ranking as the world’s
largest manufacturer for more than a century, the United
States has lost ground to China in terms of share of global

manufacturing output. It also has slipped below Germany,
South Korea, and Japan in rankings of manufacturing
intensity, a critical indicator of future job-creating innovation.
A National Program Office has been established to manage the AMP
program. This initiative, along with other actions listed below, is
intended to recover and grow America’s share of global manufacturing.
Manufacturing Extension Partnership

The Manufacturing Extension Partnership (MEP) is a federal and state
government service designed to help small and mid-sized U.S. manu-
facturers create and retain jobs, save time, and increase profitability.
According to MEP’s website, “America needs a robust manufacturing
base and MEP is critical to the small and mid-sized U.S. manufactur-
ers who strengthen that base.” They also claim that for every dollar of
federal investment, the MEP generates around $30 in new sales growth.21
The MEP connects small manufacturers with a national network of
approximately 1,400 specialists who help business owners expand
operations and improve productivity. The MEP program has centers
in every state and this national network provides a number of services,
from strategic planning to process improvements, case studies, and
best practices. The Manufacturing Extension Partnership also arranges
programs to assist manufacturers in developing new customers,
expanding into new markets, and creating new products.
National Network for Manufacturing Innovation

The National Network for Manufacturing Innovation is a collabora-
tive initiative involving the Departments of Commerce, Defense,
and Energy, and the National Science Foundation. When fully imple-
mented, the National Network will consist of 15 U.S. Institutes for
Manufacturing Innovation with the goal of bringing together industry,
universities, community colleges, federal agencies, and regional and
state organizations to accelerate innovation by investing in industrially-
relevant manufacturing technologies with broad applications.
Materials Genome Initiative

The Materials Genome Initiative is intended to model the Human
Genome program and accelerate our understanding of the use of
advanced materials in manufacturing. According to a report published by
the National Science and Technology Council, this program will create
the infrastructure that will allow scientists and engineers to create new,
advanced materials and address issues of pressing national importance.22
SBIR/STTR
The Small Business Administration (SBA) Technology Program Office
administers the Small Business Innovation Research (SBIR) Program
and the Small Business Technology Transfer (STTR) Program. These
two programs are designed to ensure that small, high-tech, innovative
businesses have access to the resources they need to be successful.
Examples of some of the services provided include guidelines for
financing small manufacturing businesses, venture capital brokerage
services, business guides for the aerospace and defense sector, site
selection services, assistance with various types of regulations, import
and export assistance, links to Manufacturing Extension Partnership
programs, and much more.
Select USA
This program was created to promote the United States as a good
place to do business; resolve issues related to foreign direct invest-
ments (FDI) into the United States; provide information on
economic development and
incentives; and advise the Innovative Manufacturing
Administration and appropriate Game Changers
federal agencies on relevant FDI ■■ Robot technologies including
issues and business policy.23 machine vision.
■■ Machine communication standards.
■■ Embedded sensors for in-process
Other Programs inspection, feedback and health
There are also a number of monitoring.
smaller but no less important ■■ Automated creation of more efficient
programs that are intended machine tool paths based on
in-house capabilities and geometric
to improve America’s R&D component features.
and manufacturing capabili- ■■ Reductions in consumables such as
ties. These include accelerated coolant and development of longer
programs in flexible manufactur- cutting tool life.
ing, nanotechnologies, ultra-light ■■ Friction stir welding.
materials, robotics, additive ■■ Advanced composites manufacturing.
manufacturing, and other prom- ■■ Additive manufacturing.
ising research areas. Some of the ■■ Integrated computational materials
science & engineering.
more innovative manufacturing
■■ Manufacturing modeling and simulation.
“game changers” are listed in the
box on the right.24 Source: Ed Morris, National Defense Industrial Association
(NDIA) Manufacturing Division Chairman, 2012.
Summary and Conclusions

Manufacturing is vital to innovation, the economy, and national
defense. Over the past year, R&D levels have remained relatively
constant, manufacturing output has increased, and manufacturing jobs
have grown. Nevertheless, the U.S. economy has been impacted by
political inaction, mounting debt, and wavering demand for U.S. goods
caused by faltering economies and other events in Europe, the Middle
East, China, Russia, India and other countries. The following two chap-
ters go into more detail about the national and international economy.
Chapter Endnotes
1 Pisano, G.P., & Shih, W. C.(2009. July-August). Restoring American competitiveness.

Harvard Business Review, 87(7/8), 114-125.
2 Langdon, D., & Lehrman, R. (2012, May). The benefits of manufacturing jobs.
Washington, D.C.: U.S. Department of Commerce, Economics and Statistics
Administration, p. 1. Retrieved from http://www.esa.doc.gov/news/2012/05/09/new-
us-commerce-department-report-manufacturing-jobs-provide-higher-pay-more-benefit
3 Boston Consulting Group. (2012, April 20). More than a third of large manufacturers
are considering reshoring from China to the U.S. Retrieved from http://www.bcg.com/
4 Ibid.
5 Council on Competitiveness. (2011, December). Make: An American manufacturing
movement. Retrieved from http://www.compete.org/publications/
6 Ibid.,17.
7 Federal Reserve Bank of St. Louis. (2013, March). ISM Manufacturing: PMI Composite
Index (NAPM). Retrieved from http://research.stlouisfed.org/fred2/series/NAPM/
8 Moutray, C. (2012, June 29). NAM/IW Q2 Survey: cautious optimism even as U.S.,
global uncertainties mount. Industry Week. Retrieved from http://www. industryweek.
com/artcles/nam/iw_q2_survey_ cautious_ optimism_even_as_u-s-_global_
uncertainties_mount_27729.aspx
9 Meckstroth, D. (2012, January 31). Is China the largest manufacturer in the world?
The Manufacturers Alliance for Productivity and Innovation (MAPI). Retrieved from
http://www.mapi.net/china-largest-manufacturer-world
10 Brookings. (2012, January). Adjusting to China: a challenge to the U.S. manufacturing
sector. Policy Brief #179. Retrieved from http://www.brookings.edu/research/
papers/2011/01/china-challenge-baily
11 Deloitte. (2012, March). The aerospace and defense Industry in the U.S. A financial
and economic impact study. Retrieved from http://www.aia-aerospace.org/assets/
deloitte_study_2012.pdf
12 Ibid., 22-29.
13 Brynjolfsson, E., & Schrage, M. (2009, August 17). The new, faster face of innovation.
The Wall Street Journal, R3.
14 U.S. Department of Commerce. (2012, January). The competitiveness and innovative

capacity of the United States. Retrieved from http://www.commerce.gov/sites/default/
files/documents/2012/january/competes_010511_0.pdf
15 Charles River Associates. (2010, February). Innovation in aerospace and defense.
Retrieved from http://www.crai.com/uploadedFiles/Publications/innovation-in-
aerospace-and-defense.pdf
16 Battelle. (2011, December). 2012 Global R&D Funding Forecast. Retrieved from
http://www.battelle.org/aboutus/rd/2012.pdf
17 Levinson, M. (2012, January 5). U.S. Manufacturing in international perspective.
(CRS Report No. R42135). Washington DC: Congressional Research Service.
18 Velocci, A. (2009, October 26). The innovation imperative. Aviation Week & Space
Technology, 50.
19 The Information Technology & Innovation Foundation, for example, claims that adjusting “the
Alternative Simplified Credit from 14 to 20 percent would increase annual GDP growth
by $66 billion and create at least 162,000 jobs.” See Stewart, L., Warda, J., & Atkinson, R.
(2012, July 1). We’re #27: The United States lags far behind in R&D incentive generosity.
The Information Technology & Innovation Foundation. Retrieved from http://www.itif.org/
publications/we%E2%80%99re-27-united-states-lags-far-behind-rd-tax-incentive-generosity
20 Advanced Manufacturing National Program Office. (2012). Made in America: The
next-generation of innovations. Retrieved from http://manufacturing.gov/advanced_
manufacturing.html
21 National Institute of Standards and Technology. About the Manufacturing Extension
Partnership. Retrieved from http://www.nist.gov/mep/about.cfm
22 National Science and Technology Council. (2011, June 24). Materials Genome
initiative for global competitiveness. Retrieved from http://www.whitehouse.gov/sites/
default/files/microsites/ostp/materials_genome_initiative-final.pdf
23 U.S. Department of Commerce. (2013). Select USA: The aerospace Industry in the
United States. Retrieved from http://selectusa.commerce.gov/industry-snapshots/
aerospace-industry-united-states
24 Morris, E. (2012, October 9). Manufacturing innovation: a national defense imperative.
Presented at the Aerospace States Association Fall General Meeting, Ft. Worth, Texas.
21
The National Economy
Introduction
The policies and practices of a nation have a major impact on the
performance and financial wellbeing of firms and individuals in that
country. Such policies define the framework within which compa-
nies must operate and address issues such as taxes, inflation, the
availability of credit, interest rates on investments, minimum wages,
spending limits on specific programs, and numerous other factors.
Understanding those issues that are most relevant to the aviation and
aerospace communities can help firms of all sizes make better busi-
ness decisions.
This chapter presents a number of economic indicators that collec-
tively provide an understanding of context in which the aviation and
aerospace industries must operate. These indicators provide insight
into the strength and direction of the economy and can help busi-
nesses leaders develop better plans and strategies to guide decision-
making. Almost all of these indicators are routinely updated and
publicly available.
Economic Overview
The United States has the largest, most innovative, and diverse economy
in the world. However, because the economy is so diverse, each industry
segment has its own specific drivers—and competing in today’s market
requires an understanding of these drivers and their impact on corpo-
rations. For example, demand for new aircraft in the civil aerospace
segment tends to be highly correlated with Gross Domestic Product
(GDP).1 GDP, in turn, is an important measure of the state of the
economy. Hence, understanding the state of the domestic and global
economy is an important first step in understanding the forces that are
driving demand for new aerospace systems and services.*
The Recovery Continues

Political and economic uncertainty, combined with events in Europe,
the Middle East, Africa and Asia have diminished the pace of recov-
ery in the United States. Despite numerous efforts to stimulate the
economy, it is now clear that the United States is experiencing its
longest economic recovery since World War II. In June 2012, the
Federal Reserve lowered its estimates for GDP growth, and increased
its estimates for unemployment for the balance of the year.2 However,
by the end of the year, an increasing number of signs indicated that
the economy was slowly, but steadily, beginning to recover. Many of
the signs are described below.
Money Multiplier
The M1 Money Multiplier is an important measure of the nation’s
money supply. M1 measures the number of times the basic money
supply circulates in the economy.** The multiplier is inversely related
to the Federal Reserve requirements, so as reserve requirements
increase, the money multiplier decreases. Furthermore, a multiplier
above 1.0 indicates that the money supply is expanding, while a figure
below 1.0 indicates the supply is contracting. Liquidity of capital is
vital to a healthy economy and the supply of money affects interest
rates, investments, stock prices, and inflation. Prior to 2008, M1 varied
between a low of 1.5 and a high of 3.0, but as the recession deepened
in 2008, the Federal Reserve increased its reserve requirements. As
reserve requirements rose, the multiplier dropped, and by the end of
2012, M1 was hovering around .90 (see Figure 2.1).
* Each segment of the aerospace industry has its own set of drivers. For example, new orders for general
aviation aircraft, large commercial aircraft, remotely piloted vehicles, and military systems are determined
by their own set of drivers and influencing factors.
** M1 includes currency and demand deposits at commercial banks. Source: Minneapolis Federal Reserve
Glossary, August 2012.
The National Economy 23
Figure 2.1 M1 Money Multiplier
Ratio
3.0
2.5
2.0
1.5
.90
1.0
0.5
0.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Reserve Balances
As reserve requirements increased and the banks deposited funds into
the Federal Reserve System, balances rose quickly and have remained
high to this day. These actions impacted the entire aerospace supply
chain—from the lack of loans for small to medium-sized aerospace
manufacturers,3 to the lack of capital for leasing or purchasing large
civil aircraft.4 In 2011, balances began to decrease, but at the end of
2012, obtaining credit was still difficult and reserve balances were in
excess of $1.5 trillion (see Figure 2.2).
Figure 2.2 Reserve Balances with Federal Reserve Banks

1,800
1,570
1,600
1,400
1,200
1,000
800
600
400
200
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Velocity of Money
Another important indicator is the Velocity of the M2 Money Stock
(M2V). This indicator measures the rate at which the M2 money
supply turns over in the economy.* During the years preceding the
recession, M2V remained above 1.8, but dropped during the reces-
sion. By the end of 2012, M2V had declined to 1.5—the lowest since
records started being kept in 1959—indicating a loss of confidence
in the economy and a lack of consumer demand as companies and
individuals reduced spending and investments. Even though M2V is
only one indicator of the state of the economy, the downward trend is
troubling and consistent with other signs that indicate that the recov-
ery may be delayed (see Figure 2.3).
Figure 2.3 Velocity of the M2 Money Stock
Ratio
2.2
2.1
2.0
1.9
1.8
1.7
1.5
1.6
1.5
1.4
1.3
1.2
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Interest Rates
Another key indicator of the state of the economy is the 10-Year
Treasury Constant Maturity Rate. This is a risk-free rate and most
bonds and money market instruments are priced at a spread over this
rate. This rate is a good gauge of what aerospace manufacturers can
expect to pay for investments and other expenditures. Under normal
circumstances, one would expect that the rates reflected in Figure 2.4
would stimulate the economy and create new jobs, but this may be one
more indication that further monetary stimuli may not be useful.
* M2 is a broader measure of the money supply that incorporates M1, but also includes assets such as
commercial bank savings deposits, deposits at credit unions and non-institutional money market funds,
among other components. Source: Minneapolis Federal Reserve Glossary, August 2012.
Figure 2.4 U.S. 10-Year Treasury Constant Maturity Rate
Percent
9.0
8.0
7.0
6.0
5.0
4.0
3.0
1.8
2.0
1.0
0.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Producer Prices
The Producer Price Index (PPI) is a widely used family of indexes
that measures the average change in selling prices over time.* The PPI
measures the selling prices producers charge for goods and services
in the wholesale market. It is a measure of the cost of inputs into the
production process. Because higher costs of production tend to be
passed on to consumers, a rising PPI can be an early indicator of a
growing economy and potential inflation. Conversely, a falling PPI can
signal an economic slowdown. The Producer Price Index can provide
insight into what is driving higher prices in the aerospace industry. The
price of metals and fuel, for example, can be significant cost drivers,
and the PPI can be helpful in estimating the cost of manufacturing or
operating aircraft. When the PPI peaked and then dropped in 2008,
the recession was evident. In a similar, but opposite manner, the back-
to-back increases in producer prices in 2011 and 2012, suggest that the
economy may be recovering (see Figure 2.5).
Industrial Production
The Industrial Production Index (IPI) measures the real output of the
manufacturing industry. The IPI is one of the economic indicators
* The Bureau of Labor Statistics defines the Producer Price Index as a family of indexes that measures
the average change over time in the selling prices received by domestic producers of goods and services.
PPI measures price change from the perspective of the seller. This contrasts with other measures, such as
the Consumer Price Index (CPI), that measure price change from the purchaser’s perspective. The prices
of sellers and producers may differ due to government subsidies, sales and excise taxes, and distribution
costs. Source: U.S. Bureau of Labor Statistics, August 2012.
Figure 2.5 Producer Price Index
Index 1985 = 100

250
215.7
200
193.1
150
100
Total Manufacturing
Aerospace Products and Parts Manufacturing
50
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Department of Labor: Bureau of Labor Statistics, March 2013.
that reacts fairly quickly to changes in the business cycle. It measures

changes in the volume of goods produced, not prices. Because manu-
facturing is sensitive to cyclical economic activity, it is a good indicator
of business conditions. As can be seen in Figure 2.6, the index declined
abruptly during the last recession. Manufacturing industrial production
has now rebounded with the index for aerospace and miscellaneous
equipment exceeding the manufacturing average. This tends to indicate
the demand for aerospace and miscellaneous equipment is increasing
somewhat faster than the demand manufactured goods overall.
Capacity Utilization
Capacity utilization is another widely used measure that tends to
respond quickly to changes in the economy. This makes it a particu-
larly good leading indicator of a recession. Levels around 80 percent
are generally considered normal. Figure 2.7 shows that after recovering
from a low of 64.2 percent in June 2009, overall manufacturing capac-
ity utilization increased to 77 percent by December 2012. During the
same period, aerospace and miscellaneous transportation manufactur-
ing utilization increased to an “almost normal” level of 77.6 percent.
Increasing utilization usually means that unit costs are declining, and
that the firm is working more efficiently and becoming more competi-
tive. The opposite is true when utilization is declining. Given the steep
drop in utilization that occurred during the last recession, there may
not yet be enough capacity to meet demand as economies around
Figure 2.6 Industrial Production in Manufacturing
Index 2007 = 100

120
107.7
100
80 96.6
60
40
All Manufacturing
Aerospace and Misc Trasportation Equipment
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: Board of Governors of the Federal Reserve System, March 2013.
Figure 2.7 U.S. Manufacturing Capacity Utilization
Percent Utilization
95.0
90.0
85.0
Aero 77.6
80.0
75.0
70.0
All 77.0
65.0
60.0
All Maufacturing
55.0
Aerospace and Misc Transportation Equipment
50.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
the globe continue to recover. In Chapter 11 of this report, forecasts

from various public and privates sources are presented. Based on these
forecasts, demand is expected to rise, and as demand rises, insufficient
capacity could become a constraint.
Manufacturing Output per Worker

Productivity growth is one of the single most important indicators of
the long-term health of the economy. It is a key indicator of future
prosperity. Today, the output per work hour for the average U.S.
worker is more than twice what it was two decades ago. As depicted in
Figure 2.8, productivity started to rebound in October 2008 and has
continued to increase ever since.
One unique aspect of the current economic situation is that even
though employment is down, productivity has continued to increase,
due in large part, to investments in technology and process innova-
tion. It should also be noted that the recently formed Advanced
Manufacturing Partnership (AMP) is exploring how new materials and
advanced manufacturing techniques may be able to reduce the time
required to design, build, and test new products, including complex
systems for the U.S. Department of Defense.5
Figure 2.8 Manufacturing Output per Worker
Index 2005 = 100

120
116.7
110
100
90
80
70
60
50
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Department of Labor: Bureau of Labor Statistics. March 2013.
Unemployment Rate
Following the end of the “official” recession, unemployment rose dramat-
ically and reached a high of 10.1 percent in October 2009. Since then, the
number of unemployed workers has decreased and by the end of 2012,
unemployment was down to 7.8 percent (see Figure 2.9).
Ironically, while the unemployment rate remains high across the United
States, in most states there is a severe shortage of workers who are
qualified to work in aerospace. This shortage has been well docu-
mented, but a recent article in The Wall Street Journal illustrates the scope
of the problem. In the fall of 2011, AAR, an aviation Maintenance,
Repair and Overhaul (MRO) service provider and parts fabricator in
Chicago, had to pass up new work and delay existing work due to the
company’s inability to fill 600 maintenance and manufacturing jobs.6
Figure 2.9 Unemployment Rate
Percent
12.0
10.0
7.8
8.0
6.0
4.0
2.0
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Civilians Unemployed 15 Weeks or More

Like the overall unemployment rate, the number of people unem-
ployed 15 weeks or more peaked just after the end of the official
recession. By the end of December 2012, the number of people
unemployed for 15 weeks or more was approximately 6,661,000—
a 27 percent reduction from its peak in April 2010 (see Figure 2.10).
Initial Claims
During any downturn, the number of people who file initial claims for
unemployment benefits is followed closely. Since the weekly number is
somewhat volatile, in practice, the four-week moving average is often
used to follow trends in this important metric. At the height of the
recession, the average number of initial claims rose to 659,250, but
by the end of 2012, the four-week moving average had declined to
364,500 claims (see Figure 2.11).
Figure 2.10 Civilians Unemployed 15 Weeks or More
10,000
9,000
8,000 6,661
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Figure 2.11 Four-Week Moving Average of Initial Claims
Average Number of Claims in Thousands

700
600
500
364.5
400
300
200
100
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Number of Manufacturing Employees

As shown in Figure 2.12, the United States experienced a steady
loss of manufacturing jobs over the past decade. That loss acceler-
ated during the recent recession. Since the recession ended, however,
manufacturing employment has been steadily increasing. At the begin-
ning of December 2012, the number of manufacturing employees
totaled 11,951,000. Fortunately, as stated in Chapter One, there is
evidence which suggests that at least some of the manufacturing jobs

that have been offshored over the years, will soon be returning.
However, this figure does not address the growing shortage of
qualified, aerospace manufacturing workers, which is a topic that is
discussed in some detail in Chapter Eight.
Figure 2.12 Number of Manufacturing Employees
20,000
18,000
16,000
14,000
11,951
12,000
10,000
8,000
6,000
4,000
2,000
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Corporate Profits
Corporate profits after taxes dropped dramatically during the last
recession. Fortunately, the rebound has been equally robust. Alen
Mattich wrote in The Wall Street Journal that “the boom in corporate
profitability since the financial crisis, particularly in the United States,
has been astonishing.” Mattich attributes the dramatic rise in profit-
ability to a combination of intense cost cutting along with massive
government spending. As demand returned to the economy, he notes
that a lot of the revenue “flowed straight into the bottom line.”7 By
the end of 2012, profits totalled approximately $1.77 trillion (see
Figure 2.13).
Key figures on the profitability of the aerospace industry, and other
financial data, are included in Chapter Nine as well as the Appendices.
Figure 2.13 Corporate Profits After Tax

2,000
1,774
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Department of Commerce: Bureau of Economic Analysis, March 2013.
Employment Costs
While producer prices, industrial production, capacity utilization,
productivity, and even profitability declined during the recession,
wages and salaries of all workers continued to rise. Employment costs
have risen because the U.S. manufacturing industry is dependent on
highly-skilled workers, and many of these workers are in short supply,
especially in aerospace. Based on an index of wages and salaries,
aircraft manufacturing workers are at 120.6 on the index, which is
significantly higher than the industry average (see Figure 2.14).
Fixed Investments
As mentioned in last year’s report, one of the key drivers of long-
term economic growth is private, non-residential fixed investment
(PNFI). As a general rule, reinvesting resources back into a company
will increase efficiency, drive revenues, and increase profits. U.S. PNFI
peaked during the second quarter of 2008 at more than $1.70 trillion,
but subsequently dropped because of the recession. Firms have, once
again, started to invest in their physical infrastructures and PNFI is
now approaching pre-recession levels. By the end of 2012, PNFI had
increased to almost $1.67 trillion (see Figure 2.15). Over time, these
investments should lead to improved operating efficiencies, increased
profits, and, perhaps, more jobs in the aerospace sector.
Figure 2.14 Employment Cost Index, Wages, and

Salaries for Private Industry Manufacturing Worker
Index December 2005 = 100

125
All Manufacturing
Aircraft Manufacturing 120.6
120
115.1
115
110
105
100
95
90
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Figure 2.15 Private Nonresidential Fixed Investment

1,800
1,666
1,600
1,400
1,200
1,000
800
600
400
200
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
National Debt
One of the major concerns of the U.S. Government, its citizens, and
the rest of the world is the growing size of America’s national debt.
As indicated in Figure 2.16, at the end of FY 2012 the total public
debt stood at $16,432,729,000,000.
Figure 2.16 Federal Government Debt

18,000
16,433
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Department of the Treasury, March 2013.
Under normal circumstances, the federal debt would not, by itself,

have a direct impact on aviation or the aerospace manufacturing
industry. However, the inability of Congress and the White House to
reach an agreement on how to deal with the debt and deficit reduction
is now threatening agency budgets and putting a substantial portion of
the U.S. aerospace industry and the country’s national security at risk.
Gross Domestic Product

The most comprehensive measure of the condition of the U.S.
economy is the Gross Domestic Product. At the end of 2012, the U.S.
Department of Commerce’s Bureau of Economic Analysis reported
that the Gross Domestic Product was slightly over $16 trillion (see
Figure 2.17). Furthermore, the percentage change in quarterly GDP
growth has been positive since 2010 (see Figure 2.18). Since commer-
cial aerospace sales tend to be correlated with the Gross Domestic
Product, its role as an indicator of future demand is important.
Figure 2.17 Gross Domestic Product

18,000
16,010
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1990 1993 1996 1999 2003 2006 2009 2012
Figure 2.18 Percentage Change in GDP from Previous Quarter
Percent Change
4.5
4.1
4.0
3.5
3.1
3.0
2.6
2.5
2.5 2.4
2.3
2.2
2.0
2.0
1.5
1.5 1.3
1.0
0.5 0.4
0.1
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012

Although the economic indicators presented in this chapter are
mixed, in general, they paint a picture of an economy that is slowly,
but steadily, recovering. By late 2012, manufacturing productivity was
up, fixed investments were on the rise, and industrial production and
capacity utilization were increasing. At the same time, however, the
M1 Money Multiplier was below 1.0, reserve balances were still high,
unemployment was still elevated, and the nation’s debt surpassed its
Gross Domestic Product.
Fortunately, there is a substantial backlog for large commercial aircraft
and orders for new aircraft have returned to pre-recession levels.
Although the domestic business jet and general aviation markets
are still weak, there are encouraging signs of growth internationally.
Sequestration, however, is expected to dampen demand for commer-
cial air travel and have a negative impact on organizations such as
the Federal Aviation Administration, the Transportation Security
Administration, the National Oceanic and Atmospheric Administration,
and the National Aeronautics and Space Administration.
In addition, sequestration is expected to have a negative impact on
military aerospace budgets through 2021. These cuts are making
some defense contractors look for ways to increase the production
and sales of non-defense products, while expanding exports of their
military goods and services through the U.S. Foreign Military Sales
(FMS) program. As a result, the health of both commercial and mili-
tary aerospace manufacturing in the United States will be somewhat
determined by the health of the international economy—which is the
subject of the next chapter.
Chapter Endnotes
1 Chadwick, W. A., Ellis, B. W. C., Mansfield, R. E., & Materna, R. [Equal Contributors]
(2011). Aerospace industry report 2011: Facts, figures & outlook for the aviation
and aerospace manufacturing industry. Washington, D.C.: Aerospace Industries
Association and the Center for Aviation & Aerospace Leadership at Embry-Riddle
Aeronautical University–Worldwide.
2 Federal Reserve Bank. (2012, June). Economic projections of Federal Reserve Board
members and Federal Reserve Bank presidents, June 2012. Retrieved from
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120620.pdf
3 Haynes, G. W., & Williams, V. (2011). Lending by Depository Lenders
to Small Businesses, 2003 to 2010. Washington DC: U.S. Small
Business Administration Retrieved from http://www.sba.gov/content/

lending-depository-lenders-small-businesses-2003-2010.
4 ILFC’s $11.6bn aircraft order. (2011, March). Airfinance Journal. Retrieved from
http://www.airfinancejournal.com/Article/2784894/UPDATE-ILFCs-116bn-aircraftorder.
html?LS=EMS500174
5 The White House, Office of the Press Secretary. (2011, June 24).
President Obama launches advanced manufacturing partnership.
Retrieved from http://www.whitehouse.gov/the-press-office/2011/06/24/
president-obama-launches-advanced-manufacturing-partnership
6 Casselman, B. (2011, November 26). Help wanted: In unexpected twist, some skilled
jobs go begging. The Wall Street Journal. Retrieved from http://online.wsj.com/article/
SB10001424052970203707504577010080035955166.html
7 Mattich, A. (2012, April 2). Mind that corporate margin gap. The Wall Street Journal.
Retrieved from http://blogs.wsj.com/source/2012/04/02/mind-that-corporate-margin-
gap/?KEYWORDS=rising+corporate +profits+tab/print/
39
The International Economy
Introduction
Economic conditions in Europe, the decline in demand for manufac-
tured goods in China, and the current state of the U.S. market vividly
demonstrate the interdependencies of today’s global economy. These
interdependencies extend well into the aerospace industry. As a result,
what happens in Europe or Asia affects aerospace manufacturing in
the United States, and vice versa. By the end of 2012, it was clear that
conditions in Greece, Spain, Italy, and Portugal were not only rais-
ing questions about the role of the European Central Bank and the
strength of the Euro, but were also having an impact on markets in
the U.K., the United States, China, India, South Africa, Brazil, and
other countries.1
The State of the World Economy

As a result of the interconnected business, travel, and trade relation-
ships that exist between countries, international markets tend to move
“in sync.” In the fall of 2012, many signs were pointing to a global
economic slowdown.2 These concerns were reflected in the downward
adjustment of GDP forecasts by the International Monetary Fund,

the World Bank, and other organizations.
GDP Growth Forecasts

The World Bank projects that global GDP will grow at approximately
three percent in 2013.3 Actual and projected GDP growth rates for
selected countries are shown in Table 3.1 and Figure 3.1.4 Figure
3.1. in particular, reveals the impact of the recession on the Gross
Domestic Product of the countries listed. It is also interesting to note
that China was the least affected.
Table 3.1 Actual and Projected GDP Growth Rates 2008–2015

Actual Projected
2008 2009 2010 2011 2012 2013 2014 2015
Brazil 5.17 -0.33 7.53 2.73 0.87 3.02 4.04 4.13
China 9.64 9.21 10.45 9.30 7.80 8.04 8.24 8.51
France -0.08 -3.15 1.66 1.69 0.03 -0.07 0.88 1.46
Germany 0.80 -5.07 4.02 3.10 0.87 0.61 1.46 1.32
India 6.19 5.04 11.23 7.75 3.99 5.68 6.23 6.63
Russia 5.25 -7.80 4.50 4.30 3.40 3.37 3.78 3.70
United Kingdom -0.97 -3.97 1.80 0.92 0.17 0.69 1.54 1.84
United States -0.34 -3.07 2.39 1.81 2.21 1.85 2.95 3.56
Source: International Monetary Fund, World Economic Outlook Database, March 2013.
Figure 3.1 Actual and Projected GDP Growth Rates 2008–2015
Percent
15.0
Brazil China Germany India Russia United States
10.0
5.0
0.0
-5.0
-10.0
2008 2009 2010 2011 2012 2013 2014 2015
Source: International Monetary Fund, World Economic Outlook Database, March 2013.
The International Economy 41
If these projections are correct, it is easy to see why firms are inter-
ested in establishing a presence in countries with high GDP growth
rates like India and China.
It is also well known that commercial aircraft demand tends to be
correlated with GDP growth rates, and the major aircraft manufactur-
ers use these rates in developing their long-range plans.
OECD Leading Indicators

A number of years ago, the Organisation for Economic Cooperation
and Development (OECD) developed Composite Leading Indicators
(CLIs) to predict the economic performance of countries around
the world. Figure 3.2 displays CLI data for the United States, Europe
and Japan from April 2011 through December 2012, while Figure 3.3
includes data for Brazil, Russia, India and China (the BRIC countries).
These figures are conceptually similar to business cycles, but CLIs
are designed to detect turning points in economic activity six to nine
months into the future. A CLI of 100 equals the long-term industrial
production level for any given country. Hence, a CLI of 105 suggests
that industrial production is projected to be five percent above that
country’s long-term production level, implying a positive output gap
six to nine months into the future. Similarly, a value of 98 indicates
that production is forecast to be two percent lower than the country’s
long-term potential six to nine months into the future.5
Given this, the data in Figures 3.2 and 3.3 tell different, but interesting,
stories. In October 2011, the U.S. CLI was just starting to rise, indicat-
ing a positive change in economic activity in the spring of 2012. By
the end of Q1, industrial production in the United States had, indeed,
increased by over five percent from the beginning of the year, validat-
ing the accuracy of the CLI forecast. Alternatively, between March and
April of 2012, the index started a sharp downward trend indicating a
decline in activity by late summer. The decline actually started several
months before the CLI predicted, so the index was directionally
correct, but the timing was somewhat off.6 A closer look at the U.S.
data shows that as of October 2012, the production gap was posi-
tive and increasing. In Europe, on the other hand, the production gap
was negative in October 2012, indicating that production levels were
predicted to be below the region’s long-term potential in the spring of
2013. Similarly, at the end of 2012, the CLIs for Brazil and the Russian
Federation were just slightly below their long-term potential, while the
indicators for China and India were somewhat lower and decreasing.
For India in particular, this means that economic activity is expected to
be almost three percent below its long-term potential by the summer

or fall of 2013. Overall, it is interesting to note that during the last
half of 2012, the CLIs for the United States, Japan and the Euro
Area were trending up, while the CLIs for Brazil, India, China and the
Russian Federation were generally flat or trending down.
Figure 3.2 CLIs for the U.S., Europe and Japan
Index Long-Term Trend = 100

102.0
101.5
100.9
101.0
100.5 100.6
100.0
99.7
99.5
99.0
Japan United States Euro-Area
98.5
98.0
Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec
2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012
Source: OECD Composite Leading Indicators, March 2013.
Figure 3.3 CLIs for Brazil, Russia, India, and China
Index Long-Term Trend = 100

104.0
103.0
102.0
101.0
Russian Federation 99.4
100.0
Brazil 99.4
99.0
China 99.1
98.0
97.0
India 97.3
96.0
Brazil China India Russian Federation
95.0
94.0
Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec
2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012
Source: OECD Composite Leading Indicators, March 2013.

Interest Rates
Long-term interest rates affect how much manufacturers have to pay
to obtain financing for the development of new products, including
aircraft, and the equipment to produce them. They also affect how
much customers must potentially pay to finance the purchase or lease
of new aircraft. Hence, the rate and availability of financing have an
important impact on the global aerospace industry. Differences in
long-term rates between the Russian Federation, the United States, the
Euro-area and Japan are highlighted in Figure 3.4. This figure vividly
illustrates how the European Central Bank has been lowering inter-
est rates to stimulate the European market, much like the U.S. Federal
Reserve has done over the past several years.
Figure 3.4 Long-Term Interest Rates for Selected Countries
Percent Japan United States Euro-Area (17 countries) Russian Federation

9.0
8.1
8.0
7.0
6.0
5.0
4.0
3.0
2.10
2.0
1.72
1.0
.78
0.0
Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug- Oct Dec
2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012
Source: OECD.StatExtracts, March 2013.
Exchange Rates
The graph in Figure 3.5 represents the U.S. dollar amount per unit
of the Chinese Yuan, the Brazilian Real, the Indian Rupee and the
Euro for 2012. Exchange rate changes can have a major impact on the
profitability of aerospace manufacturers and their suppliers. A recent
report produced by the U.S. International Trade Commission states
the following:7
Currency movements represent an important risk factor

for international aerospace companies. This is because the
companies are likely to have a significant mismatch between
the currency mix of their revenues and the currency mix of
their costs. If revenues and costs arise in different currencies
(for example, if revenues are denominated in U.S. dollars,
while costs are incurred in a combination of currencies
corresponding to the location of manufacturing facilities
around the world), a company’s operating profit … may be
affected negatively or positively merely by a movement in
exchange rates. As previously discussed, virtually all aerospace
revenues are denominated in U.S. dollars, even for sales to
customers in non-U.S. dollar markets.
This explains, in part, Airbus’s decision to build a new plant in Mobile,
Alabama, and Embraer’s decision to locate in Melbourne, Florida.
Figure 3.5 U.S. Dollar Amount per Unit of Foreign Currency
Yuan, Real, and Rupee Euro

0.70 1.40
Yuan Real Rupee Euro
0.60
1.35
1.32
0.50
1.30
.488
0.40
1.25
0.30
1.20
0.20 .160
1.15
0.10
.018
0.00 1.10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
Emerging Markets
In 2010, the OECD projected that over the next 20 years, emerging
economies would surpass the output of advanced economies and that
within the next generation, 50 percent of the top 10 economies would
be in emerging markets.8
Today, most experts believe that these claims will still come to pass,
but after the worldwide downturn in mid-2012, some are a little less
enthusiastic. Both the World Bank and the International Monetary
Fund (IMF) expect economic activity to increase in 2013 and then
ease in 2014 as some of the developing countries, including India and
China, approach the limits of their productive capacity.9 Projected
differences in GDP growth rates and Current Account Balances
Internationalization of the U.S. Aerospace & Defense Industry

The U.S. aerospace and defense (A&D) industry has been going through various forms
of “internationalization” for decades. In most companies, the process begins when orders
are received from a single foreign customer. Over time, growing foreign sales lead to the
establishment of an export department, international division, or more complex structure
that balances the need for product knowledge with a regional or global presence.
In aerospace manufacturing, in particular, most new products involve some form of
coproduction, cooperative logistics support, or industrial offset requirement.
In some cases, international agreements can be as simple as a management contract,
or involve licensing, joint ventures, or the establishment of subsidiaries in one or more
countries depending on the size of the opportunity and level of risk. The figure below
highlights the level of domestic versus international sales for a number of major U.S.
A&D companies.
Domestic Sales International Sales
United Technologies 40% 60%
Boeing 46% 54%
General Electric 48% 52%
Raytheon 74% 26%
General Dynamics 79% 21%
Lockheed Martin 83% 17%
Northrop Grumman 90% 10%
0% 20% 40% 60% 80% 100%
Source: 2012 Annual Reports.

between the advanced economies and developing and emerging coun-

tries are shown in Figures 3.6 and 3.7.
Figure 3.6 Projected Average Growth Rates in GDP
Percent
7.0
6.15
6.0
5.0
4.0
Advanced Economies Emerging Market and Developing Economies
3.0
2.0 2.45
1.0
2013 2014 2015 2016 2017 2018

Source: IMF World Economic Outlook Database, March 2013.
Figure 3.7 Projected Average Current Account Balances

400
300 249
200
100
Advanced Economies Emerging Market and Developing Economies
0
-100
-200 -163
-300
2013 2014 2015 2016 2017 2018
Source: IMF World Economic Outlook Database, March 2013.
The Current Account Balance refers to the “record of all transactions

in the balance of payments covering the exports and imports of goods
and services, payments of income, and current transfers between resi-
dents of a country and nonresidents.”10 A negative Current Account
Balance, or deficit, means that the country is importing more goods
and services than it is exporting. In broad terms, the message from

Figure 3.7 is that advanced economies are importing more than they
are exporting and the emerging and developing countries are export-
ing more than they are importing.
This imbalance in trade is a major source of tension between the
United States and China, which reinforces the importance of aero-
space since it is one of the few industry sectors where America has
a positive trade balance. This topic is addressed more in Chapter Six,
The Global Aerospace Marketplace.
Dependency Ratios
Around the world, economies with large working age populations and
few dependents offer the greatest opportunity for demand creation,
including air travel.11 These countries are often described in terms of
low “dependency ratios.” Dependency ratios are calculated by dividing
the number of children (0–14 years old) and older persons (65 years
or over) by the working-age population (15–64 years old), and express-
ing the result in terms of hundreds of people.12
As indicated in Figure 3.8, relative to advanced economies, depen-
dency ratios are lower and more favorable in developing or emerging
market countries.
Figure 3.8 Dependency Ratios for Selected Countries
Japan 57.90
India 54.34
United Kingdom 51.87
United States 50.07
Indonesia 47.83
Brazil 47.45
Serbia 46.95
Vietnam 41.34
Russian Federation 38.95
China 37.82
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00

Dependency Ratio
Source: The World Bank Data Indicators, August 2012.
In the case of China, however, it should be noted that as a result

of the government’s fertility policies, their workforce is expected to
decline substantially over the next 30–40 years as a percentage of its
population. As reported by the Economist, this shift will have significant
social and financial consequences and could “spell the end of China as
the world’s factory.”13
International Manufacturing Competitiveness

In early 2013, The U.S. Council on Competitiveness and Deloitte
Touche Tohmatsu Limited released their 2013 Global Manufacturing
Competitiveness Index. The report is based on data collected from over
550 CEOs and senior manufacturing executives from around the
world in 2012.14
The results confirm what many have been reporting for years—that
manufacturing in a number of emerging economies is becoming more
competitive, while the manufacturing competitiveness of many devel-
oped countries appears to be waning. According to the report, China
is expected to continue to dominate manufacturing over the next five
years, and Brazil and India are expected to surpass the United States in
terms of manufacturing competitiveness during the same period (see
Figure 3.9).
According to the report, the main drivers of international manufactur-
ing competitiveness, in order of importance, include the following:15
1. A culture that supports talent-driven innovation—which depends on
the availability of high quality scientists, engineers and skilled labor.
2. Strong economic and trade networks with sound financial systems
and clear tax policies.
3. Affordable and available labor and raw materials.
4. A robust supplier network.
5. Stable and clear legal and regulatory policies.
6. High quality, efficient physical and electronic infrastructure.
7. Competitive energy costs with plans and resources for ongoing
energy investments.
8. Access to sizeable local markets with spending power.
9. High quality affordable healthcare and responsible

environmental policies.
10. Government investments in research and development (R&D);
science, technology, engineering, and mathematics (STEM)
education; as well as public and private collaboration on programs
that stimulate manufacturing and innovation.
Not surprisingly, these are the same types of characteristics required to
grow and nurture successful aerospace manufacturing clusters—a topic
that is addressed later in this report.
Figure 3.9 Global Manufacturing Competitiveness Rankings
10.00
China
10.00
8.49
India
7.65
7.89
Brazil
7.13
7.82
Germany
7.98
7.69
United States
7.84
7.63
South Korea
7.59
7.18
Taiwan
7.57
6.99
Canada
7.24
6.64
Singapore
6.64
6.50
Vietnam
5.73
6.49
Indonesia
5.75
6.46
Japan
6.60
6.38
Mexico
6.17 Five Years from Now
6.31 Now
Malaysia
5.94
6.24
Thailand
6.21
5.00 6.00 7.00 8.00 9.00 10.00
Index Score 1 = Low, 10 = High
Source: Deloitte & The U.S. Council on Competitiveness. 2013 Global Manufacturing Competitiveness Index, 2013.
Although the overall message is not necessarily a surprise, it represents

a change in the status quo for many developed and developing econo-
mies. As stated in the report:16
Through a regional lens, five years from now the Americas
continue to show significant manufacturing strength with
the U.S., Brazil, Canada and Mexico all in the top 15 most
competitive nations. But the continued shift to Asia is
unquestionable with 10 of the top 15 most competitive
nations in five years. And the message for European nations is
sobering: Only Germany among the European nations remains
in the top 15 most competitive nations five years from now.

The 2007-2009 recession was the most severe and globally synchro-
nized recession since the end of WWII.17 According to the IMF, the
most distinguishing feature of the recession was its uneven nature.
Today, the length of the recovery and the number of jobs that
remained unfilled almost four years after the official end of the reces-
sion, have left many wondering when the full recovery will occur.
These conditions have created an environment that has had a predict-
able impact on manufacturers around the world, including aerospace
manufacturers in the United States and their global networks of
suppliers. More detail on the state of aerospace manufacturing in the
United States is presented in the following chapter.
Chapter Endnotes
1 Hilsenrath, J., & Mitchell, J. (2012, May 25). New signs of global slowdown. The Wall
Street Journal, pp. A1, A6.
2 Ibid.
3 The World Bank. (2012, June). Global Economic Prospects. Retrieved from
http://web.worldbank.org/
4 International Monetary Fund. (2013, March). World Economic Outlook Database.
Retrieved from http://www.imf.org/external/ns/cs.aspx?id=28
5 Fortunately, the OECD offers ample documentation on how to use and interpret CLI
data. However it should be noted that in March 2012, the OECD switched from using
an index of industrial production to GDP as its reference series for predicting economic
activity. OECD System of Composite Leading Indicators. (2013, March). Retrieved
from http://www.oecd.org/
6 As stated in the previous endnote, the OECD changed from using an index of industrial
production to GDP as its reference series during this time frame. This might explain
why the timing of this prediction was off.
7 Andersen, P., McNay, D., & Peterson, J. (2012, April). Business jet aircraft industry:
structure and factors affecting competitiveness. (Publication 4314). Washington, DC:
U.S. International Trade Commission, pp. 6-27.
8 Organisation for Economic Cooperation and Development. (2010). OECD Factbook
2010: Economic, Environmental and Social Statistics. Retrieved from
http://www.oecd-ilibrary.org/economics/oecd-factbook-2010_factbook-2010-en?fmt=en
9 International Monetary Fund. (2012, April). World Economic Outlook Database.
Retrieved from http://www.imf.org/external/ns/cs.aspx?id=28
10 Ibid.
11 Birdsall, N. A., & Sinding, S. (Ed.). (2001). Population matters: demographic change,
economic growth, and poverty in the developing world. New York: Oxford University Press.
12 For more information on dependency ratios see http://www.un.org/esa/sustdev/natlinfo/
indicators/methodology_sheets/demographics/dependency_ratio.pdf
13 China’s Achilles heel: A comparison with America reveals a deep flaw in China’s model
of growth. (2012. April 21). The Economist. Retrieved from http://www.economist.com/
node/21553056
14 Deloitte & The U.S. Council on Competitiveness. (2013). 2013 Global manufacturing
competitiveness index. Retrieved from http://www.deloitte.com/view/en_US/
us/Industries/Process-Industrial-Products/manufacturing-competitiveness/mfg-
competitiveness-index/index.htm
15 Ibid., pp. 7-26.
16 Ibid., p. ii.
17 International Monetary Fund. (2012, April). World Economic Outlook, Washington,
D.C.: International Monetary Fund Publication Services, p. 38.
53
Aerospace Manufacturing
in the United States
Introduction
This chapter focuses primarily on aerospace manufacturing in the
United States. The discussion begins with a review of trends in
aerospace sales by product and customer. Following this review, the
emphasis then shifts to more detail about civil and military aircraft
manufacturing, general aviation manufacturing, engine manufactur-
ing, trends in space, and a significant change in focus for U.S. missile
development and production programs.
Aerospace Sales, Orders, and Backlog

The U.S. aerospace industry has demonstrated remarkable resilience
since the end of the recession. In 2012, aerospace sales totaled $217.9
billion—a new record for the industry and a 3.4 percent increase
over 2011. This increase was largely due to a significant jump in
civil aircraft sales and the rollout of a number of new products and
services (see Figure 4.1).
Figure 4.1 Aerospace Industry Sales by Product Group

250
Civil Aircraft Military Aircraft Missiles Space Related Products and Services
225
200 31.0
30.2 29.4 29.7 30.0
175
44.9
43.2 45.0 45.4 44.6
150
125 23.1
24.6 24.7 23.5 23.4
100
58.2
64.0 59.4 61.8 59.7
75
50
25 51.3 53.1 60.6

48.2 48.2
0
2008 2009 2010 2011 2012
Source: Aerospace Industries Association (AIA), based on company reports and data from the National Aeronautics and Space
Administration, the Bureau of the Census, the Office of Management and Budget, and the Department of Defense, 2013.
While the overall results were positive—a considerable achievement

given the continuing economic challenges in both the national and
international markets—sales were uneven across the various aero-
space sectors. Civil aircraft sales were strong, while military aircraft
and missile sales declined slightly. The push to cut defense spending,
as part of the overall strategy to reduce the national budget, affected
both domestic and international sales of military aerospace products.
However, strong gains within the civil sector more than compensated
for the decrease in military aircraft and missile sales.
Figure 4.2 presents the same annual sales data shown in Figure 4.1, but
with the yearly totals broken out by customer. In 2012, sales of civil
aircraft surpassed those purchased by the Department of Defense.
The non-government civil sales sector is comprised primarily of large
commercial aircraft sales which, as discussed previously, experienced
a very respectable rebound in 2011 and 2012. In the coming years,
downward pressure on the defense budget and other discretionary
federal spending areas is likely to be reflected in decreased fund-
ing levels for military, space, and other federally-funded programs.
However, the non-government civil sector is expected to continue
to improve as the U.S. economy recovers and demand for air travel
continues to grow in emerging markets.
Aerospace Manufacturing in the United States 55
Figure 4.2 Aerospace Industry Sales by Customer

250
DoD NASA and Other Govt. Agencies Other Customers Indeterminant Customers
225
200 31.0
30.2 29.4 29.7 30.0
175
150 59.0 60.2 56.5 60.0 70.4
125
19.5 20.8 21.1 21.2 20.3
100
75
50 101.5 99.4 101.2 99.6 96.2

25
0
2008 2009 2010 2011 2012
Source: AIA, based on company reports and data from NASA, the Census Bureau, OMB, and DOD, 2013.
Note: “Indeterminable source” indicates that it was not possible to determine if the customer was military, government, or civilian.
In 2012, U.S. aerospace shipments, orders, and backlog all increased.

Shipments totaled $224.5 billion for an increase of 11.6 percent over
the previous year; orders totaled $267 billion for a gain of approxi-
mately 7.5 percent; and the backlog increased to $543.6 billion result-
ing in a 8.5 percent increase over 2011 (see Figure 4.3).
Figure 4.3 Aerospace Orders, Shipments, and Backlog
Millions of U.S. Dollars Shipments Orders Backlog

600,000
543,582
500,000
400,000
267,037
300,000
200,000
224,493
100,000
0
2008 2009 2010 2011 2012
Source: U.S. Census Bureau, 2013.
Federal Outlays for DOD Aircraft and Missiles

Federal outlays for DOD aircraft and missiles have continued to
increase over the past five years. In 2012, outlays for aircraft and missiles
increased by 19.4 percent and 32.7 percent respectively (see Figure 4.4).
Figure 4.4 Federal Outlays for Aerospace Products and Services
Millions of U.S. Dollars DOD Aircraft DOD Missiles

60,000
50,000 13,070
40,000 9,847
9,894
9,721
30,000 8,545
20,000 42,398
33,745 35,513
30,575
25,964
10,000
0
2008 2009 2010 2011 2012
Source: Office of Management and Budget, The Budget of the United States Government, 2013.
Figure 4.5 displays budget outlays for the Department of Defense by

functional title from 2008 to 2012. This figure highlights how DOD’s
budget has leveled off with an overall increase of just 1.5 percent from
2011 to 2012. Within the 2012 budget, DOD procurement grew at nine
percent, operations and maintenance grew at 1.2 percent, and research
and development grew at 1.4 percent. The budget for military person-
nel dropped by 3.4 percent as did the “other” category which includes
military construction, family housing and other miscellaneous items.
Civil and Military Aircraft

Civil Aircraft
The U.S. large civil aircraft market enjoyed several hallmarks in 2012.*
The value of aircraft shipped increased by 27.9 percent between 2011
and 2012 and the number of aircraft shipped increased by 26 percent
(see Figures 4.6 and 4.7). Production of the Boeing 787 continued to
* Civil aerospace sales include all fixed-wing and rotary-wing aircraft, aircraft engines, and related parts and
services sold to private entities or to civil (non-defense) government departments and agencies (e.g., NASA,
NOAA, the U.S. Department of Transportation, Federal Aviation Administration, and state governments).
Figure 4.5 Military Outlays by Functional Title

800,000
Procurement Research, Development, Test & Evaluation
Military Personnel Other
700,000
Operations & Maintenance 22,544 21,784
24,432
21,834 74,871 75,904
600,000 76,990
18,338 79,030
75,120
500,000
275,988 291,038 294,513

400,000 259,312
244,836
300,000
200,000 147,348 155,690 161,608 156,185

138,940
100,000
117,398 129,218 133,603 128,003 139,869
-
2008 2009 2010 2011 2012
Source: Office of Management and Budget, the Budget of the United States Government, 2013.
Figure 4.6 Civil Aircraft Shipments
Transport Aircraft Helicopters General Aviation Total Value

Number of Aircraft Millions of U.S. Dollars
5,000 70,000
62,482
4,500 3,079 58,298 60,000
4,000
3,500 44,105 45,582 50,000

43,097
40,602
3,000
40,000
1,662
2,500 1,585 1,514
1,465 30,000
2,000 1,334
1,500 20,000
1,000 1,084 519
570 478
339 435 10,000
500
481 462 477 601 671
375
0 -
2008 2009 2010 2011 2012 2013(E)
Source: AIA, based on company reports and data from the General Aviation Manufacturers Association (GAMA), 2013.
E = estimate.
ramp up at the Washington and South Carolina plants and is expected

to achieve its goal of producing 10 aircraft per month by the end of
2013. A total of 46 Boeing 787s were produced in 2012.
Figure 4.7 Shipments of U.S. Large Civil Transport Aircraft
Number of Aircraft Millions of U.S. Dollars

700 60,000
Number of Aircraft Total Value 49,127
600
50,000
500 34,051 36,171

31,834
40,000
28,263
400
30,000
300 601
481 462 477 20,000
200 375
10,000
100
0 0
2008 2009 2010 2011 2012
Source: Aerospace Industries Association based on company reports, 2013.
Production of the Boeing 777 increased to 8.3 aircraft per month

with a total of 83 aircraft produced in 2012. Twenty six Boeing 767s
were produced in 2012 as this line is converted to KC-46A produc-
tion. Thirty one Boeing 747s were manufactured in 2012, and the new
Boeing 747-8 is now being produced at the rate of approximately two
units per month. Finally, the Boeing 737 line produced 415 aircraft in
2012 and is likely to surpass 450 units in 2013.
A key market driver well into 2013 will be the price of fuel, which
is problematic for the airlines and other fuel-dependent industries.
The net effect on the aircraft manufacturing industry is difficult to
quantify because while high fuel prices create demand for new fuel-
efficient aircraft, the added expense also erodes the airlines’ ability
to purchase new aircraft. This situation places renewed emphasis on
developing commercially viable alternative fuels, which could poten-
tially dampen the volatility of fuel costs faced by operators while
also lessening the global airline industry’s environmental impact. The
United States is a leader in developing alternative aviation fuels. U.S.
producers have successfully completed test flights using fuels from a
variety of sources and are now moving toward commercial produc-
tion. DOD-led tests in the laboratory and in the air have shown that
many types of feedstock, from weedy plants to animal fat, can be used
to create aviation fuel that is chemically identical to the crude-oil based
kerosene that powers flight today.1
Military Aircraft
As stated in the Aerospace Industries Association 2012 Year-end
Review and Forecast,2 the U.S. military aircraft sector continued to
decline in 2012, falling 2.4 percent over last year. Furthermore, a
decline by more than 10 percent is anticipated in 2013. Figure 4.8 is a
graph of military aircraft sales, while Figure 4.9 highlights current and
projected outlays for military aircraft by DOD agency.
Figure 4.8 Military Aircraft Sales

66,000
64,010
64,000
61,800
62,000
60,000 59,390 59,658

58,236
58,000
56,000
54,000
52,000
50,000
2008 2009 2010 2011 2012
Source: AIA, based on company reports and data from NASA, the Bureau of the Census, OMB, and DOD, 2013.
Figure 4.9 DOD Outlays for Aircraft Procurement by Agency
Millions of U.S. Dollars Air Force Army Navy

45,000
40,000
35,000
18,294
18,601
30,000
14,337 16,286
25,000 15,218
11,996
20,000 10,266 6,403

6,818
5,076 5,672 6,138 5,709
15,000
4,250
10,000
17,701 15824
13,503 13,736 13,089 12808
5,000 11,448
0
2008 2009 2010 2011 2012(E) 2013(E) 2014(E)
Fiscal Year
Source: Office of Management and Budget, Budget of the United States Government, FY 2013. E = estimate.
The decision to terminate production of the F-22 and to not fund

additional C-17 transport purchases or the development of a future
strategic airlifter, have all had a negative impact on the development
and production of military aircraft and their related support programs.
However, the F-35 Joint Strike Fighter, the KC-46 tanker, the P-8
maritime patrol aircraft and other platforms continue to receive
funding. In addition to these programs, the venerable C-130 has now
been in production longer than any other military aircraft and various
models are in use by 72 countries.3 According the Lockheed Martin’s
website, 15 countries have already selected the C-130J Super Hercules
and additional orders are expected—despite emerging competition
from Europe’s Airbus Military A400M.
The aging of the U.S. military aircraft fleet remains a significant factor.
Anecdotally, it has been said that some of today’s pilots are now flying
the exact same equipment as did their fathers—and, in a few cases,
their grandfathers. For example, in 2012, the newest B-52 turned
50 years old and those aircraft are projected to fly another 20 years.
Overall, the current U.S. Air Force fleet, with planes averaging more
than 23 years old, is the oldest in USAF history.
Given the sequestration-driven budget reductions being implemented
across the Department of Defense, foreign sales of military aircraft
represent an important growth opportunity for U.S. aerospace defense
contractors. As of 2012, no fewer than three key military aircraft
production lines—the C-17, F-15 and F-16—are being sustained
largely by international export demand. However, U.S. firms face stiff
competition from around the world, as suppliers from France, the U.K.,
Russia, and elsewhere pursue the same opportunities. A case in point is
the recent India fighter competition. The Indian government was able
to choose between aircraft from Europe, Russia, and the United States
and ultimately selected the Rafale jet fighter manufactured by Dassault
Aviation. Although talks are currently stalled around the production
of Indian manufactured Rafales, this transaction represents one of the
biggest military aircraft purchases in the world. Another example of
an opportunity lost is India’s decision to co-develop a fifth generation
fighter with Russia. Even though India is purchasing U.S. manufac-
tured aircraft such as the C-17 Globemaster III, the AH-64D Apache
combat helicopters, the C-47F Chinook heavy-lift helicopter and the
P-8I anti-submarine aircraft,4 the fact that U.S. contractors failed to win
the multi-role combat aircraft competition and India’s rejection of the
F-35, are indicative of the challenges facing U.S. military aircraft manu-
facturers in the international marketplace.
Rotorcraft
The U.S. civil rotorcraft market is still recovering from the economic
downturn but has seen a steady increase in new deliveries over the
past two years. The market encompasses emergency medical service
providers, offshore oil and gas exploration and law enforcement
applications.
Preliminary figures indicate that helicopter shipments increased by
9.9 percent from 2011 to 2012. This estimate may be low because
Robinson Helicopter reported that shipments of its civil helicop-
ters increased by 45 percent in 2012,5 and Bell Helicopter, a Textron
company, reported almost a 41 percent jump in its commercial
helicopter revenue. Bell also launched its largest civil model ever
produced, the Model 525 Relentless, a testament to the strength
of demand from the offshore oil segment.6 Sikorsky, a United
Technologies company, saw an increase in civil helicopter sales of
about two percent, due primarily to an increase in S-92 volume, which
was partially offset by lower S-76 sales as the company transitions to
the new S-76D model.7
This steady, upward trend in civil helicopter sales is expected to
continue as demand deferred during the downturn reaches the U.S.
and foreign markets. While growth in the emerging markets has soft-
ened recently, the demand for helicopters in the Asia Pacific and Latin
American markets is spurring considerable OEM investment. China, in
particular, shows enormous promise, where demand for civilian heli-
copters is expected to rise as authorities relax certain flying restrictions.8
General Aviation
The overall number of U.S. manufactured general aviation (GA) aircraft
increased by slightly over three percent in 2012, but at $8,017 million,
the dollar value of billings actually decreased by about the same percent.
Within the GA category, results were mixed. The number of single
engine piston aircraft shipped increased from 639 to 645; the number
of multi-engine piston aircraft shipped decreased from 67 to 63; turbo-
prop shipments increased from 395 to 459; and the number of turbojet
aircraft shipped decreased from 364 to 347.
AIA’s 2012 year-end report notes that the last few years have been
challenging for the general aviation industry, but few doubt that growth
will resume as the world economy recovers.9 The General Aviation
Manufacturers Association (GAMA) believes that market fundamentals
are moving in the right direction and that the industry is poised for
resurgence.10 U.S. corporate profits are at record highs, the used aircraft
market is improving, and as the U.S. and European markets recover and
the emerging markets resume their growth, sales will follow. In the near
term, alternative financing techniques have the potential to help spur
sales in the United States and elsewhere (see Chapter 9).
Worldwide, sales of larger business jets are leading the market, particu-
larly in Russia, China and the Middle East. It is estimated that China
alone, could account for 20 percent of all business jet deliveries by
the end of the decade, which would be a significant increase over the
current level of deliveries at seven percent. Light and medium busi-
ness jets have not yet returned to their pre-recession sales levels, and
remain a concern for business jet manufacturers.
Engines
The jet engine market is dominated by a three manufacturers:
General Electric (GE) Aviation; Pratt & Whitney (P&W), a United
Technologies company; and Rolls Royce plc. Given the high barriers
to entry, the fundamental market structure for jet engine development
and production is not likely to change.11 However, joint ventures and
other forms of collaboration play an important role in aircraft engine
manufacturing. Significant joint ventures involving U.S. aerospace
engine manufacturers include:
■■ The Engine Alliance (EA), created in 1996 between General
Electric Aviation and Pratt & Whitney.
■■ CFM, founded in 1974 by Snecma of France and General Electric
Aviation. and
■■ Aero Engines International, a 30-year, collaborative venture that
includes Pratt & Whitney Aero Engines International GmbH, the
Japanese Aero Engine Corporation and MTU Aero Engines.
Not surprisingly, trends in the aircraft engine market are linked to
aircraft sales, which have been steadily increasing after sharp declines
in 2008 and 2009. For 2012, GE Aviation’s revenue went from
$18,859 to $19,994 million for an increase of six percent; while Pratt
& Whitney’s revenues increased from $12,711 to $13,964 million for
a gain of 10 percent. During the same period, Rolls Royce civil and
defense sales increased by over 13 percent. Looking forward, most
experts agree that aircraft engine production will increase in 2013,
“but more significantly on the commercial side than the military.”12
Space
Space sector sales increased slightly to $44.9 billion in 2012, but
NASA’s 2012 budget decreased by 3.7 percent to $17.7 billion. Within
NASA’s budget, funding for space applications increased by over
five percent; but funding for the development of space exploration
capabilities decreased by roughly three percent; and funding for space
operations declined by approximately 19 percent (see Figure 4.10).
When NASA’s Space Shuttle rolled to a stop on July 21, 2011, the U.S.
became dependent on foreign countries for human access to space.13
NASA is now moving forward with plans to incentivize the develop-
ment of commercial crew services by private companies, obviating the
need to pay Russia $63 million a seat to send astronauts to or from
the International Space Station (ISS). Under this new paradigm, the
U.S. government relies on private industry to take a more active role in
this segment of the market, freeing up government resources to make
investments in space exploration beyond low Earth orbit.
Although this transition has been difficult for many involved in the
development of America’s space program, there is evidence which
suggests that this new strategy may be working. In May 2012, SpaceX
successfully completed the first visit of a commercially-operated
vehicle to the ISS. This achievement was followed by the first official
commercial resupply mission to the ISS in October 2012, moving
the United States closer to supplying the ISS through commercial
space services. Boeing and Sierra Nevada are also working on alterna-
tive approaches for ferrying astronauts to and from the International
Space Station. Other commercial space initiatives include Virgin
Galactic’s SpaceShipTwo program for ferrying commercial passengers
into space by the end of 2013 and using its WhiteKnightTwo carrier
for small satellite launch services. Similarly, XCOR Aerospace hopes to
use its all composite reusable Lynx launch vehicle to launch passengers
and small science payloads into sub-orbital flight by the end of 2013.14
Despite budget pressure, NASA has had several noteworthy successes
and more are on the way. Some of these include the Mars Science
Laboratory, Curiosity, which landed on Mars on August 6, 2012; the
development of the Orion Crew Exploration Vehicle which is sched-
uled for its first uncrewed flight in 2014; the development of the
Space Launch System which should see its first launch in 2017; and
the development of the James Webb Space Telescope which is sched-
uled for launch in October 2018.
Unfortunately, some of this progress may be at risk as sequestration

cuts are implemented. Under sequestration, NASA’s budget will be
reduced by nearly $1.2 billion in fiscal year 2013—with similar reduc-
tions the following eight years. These cuts could delay progress on
the development of private space transportation services as well as
NASA’s next generation of launch vehicles and spacecraft. NASA’s
science activities, including efforts to follow up on its successful Mars
exploration program, would also be affected, and its public outreach
programs will be cut.
Similarly, the National Oceanic and Atmospheric Administration
(NOAA) satellite programs may also be affected by sequestration,
with an immediate reduction of $154 million and additional cuts over
the next several years. If the budget cuts go forward, NOAA could
be forced to extend what is already projected to be a 17-month gap
in polar orbiting weather satellite coverage beginning in 2017. These
satellites provide nearly 90 percent of all observation data used to
deliver three- to seven-day weather forecasts.
At this point, the U.S. space industrial base faces an uncertain future.
Challenges include budget cuts and increasing competition from space
programs in India, China, and Russia. At the same time, however, the
government’s increasing dependence on commercial space is creating
new opportunities for the private sector.
Figure 4.10 NASA Outlays

25,000
Space Applications Exploration Capabilities
Space Operations Inspector Gen & Other
20,000
4,277
3,690 3,519 3,713
15,000
5,800 4,471 4,259

5,046
10,000
3,589 3,773
3,833 3,507
5,000
4,996 5,375 5,611 6,052
-
2010 2011 2012 2013(E)
Fiscal Year
Source: Office of Management and Budget, Budget of the United States Government for FY 2013.
Missiles
U.S. missile sales continued to decrease in 2012 and this trend is
expected to continue (see Figure 4.1).* Although U.S. government
outlays for missile procurement jumped in 2012, they are expected to
decrease almost as dramatically in 2013 (see Figure 4.11). These reduc-
tions are being driven by the drawdown of forces in Afghanistan and
reductions in the Department of Defense budget.
Figure 4.11 DOD Outlays for Missile Procurement by Agency
Millions of U.S. Dollars Air Force Army Navy

14,000
12,000
3,808
10,000
3,668
3,326 3,448 3,443 1,835

8,000
2,995
1,694
6,000
2,057 2,034 1,994
1,468
4,000
7,427
5,747
2,000 4,082 4,338 4,412 4,410
-
2008 2009 2010 2011 2012 2013(E)
Source: Office of Management and Budget, Budget of the United States Government for FY 2013.
According to Aviation Week, as the United States reduces its presence

in Afghanistan and shifts its attention to the Pacific, the focus of its
missile programs may also shift from the development and produc-
tion of air-to-surface weapons to long-range land attack and anti-ship
systems.15 A detailed breakdown of missile procurement funds by
service and system is provided in the Appendix.
But even as funding for missile development and production in the
United States declines, missile exports could increase. Examples
include the United Arab Emirates’ decision to purchase the Terminal
High Altitude Air Defense (Thaad) system, which is also being
considered by Qatar.16 Additional foreign military missile sales that
* The aerospace missile sector includes RDT&E and procurement of DOD missiles, missile defense
systems, and parts. Sector components include the missiles themselves, as well as the associated
sensors and command, control, battle management, and communications systems.
were being evaluated in late 2012 and early 2013 included Sidewinder
missiles to Singapore and Turkey; Seasparrow missiles to Thailand;
Javelin missiles to Belgium, Indonesia, Oman, and Qatar; Patriot
missiles to Kuwait, Saudi Arabia and Qatar; and numerous other sales
to countries whose national security interests are aligned with those of
the United States.17
The U.S. missile defense program faces several difficult challenges in
the years ahead, as the Missile Defense Agency balances the ability to
counter threats under increasingly austere financial constraints. North
Korea and Iran continue to pursue long-range missiles, as well as
nuclear warhead technologies and advanced countermeasures. China’s
development of the so-called DF-21 anti-ship ballistic missile is also
troubling, as it could limit the Pentagon’s ability to place aircraft carrier
strike groups in the Pacific.18
International Trade
Aerospace exports exceeded imports, resulting in a positive balance
of trade for the U.S. aerospace industry in 2012. The role of the
U.S. aerospace industry in the global economy is so important that is
addressed separately in Chapter 6.

Looking forward, the commercial aerospace sector is expected to
continue the momentum established in 2011 and 2012. Order books
at Boeing and Airbus contain years of commercial aircraft backlog and
both companies have announced production rate increases that will
continue through at least 2014. In addition, the demand for high-end
business jets is also expected to increase.
Volatile fuel prices continue to cause the airlines and business jet
owners to replace older, less fuel-efficient aircraft with newer models.
This demand, combined with low-rate financing and the rapid growth
of air travel in Asia and the Middle East, suggests that new aircraft
sales are likely to increase. Moreover, the global air traffic market is
expected to increase at a rate of 4.9 percent per year over the next 20
years, considerably higher than the global GDP growth rate. In order
to keep pace with the growing demand for air travel, estimates are that
by the end of 2031, the world’s airlines will need 34,000 new commer-
cial aircraft with a total value of $4.5 trillion. Nearly 70 percent of the
deliveries will be single-aisle airplanes, reflecting growth in emerging
markets, such as India and China, and the continued expansion of
low-cost carriers throughout the world. At the same time, the new
twin-aisle airplanes will allow the airlines to continue their expansion
into international markets.19
On the military side, the Department of Defense is doing its best to deal
with sequestration. In April, 2013, the President submitted a proposed
budget of $526.6 billion in discretionary budget authority to fund
defense programs for fiscal year (FY) 2014—not including the budget
for Overseas Contingency Operations which will be submitted later.20
Even as the budget was submitted, the DOD press release noted that
FY 2014 programs would be significantly and adversely affected by the
sequester budget cuts in FY 2013. Such cuts would result in less train-
ing, civilian furloughs, deferral of equipment and facility maintenance,
reductions to energy conservation investments, contract inefficiencies,
and curtailed deployments.21 From an aerospace manufacturer’s perspec-
tive, the full scale and scope of these cuts is not yet known, but they are
likely to result in reduced and/or stretched out production of the KC-46
tanker, the F-35 Joint Strike Fighter, and the V-22 Osprey, as well reduc-
tions in other fixed-wing and rotorcraft programs. Missile production and
munitions also look vulnerable as weapons stockpiles are often the first
to be cut when combat operations and defense budgets trend downward.
Sales for the space sector are expected to continue at a reasonable level,
driven by satellite replenishment and launch service demands. Although
the ongoing cuts to NASA’s budget will have a negative impact on indus-
try, they are less severe than some anticipated.
The aerospace industry plays a key role in the U.S. economy, while
simultaneously contributing to America’s national defense. With
employees in every state, the aerospace industry generates the high-
est positive trade balance of any U.S. manufacturing sector. In terms
of sales, 2012 was the best year ever for the U.S. aerospace industry,
where robust demand in the commercial market more than offset
losses in the defense sector. As the global economy continues to
recover, similar results, or better, are expected in the coming years.
Chapter Endnotes
1 Lavelle, M. (2011, May 20). As jet fuel prices soar, a green option nears the runway.
National Geographic News. Retrieved from http://news.nationalgeographic.com/news/
energy/2011/05/110520-jet-fuel-biofuel-for-commercial-flights/
2 Aerospace Industries Association. (2013). 2012 Year-end review and forecast. Retrieved
from http://www.aia-aerospace.org/assets/aia_yearender_web_2012.pdf
3 Lockheed Martin. (2013). C-130J Super Hercules. Retrieved from

http://www.lockheedmartin.com/us/products/c130.html
4 Menon, J. (2013, January 7). Buying spree. Aviation Week & Space Technology, 174(47),
pp. 63-64.
5 Robinson Helicopter Company. (2013, January 11). Robinson’s production tops 500 in
2012. Retrieved from http://www.robinsonheli.com/media/pressrelease/2012_sales.pdf
6 Textron. (2013). 2012 Annual report. Retrieved from http://investor.textron.com/phoenix.
zhtml?c=110047&p=proxy
7 United Technologies. (2013). 2012 Annual report. Retrieved from http://2012ar.utc.com/
assets/pdfs/UTCAR12_Full_Report.pdf
8 Pereira, V. (2012, February—March). Mixed messages. ROTORHUB. Retrieved from
http://www.heliasset.com/images/file_pdf/RH_FebMar12.pdf
9 Aerospace Industries Association. (2013). 2012 Year-end review and forecast, p. 4.
10 General Aviation Manufacturers Association. (2013, February 12). GAMA releases
2012 year-end report and focuses on the opportunities and goals that lie ahead.
Retrieved from http://www.gama.aero/media-center/press-releases/content/
gama-releases-2012-year-end-report-and-focuses-opportunities-and
11 PRNewswire. (2013, February 20). Global commercial aircraft gas turbine engine market
2013–2023. Retrieved from http://finance.yahoo.com/news/global-commercial-aircraft-
gas-turbine-155900065.html
12 Norris, G. (2013, January 7). Power game. Aviation Week & Space Technology, 174(47),
pp. 87-88.
13 Many of the comments in this section are based on material from the Aerospace Industries
Association 2012 Year-end report, referenced earlier.
14 Warwick, G. (2013, January 7). Launch space. Aviation Week & Space Technology,
174(47), pp. 94-95.
15 Warwick, G., & Dickerson, L. (2013, January 7). Sea change. Aviation Week & Space
Technology, 174(47), pp. 78-79.
16 Ibid.
17 The Arms Export Control Act requires the President to give Congress advance notification
of the intent to sell defense articles, equipment and services. As part of the process, the
Defense Security Cooperation Agency (DSCA) prepares and delivers notifications to
Congress with the approval of the State Department. A description of each proposed sale
is listed on DSCA’s website at http://www.dsca.mil/Default.htm
18 Butler, A. (2012, August 13). New challenge for MDA: field more interceptors. Aviation
Week & Space Technology. Retrieved from http://www.aviationweek.com/Article.
aspx?id=/article-xml/AW_08_13_2012_p44-483481.xml
19 The Boeing Company. (2012).Current Market Outlook 2012–2031. Retrieved from
http://www.boeing.com/commercial/cmo/
20 U.S. Department of Defense. (2013, April 10). DOD releases Fiscal Year 2014 budget
proposal. Retrieved from http://www.defense.gov/releases/release.aspx?releaseid=15921
21 Ibid.
69
Maintenance Repair
and Overhaul
Introduction
This chapter addresses the maintenance, repair and overhaul (MRO)
of large commercial and military aviation aircraft. The size of each
segment is determined by its own unique set of drivers but, at the
same time, all segments are directly or indirectly, influenced by world
events and the economy.
Commercial Aircraft MRO

The commercial aircraft MRO market is driven by a somewhat
complex set of factors. Some of these include the following:
■■ Demand for air travel and cargo services. In the commercial
aircraft market, the demand for shipping and passenger travel
tends to be correlated with the state of the economy. FedEx
Express, for example, is the world’s largest cargo airline. As
demand for air cargo rises or falls, FedEx Express adjusts
its fleet to maintain the efficiency of its worldwide logistics
operation—and as FedEx Express adjusts its fleet, their MRO

requirements also change.1
■■ Size and location of the fleet. As the size of the fleet increases,
so does the need for MRO services. Thus, the scale and scope of
MRO services are determined by the size of the fleet for both
passenger and cargo aircraft, broken down by aircraft type and
geographic location.
■■ Age and lifecycle of the fleet. Newer aircraft require less
maintenance and are more efficient to operate and maintain.
Hence, there is a trend towards shorter aircraft lifecycles (e.g.,
20 versus 30 years) which is being driven, in part, by the fact that
it is often easier to obtain financing for new aircraft than for
used aircraft.2
■■ Cost and availability of skilled labor. As the technology becomes
more sophisticated, the skills required to analyze, test and repair
structures, avionics, engines and components also become more
specialized—making it more expensive to train and maintain
people with the right experience and skill sets. Consequently,
as the fleet size continues to increase, the shortage of skilled
workers could become a problem. Some experts say that as many
as 650,000 maintenance technicians must be added by 2030 just
to support new additions to the fleet.3 As global demands for
these skills increase, competition will increase and labor costs will
likely rise.4
■■ Cost and complexity of test equipment. Another factor that is
becoming increasingly important is the rising cost and complexity
of test equipment. Even though the on-board equipment may be
more reliable, the equipment required to test the next generation of
equipment can be extraordinarily expensive, making it difficult for
the airlines or third parties to deliver a full range of MRO services.
Scale and Scope of the Market

Estimating the scale and scope of the global maintenance, repair, and
overhaul market is an inexact science. For example, most commercial
MRO estimates are based on the following categories of activity: heavy
airframe maintenance and modifications; engine maintenance and over-
haul; component maintenance on items such as fuel systems, avionics,
wheels and brakes, etc.; and line maintenance. Such work is typically
done by the original equipment manufacturer (OEM); the operator,
Maintenance Repair and Overhaul 71
such as an airline; an operator that services other operators; or a third

party provider that offers one or more levels of maintenance services.
Describing the market itself can also be confusing. At the highest
level, the civil aircraft market consists of private aircraft and commer-
cial aircraft. The commercial side of the market is often broken down
into commercial aircraft, regional aircraft, business jets, and rotorcraft. The
commercial aircraft market is further subdivided into wide-body aircraft
or narrow-body aircraft. Wide-body aircraft are described in terms
of twin-aisle or large aircraft that seat between 200-600 passengers.
Narrow-body aircraft are often referred to as single-aisle aircraft with a
seating capacity of 100-200 people. The regional aircraft market is also
subdivided into regional jets that seat between 70-100 people and turbo-
props that typically seat less than 100 passengers.5 As a result, it can be
difficult to compare numbers prepared by different providers directly.
Given these complexities, estimates for the 2012 commercial air
transport market range from approximately $49 billion to $61 billion.
Growth estimates for this segment of the market range from three
to five percent over the next 10 years, with variance between regions
and by type of aircraft. Projecting out to 2020 at a growth rate of
four percent, estimates range from $67 billion to over $80 billion. The
trendline and numbers in Figure 5.1 represent averages based on esti-
mates from at least six different sources.
Figure 5.1 Estimated Global Commercial Aircraft MRO Market, 2012–2020

85.0
80.0
75.0
72
70.0
65.0
60.0 High
Average
55.0 Low
53
50.0
45.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Embry-Riddle, based on estimates from multiple sources, March 2013.
The maintenance, repair and overhaul of aircraft, and related parts

manufacturing and distribution services, play an important role in the
U.S. economy. According to a report produced for the Aeronautical
Repair Station Association (ARSA) by ICF SH&E, the civil MRO
industry employees about 196,000 people in 4,100 firms across the
United States. Of this total, over 3,400 firms are small to medium-size
enterprises that employ in excess of 41,000 people.6 The same report
indicates that California and Texas top the list of states with the most
employees engaged in MRO and MRO-related activities.7
Distribution by Type and Geography

Figure 5.2 depicts the geographic distribution of MRO spending in
2012. Even though North America accounts for the largest share
today, most experts agree that greatest growth over the next decade
will occur in the Asia Pacific region and the Middle East.
Figure 5.2 Commercial Aircraft MRO Spending by Region, 2012
Rest of World
13%
North America
35%
Asia Pacific
26%
Europe
26%
As can be seen in Figure 5.3, engine MRO represents the largest single
portion of commercial MRO spending.
Figure 5.3 Commercial Aircraft MRO Spending by Activity, 2012
Airframe Heavy
Line
Mx & Mods
18%
17%
Component
21%
Engine
43%
Military Aircraft MRO

Since governments fund military MRO programs, the key drivers of
military MRO are similar, but different, from those that drive commer-
cial MRO. Some of the major drivers of military MRO, and the avia-
tion sector in particular, include the following:
■■ The global economy. As a result of the global financial crisis,
many countries have reduced or postponed plans to buy new
military systems and have chosen instead to repair and upgrade
existing equipment.8 The net result is that some government-
funded military MRO budgets are higher than normal.
■■ Size of the fleet. One of the biggest factors in determining military
MRO needs is the size of the fleet, where the type and quantity of
equipment is determined by national goals, available funds, military
objectives, and perceived threats to national security.
■■ Age and utilization of aircraft. Like their commercial counterparts,
military aviation MRO is driven by the age and use of aircraft.
Wars in Iraq, Afghanistan, and operations in other locations have
taken a toll on existing U.S. systems and have added to demands
for MRO services. When military RESET programs are combined
with delays in the deployment of new systems like the F-35 Joint
Strike Fighter, the MV-22 Osprey and others, near-term field and
depot-level maintenance requirements can be expected to increase.
■■ Support strategy. New strategies for supporting systems, like

performance-based logistics (PBL), can also influence the shape
and delivery of MRO services. Strategic alliances and technology
transfer agreements between countries and firms are also being
created, making it more cost effective for some governments to
deliver domestic military MRO services.9
Scale and Scope of the Market

While it is difficult to estimate the size of the commercial aircraft
MRO market, the size of military aircraft MRO is even more difficult
to determine. This is primarily due to greater variance in the assump-
tions—assumptions about country government-driven growth rates;
assumptions about what categories of systems should be included such
as fighters, transport aircraft, reconnaissance aircraft, bombers, rotor-
craft, trainers, unmanned aerial vehicles, etc.; and for the U.S. market,
assumptions about the appropriate levels of maintenance, repair, and
overhaul for a fleet that is going through a sequestration-driven trans-
formation. While doing research for this report, at least five different
estimates of military aircraft MRO levels were reviewed. In the end,
the highest and lowest estimates of those that seemed most consistent
over the years were used to calculate averages for this segment of the
market. For 2012, the average was approximately $62.8 billion. Using a
compound annual growth rate of two percent, half of that used for the
air transport market, the average for military aircraft MRO spending for
2020 is estimated to be almost $74 billion (see Figure 5.4).
Many countries are under pressure to reduce military spending in an
effort to balance their budgets. As a result, countries are cutting back
on research, development and the acquisition of new systems, while
extending the life of existing systems through engineering changes
and more scheduled and unscheduled maintenance. In today’s envi-
ronment, it is often easier to justify maintaining an aging fleet than to
justify the cost of developing and building a new fleet even though the
overall lifecycle costs, including MRO, may be higher.
Distribution by Type and Geography

Estimates of worldwide military aircraft MRO spending by region
and activity are shown in Figure 5.5 and Figure 5.6. Once again, these
numbers represent averages based on data from several sources. North
America has the greatest share of the military aircraft MRO market at
approximately 45 percent, while field maintenance represents the larg-
est share of military aircraft MRO market activity at 47 percent.
Figure 5.4 Estimated Global Military Aircraft MRO Market, 2012–2020
85.0
80.0
75.0
73.6
70.0
High
65.0 Average
62.8 Low
60.0
55.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 5.5 Military Aircraft MRO Spending by Region, 2012
Rest of World
16%
North America
Europe 45%
22%
Asia Pacific
16%

Figure 5.6 Military Aircraft MRO Spending by Activity, 2012
Engine
17%
Field Maintenance
Component 47%
17%
Airframe
20%
Trends and Challenges in MRO

Based on a review of the market, general trends and challenges in the
MRO market include:
■■ Growing opportunities in the Asia Pacific region and the
Middle East.
■■ Continued outsourcing by many of the world’s major carriers.
■■ OEMs pursuing a greater role in the delivery of MRO services,
including the maintenance, repair and overhaul of military systems
which, in some cases, will be delivered through performance-based
logistics agreements.
■■ More joint ventures to deliver one-stop MRO services.
■■ MRO services that are more tailored to specific customer needs.
■■ Continued consolidation among MRO providers.
■■ A continuing struggle to find qualified MRO workers.

During the past year, the overall civil MRO market grew at over five
percent. Even though certain regions, countries and sectors may do
better than others, most experts predict that the overall commercial
MRO market will continue to grow at a moderate rate of three to

four percent a year over the next 10 years. Unfortunately, the same
cannot be said for the global military MRO market. Due to a variety
of factors, military MRO levels are more difficult to predict. Based
on this complex set of factors, it seems reasonable to expect that the
military aircraft MRO market will decrease slightly, and then stabilize
and grow at a rate of one to three percent for the foreseeable future.
The overall business aviation MRO market is also starting to recover
although some sectors, such as the larger and more expensive busi-
ness jets, are doing better than others. It is also clear that the global
business aviation market is not only poised to grow, but is shifting its
focus to emerging markets in Africa, South America, India, China and
the Asia Pacific region. When this information is combined with the
international economic trends reviewed earlier, it is apparent that there
are opportunities for new entrants, as well as existing firms, in the
domestic and global aviation MRO markets.
Chapter Endnotes
1 Roche, C. (2012, September 19). FedEx total package shipments point to sharp
decline in GDP. Pragmatic Capitalism. Retrieved from http://pragcap.com/
fedex-total-package-shipments-point-to-sharp-decline-in-gdp
2 Doan, C. (2012, April). The global MRO forecast, 2012–2022. TeamSAI Consulting
Services. Retrieved from http://teamsai.com/media/content/2012_teamsai_global_
mro_forecast_120329-print-ver-final.pdf
3 Norris, G. (2011, June 24). Boeing warns of shortages for pilots, technicians. Aviation
Daily. Retrieved from http://www.aviationweek.com.ezproxy.libproxy.db.erau.edu/awin/
ArticlesStory.aspx?keyWord=650,000 maintenance&id=/article-xml/avd_06_24_2011_
p03-01-340404.xml
4 Majcher, K. (2012, June 1). Skills Shortages. Aviation Week & Space Technology.
Retrieved from http://www.aviationweek.com/Article.aspx?id=/article-xml/
OM_06_01_2012_p37-457712.xml
5 Deloitte & Touche. (2010, October). Global aerospace market outlook and forecast.
[AIAC Phase 3 report]. Retrieved from http://www.aiac.ca/uploadedFiles/Resources_
and_Publications/Reference_Documents/AIAC%20Phase%203%20Report_FINAL.pdf
6 Aeronautical Repair Station Association. (2013, March 13). Global MRO market
economic assessment. [Data provided by ICF SH&E]. Retrieved from
http://arsa.org/wp-content/uploads/2013/04/2013MROStudy.pdf
7 Ibid., p. 39.
8 ICD Research. (2012, July). The global military MRO market 2012–2022.
Retrieved from http://www.airforce-technology.com/downloads/whitepapers/
technical-publications/fileglobal-military-aviation-mro-market-2012-2022/
9 Ibid, p. 17.
79
The Global Aerospace

Marketplace
Introduction
The U.S. aerospace industry is part of a dynamic and interdependent global
marketplace. In 2012, the United States exported $1,546,455,243,556 in
goods and services, while importing $2,275,392,482,533 for a net trade
deficit of $728,937,238,977.1 The major drivers of the deficit were foreign
oil, consumer products, and automobiles—but the aerospace sector
sustained a positive trade balance.
This chapter addresses aerospace exports, imports, and the U.S.
balance in aerospace trade. It also includes state and regional data on
aerospace exports for the past five years. The chapter concludes with a
brief discussion about the role of the U.S. Export-Import Bank in the
aviation and aerospace industries.
U.S. Aerospace Exports

According to the U.S. Department of Commerce, International Trade
Administration, U.S. exports of aerospace products and parts totaled
$105,617,117,330 in 2012.* This represents nearly an 18 percent

increase over 2011. Aerospace export data for the last five years are
presented in Figure 6.1.
Figure 6.1 U.S. Exports of Aerospace Products and Parts
120,000
105,617
100,000
89,379
85,681 84,478
81,478
80,000
60,000
40,000
20,000
-
2008 2009 2010 2011 2012
Source: U.S. Department of Commerce, International Trade Administration, TradeStats Express, March 2013.
Figure 6.2 is a color-coded display of the recipients of U.S. aerospace

exports in 2012. Top-tier export markets are highlighted in red (see
map legend). The standout feature of this map is the scale and scope
of U.S. aerospace exports.
In 2012, 15 countries accounted for almost 71 percent of total U.S.
aerospace exports (see Table 6.1). The top five U.S. export markets
were Japan, China, France, the United Arab Emirates, and the United
Kingdom. Table 6.1 also reveals that within this list, the countries that
had the greatest percentage increase in U.S. aerospace exports in 2012
were the United Arab Emirates, Japan, Mexico, Qatar, and South Korea.
Figure 6.3 is a graph of the trends in the top U.S. aerospace export
markets over the past five years. These data points show that in 2012,
demand increased in all of the top U.S. aerospace export markets,
except the United Kingdom, which decreased by three percent.
* Note: almost all the data in this chapter comes from the International Trade Administration’s TradeStats
Express. These numbers often differ from other figures provided by the U.S. Government and other
sources, depending on when and where the data was collected, and other factors.
The Global Aerospace Marketplace 81
Figure 6.2 Map of U.S. Aerospace Export Countries
2012 Exports of NAICS 3364

$166,553 : $8,468,264
$10,895 : $166,553
$718 : $10,895
$2 : $718
zero
Thousands of U.S. Dollars
Product of MapXtreme 2008 ® SDK Developer License © 2008 Pitney Bowes MapInfo Corporation.
Table 6.1 U.S. Exports of Aerospace Products and Parts

Percentage Percent
Change Exports
2008 2009 2010 2011 2012 2011–2012 to World
World 85,681 84,478 81,478 89,379 105,617 18 100
Japan 6,703 5,511 5,296 5,072 8,468 67 8
China 3,917 5,344 5,764 6,392 8,367 31 8
France 7,326 8,655 7,234 7,142 8,025 12 8
United Arab
2,775 3,507 1,811 3,655 7,186 97 7
Emirates
United
7,152 6,085 5,971 7,013 6,813 -3 6
Kingdom
Brazil 5,568 4,681 4,479 5,469 6,173 13 6
Germany 5,677 5,515 5,407 5,680 5,712 1 5
Canada 7,245 5,700 5,678 5,893 5,289 -10 5
Singapore 3,902 2,974 3,877 3,925 4,025 3 4
South
2,712 2,026 2,650 2,741 3,635 33 3
Korea
Mexico 1,530 1,657 1,620 1,848 2,821 53 3
Hong Kong 1,177 2,199 1,408 2,487 2,496 0 2
Australia 1,749 1,797 1,636 2,002 2,206 10 2
Turkey 1,409 1,240 2,483 2,886 1,911 -34 2
Qatar 742 1,366 1,702 1,203 1,777 48 2
Figure 6.3 Trends in Top U.S. Aerospace Export Markets

10,000
Japan China France United Arab Emirates United Kingdom
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2008 2009 2010 2011 2012

U.S. Military Aerospace Exports

Foreign military sales represent another channel for U.S. aerospace
manufacturers and service providers. Table 6.2 shows the top 10
nations’ expenditures on military spending in 2012.
Table 6.2 Percent GDP Spent on Military, 2012

Spending Percentage
Billions of Percentage Change Share
Country U.S. Dollars 2011–2012 of GDP
United States 682.4 -4.0 4.4
China* 166.1 16.2 2.0
Russia* 90.7 26.1 4.4
United Kingdom 60.8 -3.0 2.5
France 58.9 -5.8 2.3
Japan 59.3 0.0 1.0
India 46.1 -5.7 2.5
Saudi Arabia 56.7 16.9 8.9
Germany 45.8 -1.9 1.4
Brazil 33.1 -6.5 1.5
Source: Stockholm International Peace Research Institute (SIPRI), 2013.
Spending figures are in current 2012 U.S. dollars.
* SIPRI estimates.
The United States is the world leader in terms of the total amount
spent on defense, although it spends much less as a percentage of
GDP than many other countries. When measured against GDP, the
U.S. level of national defense spending is generally ranked 23rd to
25th depending on the methodology used.2
Even though the United States leads the world in absolute expendi-
tures, the percentage rate of growth in military spending in China
and Russia now exceeds the growth rate in the United States, which
declined in 2012.3
Figure 6.4 highlights the Department of Defense’s planned Total
Obligation Authority (TOA) over the next four years. The actual
amount budgeted and authorized by Congress nearly always varies
from the programmed TOA. The actual budget is currently in flux
awaiting the outcome of the sequestration debates in Congress.
Figure 6.4 National Defense Total Obligation Authority
Millions of U.S. Current Dollars

800,000
FY 2013(E)
614,088
700,000
FY 2017(E)
567,323
600,000
500,000
400,000
300,000
200,000
100,000
0
2002 2004 2006 2008 2010 2012 2014 2016
Fiscal Year
Source: National Defense Budget Estimates for FY 2013. E = estimate.
At the time of writing, estimated reductions range from $85 to $104

billion per year for the next 10 years, depending on which numbers
are used.4 However, some of these cuts may be mitigated by increased
demand for military aircraft and systems from outside the United States.
For the first time in several years, U.S. foreign military aerospace
sales increased (see Figure 6.5). In 2012, foreign military sales of U.S.
aerospace products and services increased by 12 percent and sales

accounted for approximately 11 percent of all U.S. aerospace exports.
Figure 6.5 Military Aerospace Exports

15,000
12,819
12,500
11,290
10,666 10,375 10,051
10,000
7,500
5,000
2,500
-
2008 2009 2010 2011 2012
Source: Aerospace Industries Association, March 2013.
U.S. Aerospace Imports

U.S. aerospace imports increased by 13 percent in 2012, driven primar-
ily by demand for civilian aircraft, civilian aircraft parts, and engines
for civilian aircraft (see Figure 6.6).
Figure 6.6 Imports of Aerospace Products and Parts

45,000
40,467
40,000
35,453 35,849
35,000
30,885 31,408
30,000
25,000
20,000
15,000
10,000
5,000
-
2008 2009 2010 2011 2012
Figure 6.7 is a color-coded display of aerospace imports into the

United States for 2012. Those countries from which the U.S. received
the most imports are highlighted in bright red.
Figure 6.7 Map of U.S. Aerospace Import Countries
2012 Imports of NAICS 3364

$72,930 : $9,685,880
$814 : $72,930
$26 : $814
$2 : $26
zero
In 2012, the United States imported the most aerospace products and
parts from France, Canada, Japan, the United Kingdom, and Germany.
Figure 6.8 shows that imports increased in all five countries in 2012.
Those countries with the greatest percentage change in imports
included Israel, Italy, Japan, Mexico, and Poland (see Table 6.3).
Table 6.3 U.S. Imports of Aerospace Products and Parts

Millions of U.S. Dollars Percent
Percentage Imports
Change from
2008 2009 2010 2011 2012 2011–2012 World
World 35,453 30,885 31,408 35,849 40,467 13 100
France 9,114 7,990 8,791 8,715 9,686 11 24
Canada 7,837 6,805 6,342 7,232 7,862 9 19
Japan 2,666 2,904 3,055 3,841 4,784 25 12
United
3,808 3,407 3,428 3,691 3,955 7 10
Kingdom
Germany 2,773 3,144 2,088 2,916 3,195 10 8
Italy 953 952 1,204 1,308 1,658 27 4
Mexico 557 469 689 1,157 1,439 24 4
Brazil 2,296 747 746 936 1,071 14 3
Israel 1,344 761 748 693 949 37 2
Poland 171 178 386 569 679 19 2
China 387 397 498 622 663 7 2
South Korea 371 387 467 598 570 -5 1
Belgium 328 263 268 453 402 -11 1
Netherlands 207 230 299 306 359 17 1
Australia 176 164 164 327 342 5 1
Figure 6.8 Trends in Top U.S. Aerospace Import Markets

10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
France Canada Japan United Kingdom Germany
1,000
-
2008 2009 2010 2011 2012
U.S. Military Aerospace Imports

Figure 6.9 highlights trends in military aerospace imports over the past
five years. It should be noted that in 2012, military imports increased
by 20.4 percent over the previous year and represented about 10.8
percent of all aerospace imports into the United States.
Figure 6.9 Military Aerospace Imports into the United States

5,000
4,500 4,378
4,000
3,637
3,500 3,345 3,331
2,936
3,000
2,500
2,000
1,500
1,000
500
-
2008 2009 2010 2011 2012
Source: Aerospace Industries Association, March 2013.
U.S. Balance of Trade in Aerospace

Products and Parts
The United States has had an annual surplus in aerospace trade for
more than 50 years, with a generally positive rate of growth. While
exports did decline in 2009 and 2010, the overall balance of trade in
aerospace products and parts remained relatively stable. As the econ-
omy recovered, so did the exports and imports of aerospace products
and parts (see Figure 6.10). The balance of trade for aerospace prod-
ucts and parts increased by 21.7 percent in 2012.
Figure 6.10 Balance of Trade Aerospace Products and Parts

120,000
105,617
100,000
80,000
65,150
60,000
40,467
40,000
20,000
Exports Imports Balance of Trade
2008 2009 2010 2011 2012

Figure 6.11 is a color-coded map of aerospace trade balances for 2012.

Countries listed in red are those with which the United States has the
most positive trade balances.
Figure 6.11 Map of U.S. Aerospace Trade Balances
2012 Balances for NAICS 3364

$51,500 : $7,704,228
$1,368 : $51,500
$2 : $1,368
zero
$-2,573,242 : $-4
Approximately 74 percent of America’s positive trade balance is

accounted for by its top 15 trading partners (see Table 6.4).
Table 6.4 Balance of Trade in Aerospace Products and Parts

Percentage
Change Percent
2008 2009 2010 2011 2012 2011–2012 of World
World 50,228 53,593 50,070 53,530 65,150 22 100
China 3,530 4,947 5,266 5,769 7,704 34 12
United Arab
2,774 3,506 1,810 3,654 7,185 97 11
Emirates
Brazil 3,272 3,934 3,733 4,533 5,102 13 8
Singapore 3,567 2,707 3,600 3,670 3,762 2 6
Japan 4,036 2,606 2,242 1,231 3,684 199 6
South Korea 2,341 1,639 2,183 2,142 3,065 43 5
United
3,344 2,678 2,543 3,322 2,858 -14 4
Kingdom
Germany 2,904 2,371 3,319 2,764 2,517 -9 4
Hong Kong 1,175 2,197 1,405 2,484 2,491 0 4
Australia 1,573 1,633 1,472 1,675 1,864 11 3
Qatar 742 1,366 1,702 1,203 1,777 48 3
Saudi Arabia 782 1,130 918 523 1,603 207 2
Turkey 1,195 989 2,214 2,603 1,575 -39 2
Indonesia 530 902 1,718 1,179 1,475 25 2
Mexico 973 1,188 931 692 1,382 100 2
Figure 6.12 highlights the fact that aerospace is one of the few catego-
ries that maintains a positive trade balance. This particular chart pres-
ents data on the trade balance for selected manufactured goods and
commodities in 2012.5
Figure 6.12 Trade Balance for Selected Products, 2012
Airplanes, engines, and parts*
Soybeans
Chemicals – plastics
Coal
Petroleum preparations
Corn
Rubber tires and tubes*
Iron and steel mill products
Power generating machines*
Electrical machinery*
Clothing
ADP equipment and office machines
Vehicles
TV's, VCR's, etc.*
Crude oil
-350 -300 -250 -200 -150 -100 -50 0 50 100

* Due to non-disclosure requirements, certain commodity classifications are subject to suppression
and require a change in aggregation. For additional information see www.census.gov/ft900.
Source: U.S. Bureau of Economic Analysis, March 2013.
Regional Aerospace Exporting Trends

Even though data on the value of aerospace products produced in each
state is no longer available to the public, it is still possible to assess and
compare the value of U.S. aerospace exports by region and state.
Pacific Region Aerospace Exports

For the purpose of this report, the Pacific region includes Alaska,
California, Hawaii, Oregon, and the state of Washington.* Aerospace
exports from this region are dominated by deliveries of Boeing’s large
civil aircraft. The five year trend for the region has been extremely
positive; with 2012 sales totaling $46,067,665,962—a 32 percent
increase over 2011 (see Figure 6.13).
* The regions used in this chapter are the same as those used by the International Trade Administration in
their TradeStats Express database.
Figure 6.13 Pacific Region Aerospace Exports to World

50,000
46,068
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
2008 2009 2010 2011 2012

In the case of large civil aircraft, customers typically buy specific

production line sequences (slots) for aircraft years in advance of deliv-
ery. Consequently, the level of exports typically rises or falls depend-
ing on the mix of deliveries in a particular year. Table 6.5 reveals that
aerospace exports increased for all Pacific region states except Hawaii
between 2011 and 2012.
Table 6.5 Pacific Region Aerospace Exports by State

Millions of U.S. Dollars Percentage
Change
State 2008 2009 2010 2011 2012 2011–2012
Washington 21,493 26,479 23,322 27,163 37,106 37
California 7,865 6,683 6,100 6,800 7,960 17
Oregon 459 369 463 484 625 29
Hawaii 403 197 253 372 308 -17
Alaska 197 30 59 36 69 94
Figure 6.14 is a graphical display of the data in Table 6.5.*
* This is one of several figures that has dual axes. The reason for using two axes is because there is such a
large difference in exports between California and Washington and all the other states. The axis on the right
applies to California and Washington and the axis on the left applies to all the other states in the region.
Figure 6.14 Trends in Pacific Region Aerospace Exports by State
All Others Millions of U.S. Dollars Washington and California

700 40,000
Oregon Hawaii Alaska Washington California
600 35,000
30,000
500
25,000
400
20,000
300
15,000
200
10,000
100 5,000
2008 2009 2010 2011 2012

Figure 6.15 illustrates trends in the export of aerospace products

and parts from the Pacific region to its top five markets over the past
five years. The top recipients of aerospace products from the Pacific
region in 2012 were China, Japan, and the United Arab Emirates.
Figure 6.15 Trends in Pacific Region Top Aerospace Export Markets

7,000
China United Arab Emirates South Korea Hong Kong Japan
6,000
5,000
4,000
3,000
2,000
1,000
2008 2009 2010 2011 2012

Mountain Region Aerospace Exports

The Mountain region includes Arizona, Colorado, Idaho, Montana,
Nevada, New Mexico, Utah, and Wyoming. Figure 6.16 indicates that aero-
space exports from the Mountain region to the world increased slightly
between 2009 and 2011, and posted an impressive 23 percent gain in 2012.
Figure 6.16 Mountain Region Aerospace Exports to World

4,500
4,000 3,855
3,500
3,000
2,500
2,000
1,500
1,000
500
2008 2009 2010 2011 2012

The data in Table 6.6 and Figure 6.17 indicate that Arizona is the
dominant aerospace exporter in the region, with Arizona, Idaho and
Utah showing solid growth in 2012.
Table 6.6 Mountain Region Aerospace Exports by State

Change
State 2008 2009 2010 2011 2012 2011–2012
Arizona 2,749 2,148 1,987 2,372 2,579 9
Idaho 19 14 308 24 532 2,078
Utah 483 299 289 241 389 61
Colorado 219 228 252 210 176 -16
Nevada 99 104 127 135 100 -26
New Mexico 66 70 74 114 66 -42
Montana 18 17 42 41 12 -72
Wyoming 2 1 1 1 3 245
Figure 6.17 Trends in Mountain Region Aerospace Exports by State
All Others Millions of U.S. Dollars Arizona

600 3,000
Idaho Utah Colorado Nevada
New Mexico Montana Wyoming Arizona
500 2,500
400 2,000
300 1,500
200 1,000
100 500
0 0
2008 2009 2010 2011 2012
Figure 6.18 displays the top five aerospace export markets for the
Mountain region. As can be seen in this chart, exports to all of these
countries increased in 2012, led by Singapore which grew by 494
percent in a single year.
Figure 6.18 Trends in Mountain Region Top Aerospace Export Markets

700
Singapore Canada United Kingdom Germany France
600
500
400
300
200
100
2008 2009 2010 2011 2012
South-Central Region Aerospace Exports

States included in the South-Central region are Alabama, Arkansas,
Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee, and Texas.
Aerospace export sales for the South-Central region dropped signifi-
cantly following the recession, but have steadily improved over the
past two years. The net result was a 23 percent increase in 2012; with
the value of aerospace exports totaling $14,211,045,567 for the region
(see Figure 6.19).
Figure 6.19 South-Central Region Aerospace Exports to World

16,000
14,211
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2008 2009 2010 2011 2012

Aerospace export growth rates were positive for all states in the South
Central region in 2012, but were dominated by Texas and Kentucky.
However, Arkansas recorded a particularly impressive 281 percent
increase during the same period (see Table 6.7 and Figure 6.20).
Sales to all of the region’s top markets were positive in 2012 with the
exception of Singapore, which declined by approximately 4 percent.
(see Figure 6.21).
Table 6.7 South-Central Region Aerospace Exports by State

Change
2008 2009 2010 2011 2012 2011–2012
Texas 5,719 4,893 4,487 5,146 5,634 9
Kentucky 4,081 4,721 3,560 3,523 3,837 9
Arkansas 1,410 1,679 585 490 1,867 281
Tennessee 935 1,019 1,115 1,222 1,231 1
Alabama 630 535 425 527 691 31
Oklahoma 359 335 354 360 508 41
Louisiana 87 126 186 148 226 53
Mississippi 76 104 151 147 217 48
Figure 6.20 Trends in South-Central Region Aerospace Exports by State
All Others Millions of U.S. Dollars Texas and Kentucky

2,000 7,000
Arkansas Tennessee Alabama Oklahoma
1,800 Louisiana Texas Kentucky
6,000
1,600
1,400 5,000
1,200
4,000
1,000
3,000
800
600 2,000
400
1,000
200
- -
2008 2009 2010 2011 2012
Figure 6.21 South-Central Region Top Aerospace Export Markets

3,000
United Kingdom Brazil Canada France Singapore
2,500
2,000
1,500
1,000
500
2008 2009 2010 2011 2012

North-Central Region Aerospace Exports

The North-Central region includes Illinois, Indiana, Iowa, Kansas,
Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South
Dakota, and Wisconsin. As can be seen in Figure 6.22, aerospace
exports from the North-Central region dropped in 2009 but have
continued to recover over the past three years. Even though sales only
increased four percent in 2012, the positive trend led by Ohio has
been encouraging (see Table 6.8).
Figure 6.22 North-Central Region Aerospace Exports to World

16,000
13,352
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2008 2009 2010 2011 2012

Table 6.8 North-Central Region Exports by State

Change
2008 2009 2010 2011 2012 2011–2012
Ohio 4,755 4,118 4,698 5,422 5,644 4
Kansas 4,324 2,868 2,131 2,132 2,076 -3
Indiana 808 751 960 1,272 1,701 34
Illinois 1,417 1,126 1,037 1,004 1,041 4
Michigan 571 525 944 1,075 952 -11
Missouri 1,151 427 828 653 704 8
Minnesota 379 294 459 504 457 -9
Wisconsin 372 261 245 373 343 -8
Iowa 410 341 275 283 317 12
Nebraska 110 65 32 96 65 -32
North Dakota 17 32 31 28 27 -4
South Dakota 4 5 20 4 25 580
Due to the large number of states in this region, exports by states

were broken down into two separate figures (see Figure 6.23 and
Figure 6.24).
Figure 6.23 Trends in North-Central Region Exports by State (Part I)

6,000
5,000
4,000
Ohio Michigan Illinois
Indiana Kansas Missouri
3,000
2,000
1,000
2008 2009 2010 2011 2012

Figure 6.24 Trends in North-Central Region Exports by State (Part II)

600
Minnesota Wisconsin Iowa
Nebraska North Dakota South Dakota
500
400
300
200
100
2008 2009 2010 2011 2012

Within the North Central region’s top markets, a 20 percent increase

in aerospace exports to France helped offset declines in exports to
Germany and Brazil (see Figure 6.25).
Figure 6.25 Trends in North-Central Region Top Aerospace Export Markets

3,000
2,500
2,000
1,500
1,000
500
France Canada Brazil United Kingdom Germany
2008 2009 2010 2011 2012

South-Atlantic Region Aerospace Exports

In addition to the District of Columbia, states in the South-Atlantic
region include Delaware, Florida, Georgia, Maryland, North Carolina,
South Carolina, Virginia, and West Virginia. As illustrated in Figure

6.26, the South-Atlantic region is one of the few regions that main-
tained a positive increase in exports each year over the past five
years. Aerospace exports for the South Atlantic region totaled
$15,319,232,833 in 2012.
Figure 6.26 South-Atlantic Region Aerospace Exports to World

18,000
15,319
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2008 2009 2010 2011 2012

Florida and Georgia led the region in exports in 2012 (see Table 6.9).
Gains in Florida, North Carolina, Virginia, the District of Columbia,
West Virginia, Delaware and South Carolina helped mitigate declines
in Georgia and Maryland over the past year (see Figure 6.27). In terms
of top markets, China, France and Brazil saw steady increases in 2012
(see Figure 6.28).
Table 6.9 South-Atlantic Region Aerospace Exports by State

Change
2008 2009 2010 2011 2012 2011–2012
Florida 3,848 3,977 4,471 4,976 5,902 19
Georgia 3,314 3,442 4,547 5,929 5,467 -8
North Carolina 1,066 1,312 1,463 997 1,130 13
Virginia 1,095 849 964 928 1,004 8
Maryland 612 664 522 744 653 -12
District of
430 521 678 339 502 48
Columbia
West Virginia 126 118 205 192 283 47
South Carolina 381 124 94 112 214 91
Delaware 142 132 125 77 165 113
Figure 6.27 Trends in South-Atlantic Region Aerospace Exports by State
All Others Millions of U.S. Dollars Georgia and Florida

1,600 7,000
North Carolina Delaware Virginia South Carolina
Maryland Georgia District of Columbia Florida
1,400 6,000
West Virginia
1,200
5,000
1,000
4,000
800
3,000
600
2,000
400
200 1,000
2008 2009 2010 2011 2012

Figure 6.28 Trends in South-Atlantic Region Top Aerospace Export Markets

1,600
Brazil China United Kingdom Singapore France
1,400
1,200
1,000
800
600
400
200
2008 2009 2010 2011 2012

Mid-Atlantic Region Aerospace Exports

States in the Mid-Atlantic region include New Jersey, New York, and
Pennsylvania. The momentum that began prior to the recession has yet
to return to the Mid-Atlantic region. At $4,533,198,542, the region’s
exports actually declined by five percent in 2012 (see Figure 6.29).
Figure 6.29 Mid-Atlantic Region Aerospace Exports to World

6,000
4,533
5,000
4,000
3,000
2,000
1,000
2008 2009 2010 2011 2012

While Pennsylvania’s aerospace exports actually increased by 16

percent in 2012, New York and New Jersey’s exports decreased (see
Table 6.10 and Figure 6.30). Exports to two of the region’s top inter-
national markets declined significantly in 2012. In absolute dollars,
state exports for the region were relatively flat in 2012. Germany
declined by 49 percent and Canada declined by 48 percent, while aero-
space exports to Turkey, Israel, and the United Kingdom increased
slightly (see Figure 6.31).
Table 6.10 Mid-Atlantic Region Aerospace Exports by State

Change
2008 2009 2010 2011 2012 2011–2012
New York 3,073 2,701 2,428 2,590 2,508 -3
New Jersey 1,552 1,461 1,315 1,313 1,036 -21
Pennsylvania 860 832 988 855 990 16
Figure 6.30 Trends in Mid-Atlantic Region Aerospace Exports by State

3,500
New York New Jersey Pennsylvania
3,000
2,500
2,000
1,500
1,000
500
2008 2009 2010 2011 2012

Figure 6.31 Trends in Mid-Atlantic Region Top Aerospace Export Markets

1,000
Turkey Israel Canada United Kingdom Germany
900
800
700
600
500
400
300
200
100
2008 2009 2010 2011 2012

New England Region Aerospace Exports

The New England region includes Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and Vermont. Connecticut is clearly
the region’s dominant aerospace exporter. Regional aerospace exports
increased by four percent in 2012, led by Connecticut, Massachusetts,
Vermont, and Rhode Island (see Figure 6.32, Figure 6.33, and Table 6.11).
Figure 6.32 New England Region Aerospace Exports to World

8,400
8,152
8,200
8,000
7,800
7,600
7,400
7,200
7,000
6,800
6,600
2008 2009 2010 2011 2012
Table 6.11 New England Region Aerospace Exports by State

Percentage
Change
2008 2009 2010 2011 2012 2011–2012
Connecticut 6,284 6,241 6,811 6,654 6,986 5
Massachusetts 804 835 717 752 762 1
Maine 80 170 107 268 269 0
New Hampshire 79 52 52 67 61 -8
Vermont 49 33 54 58 67 15
Rhode Island 10 9 18 7 7 6
Figure 6.33 Trends in New England Region Aerospace Exports by State
All Others Millions of U.S. Dollars Connecticut

900 7,200
800
7,000
700
6,800
600
500 6,600
Massachusetts Vermont
400 Maine Rhode Island
6,400
New Hampshire Connecticut
300
6,200
200
6,000
100
5,800
2008 2009 2010 2011 2012
Within the region’s top markets, the United Arab Emirates, Germany,
and South Korea accounted for the bulk of increased exports in 2012
(see Figure 6.34).
Figure 6.34 Trends in New England Region Top Aerospace Export Markets

2,500
France Germany United Arab Emirates Canada South Korea
2,000
1,500
1,000
500
2008 2009 2010 2011 2012

Export-Import Bank of the United States

As indicated in the previous section, aerospace exports play an impor-
tant role in the U.S. economy. U.S. exporters and foreign customers
are often supported by the Export-Import Bank of the United States
(commonly referred to as the Ex-Im Bank). The Ex-Im Bank was
established in 1934 by President Franklin D. Roosevelt as part of the
New Deal.6 In May 2012, the President signed The Export-Import
Bank Reauthorization Act of 2012, extending the Bank’s authority
through 2014.7
The Ex-Im Bank is the official Export-Credit Agency (ECA) of the
United States and a self-sustaining, wholly-owned U.S. government
corporation. The Bank’s mission is to:8
Support jobs in the United States by facilitating the export
of U.S. goods and services. The Bank provides competitive
export financing and ensures a level playing field for U.S.
exports in the global marketplace. Ex-Im Bank does not
compete with private-sector lenders, but provides export
financing that fill gaps in trade financing. The Bank assumes
credit and country risks that the private sector is unable or
unwilling to accept. It also helps to level the playing field
for U.S. exporters by matching the financing that other
governments provide to their exporters.
At the present time, the Ex-Im Bank is focused on industries with

high export potential. These industries include agribusiness, aircraft
and avionics, construction, medical technologies, mining, oil and gas,
and power generation, including renewable energy.9
The Ex-Im Bank is a key player in the President’s National Export
Initiative (NEI) aimed at doubling exports by 2015. Due in large part
to this initiative, Ex-Im Bank funding has grown steadily over the past
four years, totaling $35,784,300,000 in FY 2012. The steady growth in
Ex-Im Bank funding can be seen in Figure 6.35.
Figure 6.35 Export-Import Bank Authorizations

40,000
Loans Loan Guarantees Insurance Total Authorized 35,784
35,000 32,727
5,699
30,000 7,004
24,468
25,000
21,021
20,000 7,101 18,321
6,513
14,399 19,400
15,000
3,864
10,000 13,106
11,475
5,000 10,179 11,765
6,323
3,033 4,261
356
0
2008 2009 2010 2011 2012
Source: Export-Import Bank of the United States, 2012 Annual Report.
As of September 30, 2012, the Ex-Im Bank had exposure in 178

countries throughout the world totaling $106,646,400,000. The Ex-Im
Bank’s largest exposure is associated with air transportation. The
aircraft industry has historically been a major recipient of Ex-Im Bank
financing, representing 46.3 percent (about $49.4 billion) of the Ex-Im
Bank’s total authorizations in FY 2012.10 A breakdown by industry can
be seen in Figure 6.36.
Figure 6.36 Export-Import Bank Exposure by Industry
All Others
15.5%
Manufacturing Air Transportation

17.0% 46.3%
Power Projects
8.1%
Manufacturing
13.1%
Source: Export-Import Bank of the United States, 2012 Annual Report.

The data in this chapter reinforce AIA’s message that the U.S. aero-
space industry is “second to none.” In addition to producing the
world’s finest commercial, general aviation, and military aerospace
systems, aerospace is one of America’s top export industries and one
of the few sectors that maintains a positive trade balance.
This chapter covered exports and imports at the national, regional,
and state level and the important role of the Export-Import Bank in
financing and supporting international aerospace exports.
The following chapter provides an overview of the aerospace indus-
tries in four particularly important countries: Brazil, Russia, India
and China.
Chapter Endnotes
1 U.S. Department of Commerce, International Trade Administration. (2013, March).

TradeStats Express. Retrieved from http://tse.export.gov/TSE/TSEhome.aspx
2 The CIA World Factbook, for example, rates the U.S. 24th in terms of percent of GDP.
CIA World Factbook. (2012). Retrieved from https://www.cia.gov/library/publications/
the-world-factbook/rankorder/2034rank.html
3 Stockholm International Peace Research Institute. (2013). List of countries by military

expenditures. Retrieved from http://milexdata.sipri.org/files/?file=SIPRI+military+expen
diture+database+1988-2012.xlsx
4 Crenshaw, L. (2012, May 1). 2012 Defense budget outlook: The new certainty.
Defense Industry Daily. Retrieved from http://www.defenseindustrydaily.
com/2012-Defense-budget-outlook-The-new-certainty-07375/
5 U.S. Bureau of Economic Analysis. (2012, December). U.S. international trade in
goods and services. [Exhibit 15]. Retrieved from http://www.bea.gov/newsreleases/
international/trade/2013/pdf/trad1212.pdf
6 Export-Import Bank of the United States. (2012). Ex-Im Bank History. Retrieved from
http://www.exim.gov/about/whoweare/history.cfm
7 Export-Import Bank of the United States. (2012). President Obama Signs Export-Import
Bank Reauthorization Act into Law. Retrieved from http://www.exim.gov/newsandevents/
releases/2012/president-obama-signs-export-import-bank-reauthorization-act-into-law.cfm
8 Export-Import Bank of the United States. (2011). Export-Import Bank of the United
States 2011 Annual Report. Retrieved from http://www.exim.gov/about/library/reports/
annualreports/2011/
9 Ibid, p. 20.
10 Export-Import Bank of the United States. (2012). Export-Import Bank of the United
States 2012 Annual Report. Retrieved from http://www.exim.gov/about/library/reports/
annualreports/2012/
111
Aerospace and the BRICs
Introduction
Over the past several years, Brazil, Russia, India and China, collectively
referred to as the BRIC countries, have received a lot of attention—
and for good reason. The BRICs have been experiencing growth rates
that exceed those in the United States; they have enormous resources
and technical capabilities; and they have each targeted aerospace as a
strategic industry.
This chapter provides an overview of the state of aerospace manufac-
turing in each country with a focus on opportunities for U.S. aerospace
manufacturers and suppliers.
Brazil
The CIA World Factbook describes Brazil as South America’s leading
economic power and a regional leader.1 Even though Brazil’s GDP
declined in 2012, it is expected to grow by three percent in 2013 and
four percent in 2014, while keeping unemployment between 5.5 to
6.5 percent (see Figure 7.1).2
Figure 7.1 Brazilian GDP and Unemployment Trends
Billions of U.S. Dollars Percent

3,000 9.0
2,493 8.0
2,500 2,396
2,143 7.0
GDP Unemployment
2,000 6.0
1,650 1,622
5.0
1,500
4.0
1,000 3.0
2.0
500
1.0
0 -
2008 2009 2010 2011 2012
Source: International Monetary Fund World Economic Outlook Report 2013.
Like the other BRIC countries, Brazil’s growing economy and expand-
ing aerospace industry represent both an opportunity and a threat for
U.S. aerospace manufacturers.
Opportunities
Figure 7.2 and Table 7.1 show the trends in aerospace trade with
Brazil between 2008 and 2012. Table 7.1 indicates that the U.S. trade
balance with Brazil increased by 13 percent in 2012.
Figure 7.2 Aerospace Trade Trends with Brazil
Millions of U.S. Dollars Exports Imports Balance

7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2008 2009 2010 2011 2012
Aerospace and the BRICs 113
Table 7.1 Aerospace Trade Statistics with Brazil

Change
2008 2009 2010 2011 2012 2011–2012
Exports 5,568 4,681 4,479 5,469 6,173 13
Imports 2,296 747 746 936 1,071 14
Balance 3,272 3,934 3,733 4,533 5,102 13
The demand for aerospace products, parts and services is being driven
primarily by Brazil’s steady economic growth. The following factors
contributed to the current trade balance:3
■■ Brazil is the fifth largest aviation market in the world.
■■ Brazil has the seventh largest helicopter fleet in the world.
■■ The MRO market in Brazil is significant.
■■ Brazilian aerospace manufacturers import a significant amount
of parts and components from foreign sources, including the
United States.
The 2011 Country Commercial Guide for U.S. Companies doing business in
Brazil summarizes the following opportunities:4
As Brazil’s aviation market continues to expand, imports of
parts and components will continue to increase, representing
good business opportunities for U.S. suppliers. The products
expected to have the most potential are: airplane and helicopter
parts and components for defense and executive aircraft.
Challenges
At the same time, however, Brazil is also a strong competitor in
aerospace manufacturing.5 According to the Aerospace Industries
Association of Brazil (AIAB), Brazilian aerospace firms are now
involved in every sector of aerospace including aeronautics, space, and
defense—and every phase of the life cycle including design, manufac-
turing, support, and related services.6
AIAB describes these segments as follows:7

■■ The Aeronautical segment offers a variety of products such as, but
not limited to, airplanes, helicopters, structural segments, engines,
aircraft and engine parts, on-board systems and equipment, and air
traffic control systems.
■■ The Defense segment includes aircraft designed to meet specific
mission requirements as well as weapon systems, equipment,
guided and non-guided weapons, and systems integration.
■■ The Space segment includes small satellites, satellite structures,
payloads, satellite equipment, ground systems, propulsion, sounding
rockets and launchers. It also includes services related to the usage
of satellites images, consulting and other specialized services.
■■ Other segments include MRO services to civil and military aircraft
of all sizes, including the performance of major checks, structural
modifications, engine and component overhaul.
Brazil’s largest aerospace manufacturer is Embraer. According to
Embraer’s website, the company delivered 106 commercial aircraft and
99 executive jets in 2012.
Over the past several years, Embraer has expanded its global manu-
facturing and service footprint. In 2002, Embraer established an
assembly plant for regional jets in Harbin, China that it is now expand-
ing. In 2011, Embraer opened an assembly plant for executive jets
in Melbourne, Florida. Most recently, Embraer acquired control of
OGMA, a MRO service provider in Portugal.
For More Information on Doing Business in Brazil

There are a variety of public and private sources for obtaining more
information on doing business in Brazil. The U.S. Commercial Service
in Brazil has offices in Belo Horizonte, Brasilia, Rio de Janeiro, São
Paulo (HQ) and Recife. They also have partnership offices that
can provide assistance to U.S. exporters in over 40 additional cities
throughout Brazil. For more information on doing business in Brazil,
please contact one of the following:
U.S. Commercial Service Brazil

Deputy Senior Commercial Officer: Scott Shaw (Scott.Shaw@trade.gov)
Phone: 011-55-11-5186-7191; Fax: 011-55-11-5186-7343
Rua Thomas Deloney,

381 Chacara Santo Antonio 04710-041 São Paulo, SP
U.S. Commercial Service Belo Horizonte

Commercial Assistant: Robert Pohl (Robert.Pohl@trade.gov)
Phone: 011-55-31-3213-1571; Fax: 011-55-31-3213-1575
Rua Timbiras, 1200, 7º Andar 30140-060 Belo Horizonte, MG
U.S. Commercial Service Brasilia

Principal Commercial Officer: Devin Rambo (Devin.Rambo@trade.gov)
Phone: 011-55-61-3312-7403; Fax: 011-55-61-3312-7656
SES - Av. das Nações, Quadra 801, Lote 0370403-900 Brasilia, DF
U.S. Commercial Service Rio de Janeiro

Principal Commercial Officer: Alan Long (Alan.Long@trade.gov)
Phone: 011-55-21-3823-2000; Fax: 011-55-21-3823-2424
Av. Presidente Wilson, 147, 4º Andar 20030-020 Rio de Janeiro, RJ
U.S. Commercial Service Recife

Commercial Specialist: Adierson Azevedo (Adierson.Azevedo@trade.gov)
Phone: 011-81-3416-3075; Fax: 011-55-81-3231-1906
Rua Gonçalves Maia, 163—Boa Vista 50070-060
For more information on aerospace opportunities in Brazil, please contact:
Brian C. Brisson
Regional Director—Western Hemisphere
Office of International Operations
U.S. Commercial Service
Tel: (202) 482-2736
E-mail: Brian.Brisson@trade.gov
Useful Links for Doing Business in Brazil

A number of useful links for doing business in Brazil can be found at
http://export.gov/brazil/links/index.asp
Russia
The Russian Federation (hereafter referred to as Russia) occupies a
landmass that is almost twice that of the United States with a popula-
tion of less than 140 million. The CIA World Factbook describes Russia
as a centralized, semi-authoritarian state in which the leadership seeks
to legitimize its rule through managed elections and economic growth.
Figure 7.3 reveals that Russia’s economy has recovered from the
worldwide recession quite nicely with GDP topping $2.02 trillion and
unemployment declining from 8.4 percent in 2009 to approximately 6
percent in 2012.
Figure 7.3 Russian GDP and Unemployment Trends
Billions of U.S. Dollars GDP Unemployment Percent

2,500 9
8
2,022
2,000 1,661 1,899 7
1,525 6
1,500
5
1,223
4
1,000
3
500 2
- -
2008 2009 2010 2011 2012
Source: International Monetary Fund World Economic Outlook Report, March 2013.
Following the break-up of the USSR in 1991, the Russian aero-

space industry struggled, but during Vladimir Putin’s second term
as President, things began to change. A 2010 report by the U.S.
International Trade Administration describes the transformation of
the Russian aerospace industry as follows:8
The Russian aviation industry has undergone a dramatic
transformation designed to position it as a formidable
competitor to the aviation industries of the United States
and the EU. As recently as 2005, the Russian aviation
industry could be characterized as a post-USSR era industry
comprised of separate state and privately-held manufacturers
and design bureaus with limited cooperation in research and
development, design, manufacture, sales and marketing. In
2006, however, the Government of Russia began a program
to consolidate the majority of the industry’s aerospace
companies under a central, state-owned, joint stock company:
the United Aircraft Corporation (UAC).
Today, the Russian aviation industry consists of approximately 300

companies, including 108 manufacturers, and 111 R&D and design
bureaus. Key government organizations representing the Russian aero-
space industry include the following:9
■■ United Aircraft Corporation (UAC). UAC is a holding company
consisting of the leading Russian aircraft design bureaus, aircraft
manufacturers and services companies structured as specialized
divisions for commercial transport, combat, and specialized
aircraft. UAC is working to increase the output of commercial
aircraft from the current 15 percent to 47 percent by 2025. In
order to be competitive internationally, UAC is increasingly
entering into collaborative ventures with Western suppliers.
■■ United Engine-Building Corporation (UEC). UEC is a subsidiary
of OBORONPROM Industrial Holding Company, which controls
all Russian helicopter manufacturers and manufacturers of main
aggregates and systems, representing the entire model range of
the industry. UEC consolidates over 80 percent of Russia’s engine-
building assets.
■■ Helicopters of Russia Holding is also a subsidiary of
OBORONPROM Industrial Holding Company that is focused
on the helicopter industry. The holding company incorporates 14
helicopter companies, including design bureaus, manufacturers
and service companies.
■■ Rostekhnologii (RT) is a super-state corporation that consolidates
the assets of 140 industrial enterprises in many industries,
including those in aviation such as Helicopters of Russia,
United Engine-Building Corporation, Aviation Instrument
Making, RT Chemical Composites, RT Metallurgy and others.
UAC has a strategic partnership with RT in an effort to raise
production efficiency by eliminating competition among domestic
manufacturers, and creating other synergies that will allow
expanding capabilities in the development and manufacturing of
new products.
Opportunities
Over the years, the United States has maintained a positive trade
balance with Russia. The trade balance declined during and immedi-
ately after the recession, but has rebounded nicely over the past two
years. In 2012, aerospace exports increased 101 percent and the U.S.
aerospace trade balance with Russia grew by 139 percent (see Table
7.2 and Figure 7.4).
According to the 2012 Country Commercial Guide for U.S. Companies
doing business in Russia, it is anticipated that Russian passenger traffic
will increase at a rate of 5.6 percent a year over the next 20 years—and
that this new thirst for travel will drive demand for new aircraft, MRO
services, and aircraft spare parts.10
Figure 7.4 Aerospace Trade Trends with Russia
Millions of U.S. Dollars Exports Imports Balance

1,600
1,400
1,200
1,000
800
600
400
200
0
2008 2009 2010 2011 2012
Table 7.2 Aerospace Trade Statistics with Russia

Change
2008 2009 2010 2011 2012 2011–2012
Exports 557 422 343 742 1,494 101
Imports 86 117 170 198 197 -1
Balance 471 304 172 544 1,297 139
This same report states that the current share of Western aircraft
in Russia’s airlines was expected to increase to 80 percent in 2012.
Between the increase in demand for travel and the need to replace older
aircraft, the overall prospects for the aerospace industry are quite good.
In addition to the growing demand for new aircraft, the Country

Commercial Guide for U.S. Companies doing business in Russia highlights
the following areas of opportunity for aerospace manufacturers:11
■■ Spare parts for aircraft. This market is estimated to be $600–700
million per year.
■■ Heavy maintenance MRO services. Heavy maintenance MRO
services in Russia are limited. As a result, many Western aircraft
undergo MRO services outside Russia, and even though the
airlines already have relationships with a number of MRO
providers, they are continuously looking for new providers. One
estimate indicates that the cost of Russian MRO services could
reach $750 million by 2019.
■■ Components for aircraft. The UAC needs a significant amount of
parts and components to build and support new and existing aircraft.
■■ Components for helicopters. Russia projects an annual growth in
helicopter production of 20–30 percent and has expressed interest
in helicopter components in a wide range of areas.
■■ Manufacturing technologies and machine tools. The demand for
new manufacturing technologies and machine tools continues
to grow due to the planned modernization of production
facilities at aircraft and helicopter production plants. With state
funding available for modernization, Russian plants appear to be
promising buyers.
■■ Advanced materials and integrated solutions. The modernization of
special metallurgy and composites, along with integrated solutions
from industrial software and machine tool vendors, are expected to
increase the productive capacity and quality of the Russian aviation
industry. As a result, these segments are a top priority.
Challenges
Although local aircraft manufacturers are not able to meet market
demand, there appears to be an emerging shift in policy which would
decrease foreign imports and increase local manufacturing. The impact
of this shift in policy remains to be seen.
For More Information on Doing Business in Russia

information on doing business in Russia. The U.S. Commercial Service
in Russia maintains offices in Moscow and St. Petersburg. For more

information on doing business in Russia contact one of the following:
U.S. Commercial Service Moscow

American Embassy
Bolshoy Deviatinsky Pereulok, 8
Moscow, 121099
Phone: 7-495-728-5580; Fax: 7-495-728-5585
Email: office.moscow@trade.gov
John McCaslin, Senior Commercial Officer
Phone: 7-495-728-5474; Fax: 7-495-728-5585
Email: John.McCaslin@trade.gov
U.S. Commercial Service St. Petersburg

U.S. Consulate General
15 Ulitsa Furshtatskaya
St. Petersburg 191028
Russia
Phone: 7-812-326-2560; Fax: 7-812-326-2561
Email: StPetersburg.Office.Box@trade.gov
Kenneth Duckworth, Principal Commercial Officer
Phone: 7-812-326-2563; Fax: 7-812-326-2561
Email: Kenneth.Duckworth@trade.gov
For more information on aerospace opportunities in Russia, please contact:
Vladislav Borodulin
U.S. Commercial Services Specialist
Tel: 7-495-728-5235
e-mail: Vladislav.Borodulin@trade.gov
Useful Links for Doing Business in Russia

A number of useful links for doing business in Russia can be found at
http://export.gov/russia/doingbusinessinrussia/index.asp
India
At approximately 1.2 billion people, India has the second largest popu-
lation in the world and a rapidly expanding middle class.12 Despite
overpopulation and serious environmental challenges, India’s GDP
grew from 2009 through 2011, but declined slightly in 2012. Between
2011 and 2012, India’s GDP decreased by about one percent, and
unemployment ticked up from 9.8 to 9.9 percent (see Figure 7.5).
Figure 7.5 India GDP and Unemployment Trends

2,000 12
GDP Unemployment 1,838 1,825
1,800
1,615
10
1,600
1,400
1,276 1,259 8
1,200
1,000 6
800
4
600
400
2
200
0 0
2008 2009 2010 2011 2012
Source: International Monetary Fund World Economic Outlook Report 2013 and CIA World Factbook.
Opportunities
India’s growing population, and particularly the middle class, is creat-
ing higher levels of demand for air transportation. As a result, the
demand for air travel is expected to grow at 12.5 percent per year over
the next several years.13 Similarly, India’s MRO market is expected to
grow 10 percent annually and reach $2.4 billion by 2020.14
Opportunities for U.S. exports to India include large civil aircraft,
general aviation, military systems, aviation training, and airport infra-
structure development. India is also seeking partners to develop its
commercial satellite and space launch capabilities.
The 2012 Country Commercial Guide for U.S. Companies doing business in
India states that India is the ninth biggest aviation market in the world
with the fourth largest domestic market. Despite its size, however, the
Country Commercial Guide notes that India is one of the least penetrated
aviation markets in the world—representing huge opportunities for
U.S. aerospace manufacturers.
The Country Commercial Guide goes on to say:15
India is ideally positioned as a major aviation hub at the

crossroads between Europe, the Middle East and Asia Pacific.
The fact that aviation was a neglected sector for so long has
allowed airports such as Dubai and Singapore to effectively
establish themselves as offshore hubs for Indian passengers,
and they now have a significant head start. However, as India’s
airports improve, and its airlines receive international awards for
their service, there may be an opportunity to leverage its huge
home market to compete with these longer established hubs.
Figure 7.6 and Table 7.3 illustrate the trends in aerospace trade with
India over the past five years.
Figure 7.6 Aerospace Trade Trends with India
Millions of U.S. Dollars Exports Imports Trade Balance

2,500
2,000
1,500
1,000
500
-
2008 2009 2010 2011 2012
Source: International Monetary Fund World Economic Outlook Report, March 2013.
Table 7.3 Aerospace Trade Statistics with India

Change
2008 2009 2010 2011 2012 2011–2012
Exports 1,863 2,302 1,318 770 1,377 79
Imports 44 32 32 57 84 46
Trade Balance 1,820 2,270 1,286 713 1,293 81
U.S. aerospace exports and the overall aerospace trade balance

between India and the United States declined between 2009 and 2011,
but recovered nicely in 2012. In 2012, U.S. aerospace exports to India
increased by 79 percent and the aerospace trade balance grew by 81

percent (see Table 7.3 and Figure 7.6). A recent white paper by the
aerospace team at the International Trade Administration highlights
several particularly important reasons for optimism.16
■■ The President of the United States has identified India as a key
market for the National Export Initiative (NEI).
■■ The United States and India have agreed to cooperate on export
controls.
■■ India is not a major producer of aircraft or aircraft parts and the
United States is the largest source of its aerospace imports.
■■ The Investment Commission of India envisions spending up to
$110 billion by 2020 with $80 billion spent on new aircraft and
$30 billion spent on the country’s airport infrastructure.
To facilitate the transformation of India’s aerospace industry and
aviation infrastructure, the U.S. Government and the Government of
India entered into agreements in a number of aviation and aerospace-
related areas. Some of these include:
■■ U.S.–India Aviation Cooperation Program (ACP): A bilateral
public-private partnership launched in 2007 to meet the
modernization requirements of India’s aviation sector. The ACP is
jointly supported by the U.S. Federal Aviation Administration, the
U.S. Department of Commerce, the U.S. Trade and Development
Agency, and a number of U.S. aviation companies.
■■ U.S.–India High Technology Cooperation Group (HTCG): In
2010, the Civil Aviation Subcommittee was added to the HTCG to
facilitate discussions and trade in high technology and sensitive areas.
■■ U.S.–India Aviation Summits: The United States and India agreed
to discuss aviation policy issues that enhance the commercial
relationship between the U.S. and Indian civil aviation industries.
■■ Major Indian Air Shows: The United States and India agreed to
promote and participate in major Indian air shows, such as Aero
India in Bangalore and India Aviation in Hyderabad.
■■ Open Skies Agreement: The United States and India signed an
Open Skies Agreement in 2005 to increase the flow of bilateral
air traffic.
During the fall of 2011, India announced plans to open a National

Aviation University to train pilots, air traffic personnel and other avia-
tion staff. Nevertheless, despite the numerous positive steps that have
been taken by the government, doing business in India is not without
its challenges.
Challenges
The biggest challenges in India are caused by its limited aviation infra-
structure and the government’s lack of transparency in procurement
decisions. Tariffs on imports of general aviation aircraft and parts are
also an issue and the general aviation flight clearance process can be
troublesome.17
For More Information on Doing Business in India

There are a variety of public and private sources for obtaining
more information on doing business in India. The U.S. Commercial
Service in India has offices in New Delhi, Mumbai, Chennai, Kolkata,
Ahmedabad, Bangalore, and Hyderabad. For more information on
doing business in India, please contact one of the following:
U.S. Commercial Service, New Delhi

Judy Reinke, Minister Counselor for Commercial Affairs
Margaret Hanson-Muse, Deputy Senior Commercial Officer
Greg O’ Connor, Commercial Officer
Thomas P. Cassidy, Commercial Officer
Olga Ford, Commercial Officer
Bureau of Industry and Security
Perry Davis, Export Control Attaché
Patent and Trademark Office
Kalpana Reddy, Intellectual Property Attaché
The American Center
24 Kasturba Gandhi Marg
NEW DELHI 110 001
Tel: 91-11-2347 2000; Fax: 91-11-2331 5172
E-mail: newdelhiofficebox@trade.gov
U.S. Commercial Service, Mumbai

Richard Rothman, Principal Commercial Officer
Martin Claessens, Commercial Officer

American Consulate General
C-49, G-Block, Bandra Kurla Complex (BKC)
Bandra (East), Mumbai 400 051
Tel: 91-22-2672 4000; Fax: 91-22-
E-mail: office.mumbai@trade.gov
U.S. Commercial Service, Chennai

James Golsen, Principal Commercial Officer
220 Anna Salai
Chennai 600 006
Tel: 91-44-2857 4477; Fax: 91-44-2857 4212
E-mail: office.chennai@trade.gov
U.S. Commercial Service, Kolkata

Richard Craig, Principal Commercial Officer
The American Center
38-A, Jawaharlal Nehru Road
Kolkata 700 071
Tel: 91-33-3984 6300; Fax: 91-33-2288 1207
E-mail: office.calcutta@trade.gov
U.S. Commercial Service, Ahmedabad

Sangeeta Taneja, Commercial Specialist
JMC House, Suite # 41/42
Ambawadi, Opp. Parimal Garden
Ahmedabad 380 006
Tel: 91-79-2656 5210/2656 5216; Fax: 91-79-2656 0763
E-mail: office.ahmedabad@trade.gov
U.S. Commercial Service, Bangalore

Leonard Roberts, Commercial Specialist
Manjushree Phookan, Commercial Specialist
S2, 2nd Floor, Red Cross Bhavan
26, Race Course Road

Bangalore 560 001
Tel: 91-80-2220 6401/2220 6404; Fax: 91-80-2220 6405
E-mail: office.bangalore@trade.gov
U.S. Commercial Service, Hyderabad

P. Radhakishore, Commercial Specialist
152, First Floor, Taj Deccan Hotel
Road No. 1, Banjara Hills
Hyderabad 500 034
Tel: 91-40-2330 5000/2339 3939; Fax: 91-40-2330 0130
E-mail: office.hyderabad@trade.gov
For more information on aerospace opportunities in India, please
contact Pat Cassidy at pat.cassidy@trade.gov.
Useful Links for Doing Business in India

A number of useful links for doing business in India can be found at
http://export.gov/india/doingbusinessinindia/index.asp
China
The People’s Republic of China (PRC) is a communist state with
a population of over 1.34 billion people. In the late 1970s, China’s
leaders focused on “market-oriented economic development” and
by 2000, its output had quadrupled. Despite strong controls, living
standards have improved, and the government of China has started to
proactively engage in the global economic community.18
At the macroeconomic level, China has experienced a steady growth in
its GDP since 2008, while maintaining an unemployment rate of 4.1
percent (see Figure 7.7).
Opportunities
As the Chinese economy and living conditions have improved, the
demand for air travel has also increased. Today, “China has the world’s
fastest growing domestic aviation industry …” and both “Boeing and
Airbus have identified China as the single most important market for
sales over the next 20 years …”19
As part of its plan to develop its civil aircraft manufacturing capabili-

ties, in early 2008 the Commercial Aircraft Corporation of China
(COMAC) was created to manufacture the C919 and manage its exist-
ing ARJ21 regional jet program. In late 2008, the central government
merged two large aerospace enterprises to create the Aviation Industry
Corporation of China or AVIC.20
Figure 7.7 China GDP and Unemployment Trends

9,000 4.5
GDP Unemployment 8,227
8,000 4.4
7,322
7,000 4.3
5,930 4.2
6,000
4,991 4.1
5,000 4,520
4.0
4,000
3.9
3,000
3.8
2,000 3.7
1,000 3.6
0 3.5
2008 2009 2010 2011 2012
Source: International Monetary Fund World Economic Outlook Report March 2013.
Over the years, U.S. firms and other Western companies have part-
nered with China in a number of ways to produce engines, flight
control systems, landing gear, and other components for Chinese
aircraft. Various arrangements to co-produce aircraft in China have
also been attempted with mixed results.
However, as stated in Flight Plan 2011, aviation and aerospace oppor-
tunities extend well beyond the production of large aircraft. General
aviation is also expected to grow, and some estimate that the general
aviation market in China could become the second largest market in
the world, behind the United States, by 2015.21
The Civil Aviation Administration of China (CAAC) expects that
as many as 230 new airports will be built by 2015 to meet China’s
increasing demands for air travel.22 To support these needs, massive
investments in new air traffic control systems are also anticipated.
Figure 7.8 and Table 7.4 indicate a steady growth in aerospace trade
with China over the past three years. The 2012 Country Commercial
Guide for U.S. Companies doing business in China states “opportunities
in the civil aviation market include final assembly and tier-one suppli-
ers, small niche parts manufacturers, airport design and construction
companies, and general aviation among others.”23
Figure 7.8 Aerospace Trade Trends with China

9,000
Exports Imports Balance
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
2008 2009 2010 2011 2012
Table 7.4 Aerospace Trade Statistics with China

Change
2008 2009 2010 2011 2012 2011–2012
Exports 3,917 5,344 5,764 6,392 8,367 31
Imports 387 397 498 622 663 7
Balance 3,530 4,947 5,266 5,769 7,704 34
Challenges
It is clear that the aviation and aerospace manufacturing markets in
China represent enormous opportunities for U.S. air carriers, as well as
general aviation and commercial aircraft manufacturers. However, it is
equally apparent that the Chinese market has its own internal challenges.
For example, the Country Commercial Guide states that there are three key
challenges that threaten to limit growth in China: inadequate infrastruc-
ture, overly restrictive airspace, and limited skilled human resources.24
In addition to these internal challenges, it is clear that a vibrant

Chinese aerospace manufacturing industry could dampen prospects
for U.S. manufacturers hoping to export products and services into
China, as well as those interested in licensing, joint ventures, or other
market entry arrangements. Over time, U.S. manufacturers and other
Western companies could also face new competition outside China
“as Chinese manufacturers seek to expand their share of the global
aircraft market.”25
For More Information on Doing Business in China

information on doing business in China. The U.S. Commercial Service
in China has offices in Beijing, Chengdu, Guangzhou, Shanghai, and
Shenyang. For more information on aerospace opportunities in China,
please contact one or more of the following:.
U.S. Commercial Service Beijing

Contact: Ida Peng
No.55 An Jia Lou Road, Chaoyang District
Beijing 100600, China
Tel: (86 10) 8531-3947; Fax: (86 10) 8531-4343
Email: aiqun.peng@trade.gov
U.S. Commercial Service Shanghai

Contact: Vivien Bao
Shanghai Center, Suite 631
1376 Nanjing West Road, Shanghai 200040, China
Tel: (86 21) 6279-7630; Fax: (86 21) 6279-7639
Email: vivien.bao@trade.gov
U.S. Commercial Service Chengdu

Contact: Cui Shiyang
No.4 Lingshiguan Road, Chengdu 610041, China
Tel: (86 28) 8558-9642; Fax: (86 28) 8668-9221
Email: cui.shiyang@trade.gov
U.S. Commercial Service Guangzhou

Contact: Lena Yang
14F China Hotel Office Tower, Room 1461, Liuhua Road,
Guangzhou 510015, China
Tel: (86 20) 8667-4011; Fax: (86 20) 8666-6409
Email: lena.yang@trade.gov
U.S. Commercial Service Shenyang

Contact: Liu Yang
No.52 Shi Si Wei Lu He Ping District
Shenyang 110003, China
Tel: (86 24) 2322-1198; Fax: (86 24) 2322-2206
Email: yang.liu@trade.gov
Useful Links for Doing Business in China

A number of useful links for doing business in China can be found at
http://export.gov/china/doingbizinchina/index.asp.

Brazil, Russia, India and China are unique in a number of ways. They
have all experienced significant growth over the past decade; they have
all targeted aerospace as a strategic industry; they all have some form
of state ownership or support; they all represent enormous opportuni-
ties for U.S. aerospace manufacturers and suppliers; and they all could
be formidable competitors at some point in the future. Unfortunately,
in 2012, the demand for products and services in all four countries
slowed as their economies reacted to worsening global economic
conditions. Finally, the BRICs all have one additional characteristic in
common: a lack of qualified employees who can work on state-of-the-
art aircraft, which is the subject of the next chapter.
Chapter Endnotes
1 U.S. Central Intelligence Agency. (2013). The CIA world factbook. Retrieved from
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
2 International Monetary Fund. (2013). World economic outlook database. Retrieved
from http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx
3 U.S. Department of Commerce, U.S. Commercial Service. (2011). Doing business in
Brazil: 2011 country commercial guide for U.S. companies. Retrieved from
http://www.buyusainfo.net/z_body.cfm?dbf=ccg1&search_type2=int&avar=19999&
country=Brazil&logic=and&loadnav=no and U.S. Department of Commerce, Office of
Transportation and Machinery, International Trade Administration. (2011). Flight plan
2011: Analysis of the U.S. aerospace industry. Retrieved from http://trade.gov/wcm/
groups/internet/@trade/@mas/@man/@aai/documents/web_content/aero_rpt_flight_
plan_2011.pdf
4 Ibid., p. 16.
5 U.S. Department of Commerce, Office of Transportation and Machinery, International
Trade Administration. (2011). Flight Plan 2011: Analysis of the U.S. aerospace
industry. Retrieved from http://trade.gov/wcm/groups/internet/@trade/@mas/@man/@
aai/documents/web_content/aero_rpt_flight_plan_2011.pdf
6 Aerospace Industries Association of Brazil. (2012). The Brazilian aerospace industry.

Retrieved from http://www.aiab.org.br/english/index.php?option=com_content&task=e
mailform&id=13&itemid=26
7 Ibid.
Trade Administration. (2010). Flight Plan 2010: Analysis of the U.S. aerospace
9 U.S. Department of Commerce, U.S. Commercial Service, (2012). Doing business in
Russia: 2012 country commercial guide for U.S. companies. Retrieved from h
ttp://www.buyusainfo.net/z_body.cfm?dbf=ccg1%2Cbmr11%2Cmrsearch1&sea
rch_type2=int&avar=19999&country=Russia&logic=and&loadnav=no
10 Ibid., p. 40.
11 Ibid., pp. 42-44.
12 The CIA World Factbook.
13 Flight Plan 2010, p. 63.
14 U.S. Department of Commerce, U.S. Commercial Service, (2012). Doing business in
India: 2012 country commercial guide for U.S. companies. Retrieved from
http://www.buyusainfo.net/z_body.cfm?dbf=ccg1&search_type2=int&avar=19999&co
untry=India&logic=and&loadnav=no
15 Ibid., p. 24.
16 Aerospace Team, U.S. Department of Commerce, International Trade Administration,
Office of Manufacturing and Services. (2012, July 18). India Aerospace Sector.
Washington, D.C.: Author.
17 Ibid.
18 The CIA World Factbook.
20 Ibid., p. 47.
21 Galbraith, A. (2012, April 17). Small-jet makers flock to China. The Wall Street Journal,
p. B6. Retrieved from http://online.wsj.com/article/SB100014240527023038154045
77335363327341258.html
23 U.S. Department of Commerce, U.S. Commercial Service. (2012). Doing business in
China: 2012 country commercial guide for U.S. companies. Retrieved from
http://www.buyusainfo.net/z_body.cfm?dbf=ccg1&search_type2=int&avar=19999&co
untry=China&logic=and&loadnav=no
24 Ibid., p. 36.
133
The Aerospace Workforce
Introduction
The U.S. aerospace industry has one of the finest workforces in the
world. It is, in fact, “second-to-none.” It has propelled the U.S. aero-
space industry to its current leadership position and has responded
to every challenge. Lockheed Martin’s Joint Strike Fighter, Boeing’s
Dreamliner, Northrop Grumman’s X-47B Unmanned Combat Air
System, and NASA’s Curiosity are but the latest examples of American
ingenuity and superiority in air and space—and behind it all is the U.S.
aerospace workforce.
Employee Productivity
The U.S. aerospace workforce is also one of the most productive
workforces in the world. According to a Congressional Research
Service report on manufacturing productivity, aerospace manufacturing
output in the United States increased by 21 percent between 2000 and
2011, even as overall U.S. manufacturing output decreased by 3 percent
during the same period.1 This increase in productivity can be attributed
to a number of factors including process redesign, investments in new
manufacturing equipment, and a highly skilled workforce—which is

now undergoing its own unique set of challenges.
Workforce Challenges
Despite an enviable record of achievement, high wages, and continu-
ously improving productivity, many are worried about the future of
America’s aerospace workforce. Older workers are retiring and there
are not enough people with the right skills in the workforce pipeline.
For firms of all sizes, the lack of qualified workers can slow produc-
tion, increase the cost of on-the-job training, reduce productivity, and
limit innovation.
At a recent U.S. Senate Aerospace Caucus luncheon, Marion Blakey stated:2
We need a workforce with the necessary skills to compete
globally—and to continue driving innovation in the future.
In particular, this means we need more bright young people
willing to enter and succeed in the science, technology,
engineering, and math—STEM—fields.
About 13 percent of America’s college graduates earn STEM
degrees. But in many of our competitor nations, it’s closer to
25 percent. So, we have some work to do.
A 2011 study by Deloitte revealed that finding skilled production work-
ers, distributors, and technicians to replace retiring employees was a
major concern of executives and one of their biggest hiring challenges.3
The results of the Aviation Week 2012 Workforce Study reinforce the scale
and scope of the problem.4 Prior to sequestration, aerospace firms
estimated that they would need to hire almost 120,000 employees over
the next five years to meet their workforce needs in a variety of areas.
Figure 8.1 is a breakdown of hiring needs by sector.
According to Aviation Week, the greatest challenge may be replacing
production workers, which represent the largest category of aerospace
workers that are eligible to retire. Figure 8.2 highlights the percentage
of aerospace workers that are eligible to retire, by category, from 2012
through 2015.5 As indicated by the overall trend for engineers eligible
to retire, this is clearly a growing problem. Similar trends are apparent
in the other job categories as well.
The Aerospace Workforce 135
Figure 8.1 A&D Hiring Needs, 2012–2016
Space
1,420
Commercial
15,609
Defense
102,786
Source: Aviation Week & Space Technology, August 2012.
Figure 8.2 Percentage of Workforce Eligible to Retire
Percent
30.0
Engineers R&D Program Management Hourly Manufacturing
25.0 24
23
----- Linear Trend for Engineers 22 22
20
20.0 19 19
18 18 18
17
16 16
15.0 14 14
12
10.0
5.0
0.0
2012 2013 2014 2015
Source: Based on data from Aviation Week & Space Technology, August 2012.
AAR Corporation, a leading provider of products and services to the

commercial aviation, government and defense industries, commissioned
a report that attributes the shortage of workers to the following:6
■■ The retirement of highly skilled, but older, workers.
■■ A lack of focus on applied STEM education in the nation’s
public schools.
■■ A disconnect between what is being taught in our educational

institutions and what the industry really needs.
■■ A negative perception among the general public of manufacturing
and maintenance work which discourages job seekers from
entering the field.
■■ A shrinking talent pipeline for some aerospace-related occupations
such as aircraft mechanics and sheet-metal technicians.
■■ Reliance on workers trained by the military who are no longer
entering the industry at the same rate as before.
Furthermore, the AAR report notes that the lack of skilled workers is
most challenging for small to medium-size manufacturers that do not
have the power and influence of larger corporations.7
Employment Statistics
At the end of 2012, the U.S. aerospace industry employed 632,700
people (see Figure 8.3). Employment in the aircraft, aircraft parts and
equipment and engine manufacturing segments grew, while employ-
ment in the missiles, space vehicles, and search, detection and naviga-
tion sectors declined.
Figure 8.3 Employment in the U.S. Aerospace Industry by Segment
Search, detection, and navigation instruments Guided missiles, space vehicles, and parts
Other aircraft parts and equipment Aircraft engines and engine parts
Aircraft Total Aerospace Products and Parts
Thousands
700 664.8
627.6 620.2 630.1 632.7
600
240.8
500 230.1 228.4 237.3 241.1
400
86.7
75.4 75.8 80.0 81.3
300 105.4 95.6 98.2 102.5 106.9
200 79.6 76.9 75.4 73.3 72.1
100
152.3 149.6 142.4 137.0 131.3
0
2008 2009 2010 2011 2012
Source: U.S. Department of Labor, Bureau of Labor Statistics, March 2013.
Washington State dominated the list of states ranked by employment

for aerospace product and parts manufacturing (see Figure 8.4).
Wages and salaries vary greatly depending on the size of the firm and
the nature of work performed. Average annual wages and the number
of employees for selected occupations are highlighted in Figures 8.5
through 8.10.
Figure 8.4 Top 10 States for Aerospace Employment
Washington 86,582
California 71,353
Texas 48,391
Kansas 32,196
Connecticut 30,546
Arizona 26,435
Georgia 21,680
Florida 19,156
Ohio 15,783
Missouri 14,490
- 20,000 40,000 60,000 80,000 100,000

Number of Employees
Source: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary as of August 2012.
Figure 8.5 Average Annual Wages for Functional Managers,

Lawyers, and Specialists in Aerospace
Lawyers 157
Market Research and 91

Marketing Specialists
Operations Research 82
Analysts
Financial Analysts 80
Logisticians 76
Accountants 72
and Auditors
Purchasing Agents 68
0 20 40 60 80 100 120 140 160 180

Source: U.S. Department of Labor, Bureau of Labor Statistics, August 2012.
Figure 8.6 Number of Functional Managers, Lawyers,

and Specialists in Aerospace
Number of Employees
12,000
10,500
10,000 9,340
8,000
6,000
4,000 3,600
2,510
2,000 1,920
1,100
350
-
Lawyers Market Operations Financial Accountants Logisticians Purchasing
Research and Research Analysts and Auditors Agents
Marketing Analysts
Specialists
Figure 8.7 Average Annual Wages for Engineers in Aerospace
Electrical 97.3
Engineers
Aerospace 96.7
Engineers
Materials 95
Engineers
Environmental 90
Engineers
Mechanical 89
Engineers
Industrial 86
Engineers
80 82 84 86 88 90 92 94 96 98 100
Figure 8.8 Number of Engineers in Aerospace
Number of Employees
30,000
28,340
25,000
20,000
16,830
15,000
11,800
10,000
7,410
5,000 4,170
300
-
Environmental Materials Electrical Mechanical Industrial Aerospace
Engineers Engineers Engineers Engineers Engineers Engineers
Figure 8.9 Average Annual Wages for Production Workers in Aerospace
Tool and Die Makers 57
Milling and Planing Machine Setters

Operators and Tenders 52
Aircraft Structure Surfaces Rigging

and Systems Assemblers 49
Engine and Other 47

Machine Assemblers
Structural Metal 45
Fabricators and Fitters
Computer-Controlled Machine 41
Tool Operators
Electrical and Electronic 34
Equipment Assemblers
0 10 20 30 40 50 60
Figure 8.10 Number of Production Workers in Aerospace
Number of Employees
35,000 33,020
30,000
25,000
20,000
15,000
10,000
7,600
5,000 3,920 4,470
1,930 2,520
1,410
-
Milling and Engine and Structural Tool and Electrical Computer- Aircraft
Planing Machine Other Metal Die and Controlled Structure
Setters Machine Fabricators Makers Electronic Machine Surfaces Rigging
Operators Assemblers and Fitters Equipment Tool and Systems
and Tenders Assemblers Operators Assemblers
Figure 8.11 is a graph of the age distribution of employees involved in

manufacturing aerospace products and parts in 2011. The number of
employees involved in this segment of the workforce totaled 438,000
with a median age of 48.0. Fifty-eight percent of the workers were 45
years old or older—reinforcing the need to encourage younger work-
ers to enter the profession.
Figure 8.11 Age Distribution for Aerospace Products and

Parts Manufacturing Workforce
Thousands
160
141
140
120
96
100
82 86
80
60
40
18
13
20
2
0
16–19 years 20–24 years 25–34 years 35–44 years 45–54 years 55–64 years 65 years +
Source: U.S. Bureau of Labor Statistics, Current Population Survey, 2012.

The Workforce as a Supply Chain

At a 2011 hearing of the Committee on Science, Technology,
Engineering, and Mathematics Workforce Needs for the U.S.
Department of Defense and the U.S. Defense Industrial Base, the
committee used a diagram similar to Figure 8.12 to describe the
current workforce situation.8
Figure 8.12 indicates that less than five percent of students entering
their freshman year in high school will graduate with STEM-related
college degrees nine years later. The figure also indicates that the
number of non-U.S. students obtaining degrees in science and engi-
neering is greater than in the United States and increasing.
Figure 8.12 Supply Chain Model of STEM Graduates
Proficient Proficient STEM Graduate

(proficient or Interested Major with STEM
advanced) 278,000 Degree 167,000
17%
32% in 2005
Expected
Not Proficient Proficient Non-STEM in 2011
(basic or Not Interested Major
below basic) 25%
68% S&E Degrees
Not Proficient Awarded Per Year
Interested
15% 2-Year
College
Not Proficient Time
Not Interested United States
Other Countries
42%
4,013,000 2,799,000 1,170,000
Beginning 9th grade Grads in class Enrolled in 4-year
in 2001 of 2005 college
Elementary Secondary College Career
Source: Report of a Workshop on Science, Technology, Engineering, and Mathematics (STEM) Workforce
Needs for the U.S. Department of Defense and the U.S. Defense Industrial Base. Based on a figure by
Michael Lach, Special Assistant to the Secretary for STEM, Department of Education, 2011.
For many, looking at the workforce from a supply chain perspective

makes it easier to assign and track performance metrics; identify and
manage sources of variance and risk; and develop creative solutions.
Creative Solutions
Around the country, potential employers, public officials, and orga-
nizations such as the Aerospace Industries Association (AIA), the
American Institute of Aeronautics and Astronautics (AIAA), the
Aerospace States Association (ASA), the National Defense Industries
Association (NDIA), the Society for Manufacturing Engineers, the
National Association of Manufacturers (NAM), the Manufacturing
DFW Regional Aerospace Cluster Responds to Changing Workforce Needs

The Dallas-Ft. Worth (DFW) Regional Aerospace Cluster was launched a decade
ago under the direction of the DFW Regional Workforce Leadership Council. Today,
the DFW Region is home to nearly 50 percent of the state’s aerospace manufacturing
establishments and accounts for 67 percent of state’s employment in the
aerospace sector.
The vision and mission of the DFW Regional Aerospace Cluster is to be the
regional center of excellence for meeting the education and workforce needs of the
Aerospace and Defense Industry. Industry members include American Eurocopter
LLC, Bell Helicopter, Lockheed Martin Aeronautics Company, Raytheon, and Triumph
Aerostructures—Vought Division. Cluster partners include the Arlington Chamber of
Commerce, Fort Worth Chamber of Commerce, Texas Manufacturing Assistance
Center, Workforce Solutions for Tarrant County, and the NANO Materials Design &
Commercialization Center.
Working together, the members and partners in the DFW aerospace cluster
developed and deployed:
■■ The first Career Technology Education Directors’ Advisory Committee which
includes representatives from 18 school districts, the Fort Worth Chamber, Region
XI Service Center and Workforce Solutions for Tarrant County.
■■ A 240-hour Aerospace/Manufacturing Training curriculum that was designed by
industry to meet industry needs and standards.
■■ The “Gotta Jet?” career awareness program to reach students and parents with a
clear and concise message through a “student friendly” brochure and companion
DVD. The “Gotta Jet?” outreach program distributed 40,587 brochures and 5,125
DVDs; and reached 24,452 students in 146 schools.
In November 2011, the U.S. Department of Labor awarded Workforce Solutions for
Tarrant County a four year $5 million grant to provide On-the-Job Training assistance
for H-1B level occupations including:
■■ Aerospace Engineers
■■ Electrical Engineers
■■ Industrial Engineers
■■ Electronics Engineers
■■ Mechanical Engineers and
■■ Computer Software Engineers for Systems Software.
In 2012, the members and partners of the DFW aerospace cluster decided to
proactively adjust its focus, alter its strategy, and expand its membership to deal with
the industry’s changing workforce and training needs.
Source: Bell, J. Workforce Solutions for Tarrant County. Ft. Worth, Texas: DFW Regional Workforce Leadership Council,
October 2012.
Institute, and others have been developing and implementing creative

solutions to these pressing workforce issues. Some of these ideas
include the Business and Industry STEM Education Coalition,9
the Team America Rocketry Challenge,10 the Real World Design
Challenge,11 and the Manufacturing Skills Certification program.12
Business and Industry STEM Education Coalition

The Business and Industry STEM Education Coalition (BISEC) was
established in 2010 to enhance and elevate the U.S. commitment to
science, technology, engineering and mathematics, and to facilitate
STEM education and workforce development through private and
public partnerships.13 The goals of BISEC, a dynamic affiliation of
associations representing employers of STEM professionals, are to:
■■ Increase the number of STEM graduates from high school
through graduate school, such as increasing STEM bachelors’
degrees to 400,000 annually by 2020.
■■ Leverage and align activities and resources to achieve meaningful
employer engagement in STEM in all 50 states.
■■ Improve the quality and impact of business-led or supported
STEM programs towards an increase in our nation’s student
achievement.
■■ Articulate and publicize industries’ scientific and technical
achievements and contributions to society to attract our
future workforce.
By the middle of 2012, more than 40 business and industry associa-
tions had joined the coalition whose purpose is to improve STEM
education and develop future jobs and employment specialties that will
strengthen America’s competitiveness and national security.
Team America Rocketry Challenge

The Team America Rocketry Challenge (TARC) is the world’s largest
model rocket contest. It is also AIA’s signature STEM program that
excites, engages and attracts students into the STEM education and
workforce development pipeline for ultimate recruitment into the
aerospace industry. In its 11th season, 4,500 students from 44 states,
the District of Columbia and the U.S. Virgin Islands competed for
the top prize. This year, that prize included a trip to Paris, courtesy of
the Raytheon Company; where the winning team from Georgetown,
TX, went on to win the International Rocketry Challenge at the Paris
International Air Show.
According to AIA President and CEO Marion C. Blakey,14

TARC has inspired thousands of bright young minds to
expand their interest in science, technology, engineering and
mathematics over the past 11 years ... The caliber of these
students and the dedication they have shown here today are
great indicators that the future of our industry is in good hands.
Real World Design Challenge

The Real World Design Challenge (RWDC) is an annual competition
that provides high school students with the opportunity to work on
real world engineering problems in a team environment. In the RWDC
program, student teams address challenges faced by America’s lead-
ing industries. Students use a variety of tools to develop solutions and
must convincingly demonstrate the value of their solutions to a panel
of industry experts. The RWDC provides students with the opportu-
nity to apply lessons learned from the classroom to real challenges in
the aviation and aerospace workplace.
The Real World Design Challenge program, which has grown expo-
nentially over the past several years, has the backing of the Aerospace
States Association and Embry-Riddle Aeronautical University, as well
as numerous other industry leaders and government organizations.
Zachary Lemnios, Assistant Secretary for Research and Engineering at
the Department of Defense, and keynote speaker at the 2012 event,
captured the spirit of the challenge when he stated that “I’m looking
for the future that you’re about to showcase.”15
Manufacturing Skills Certification Program

According to the Manufacturing Institute, the Skills Certification program
was established to directly address deficits in manufacturing education
and training, which are limiting the pool of candidates for high-quality
manufacturing jobs. The National Association of Manufacturers-endorsed
Manufacturing Skills Certification credentials have real value in the manu-
facturing workplace and provide pathways to employment for:
■■ Individuals seeking valuable careers in manufacturing.
■■ Workers who need to improve their skills to advance to higher
level positions.
■■ Workers whose jobs may be at risk, or workers who have lost a job
and need to return to the workforce.
■■ Individuals coming out of the military.

■■ People moving out of welfare and into work.
The Manufacturing Skills Certification System is a system of stack-
able and portable credentials applicable to all manufacturing sectors to
ensure that individuals have both the personal and professional skills
necessary for advanced manufacturing. The skill sets are based on the
Advanced Manufacturing Competency Model and include four tiers of
manufacturing competencies:16
■■ Personal effectiveness.
■■ Essential academic skills in reading, writing, math, and using and
locating information.
■■ Core manufacturing competencies.
■■ Key technical skills for the production line, welding, machining and
metalforming or Computer Numerical Control (CNC) operations.
Other Ideas
Other creative ideas that are being implemented by local communities
and employers include the following:
■■ Engage “cool” and diverse role models that will attract the
attention of a broad demographic of youth.
■■ Develop and publish stories that create positive visibility for
local workers.
■■ Use social media such as Facebook, to appeal to younger
potential workers.
■■ Restore “shop” to high school curricula to expose students to
basic manufacturing techniques.
■■ Set up tours to local plants to educate students on careers in
aerospace manufacturing.
■■ Use technology-enabled knowledge management tools to capture
the knowledge of older workers.
■■ Develop and implement mentoring programs so that older
workers can share their insights with younger workers.
■■ Offer summer internship programs for youth to expose them to

the manufacturing environment.
■■ Use recruitment and retention bonuses to attract and retain
promising workers.
■■ Develop career management programs for new manufacturing
employees that are similar to career planning methods used by
the military.
■■ Provide stable long-term funding for colleges and universities so
that they can hire the right faculty and develop the right programs
to meet industry’s long-term educational needs.
■■ Engage students in hands-on, experiential STEM-related projects.

The U.S. aerospace workforce is the finest and most talented workforce
in the world. Unfortunately, it is being challenged by an aging resource
pool, lack of interest in aerospace by the next generation of workers,
growing competition from overseas manufacturers, and the yet to be
determined impact of sequestration on the U.S. aerospace workforce.
Despite these challenges, industry leaders, government organizations,
and a variety of associations are taking a number of creative and long-
term actions to solve this potentially serious problem.
Chapter Endnotes
1 Levinson, M. (2012, January 5). U.S. manufacturing in international perspective.

(CRS Report No. R42135). Washington DC: Congressional Research Service.
2 U.S. Department of Commerce. (2012, July 18). Remarks at Senate Aerospace
Caucus Luncheon. Retrieved from http://www.commerce.gov/news/
acting-secretary-speeches/2012/07/18/remarks-senate-aerospace-caucus-luncheon
3 Deloitte Development and the Manufacturing Institute. (2011). Boiling Point: The
skills gap in U.S. manufacturing. Retrieved from http://www.deloitte.com/assets/
Dcom- United States/Local%20Assets/Documents/AD/us_PIP_2011SkillsGapRep
ort_01142011.pdf
4 Hedden, C. (2012, August 20). Sequestered workforce. Aviation Week & Space
Technology, pp. 38-41.
5 Ibid.
6 AAR Corporation. (2011). The mid-skills gap in middle America: Building today’s
workforce. Retrieved from http://www.aarcorp.com/mid-skills/
7 Deloitte Development and the Manufacturing Institute. Boiling Point, p. 3.
8 National Research Council. (2012). Report of a workshop on Science, Technology,

Engineering, and Mathematics (STEM) Workforce Needs for the U.S. Department
of Defense and the U.S. Defense Industrial Base. Washington, DC: The National
Academies Press, p. 23.
9 For more information on the Business and Industry STEM Education Coalition, see
http://www.aia-aerospace.org/issues_policies/workforce/bisec/
10 For more information on the Team America Rocketry Challenge, see
http://rocketcontest.org/
11 For more information on the Real World Design Challenge, see
http://www.realworlddesignchallenge.org/
12 For more information on the Manufacturing Skills Certification program, see
http://www.themanufacturinginstitute.org/Education-Workforce/Skills-Certification-
System/Skills-Certification-System.aspx
13 Business and Industry STEM Education Coalition. (2010, March 12). Charter for
the Business and Industry STEM Education Coalition Retrieved from
http://www.aia-aerospace.org/assets/CHARTER%20HANDOUT.pdf
14 Aerospace Industries Association. (2013, May 11). Texas students take
first place in Team America Rocketry Challenge Finals. AIA press release.
Retrieved from http://www.aia-aerospace.org/newsroom/aia_news/
texas_students_take_first_place_in_team_america_rocketry_challenge_finals/
15 Pardo, N. (2012, April 25). Students take on aeronautical design challenge, get job offers
from industry. RWDC press release. Retrieved from http://www.realworlddesignchallenge.
org/pdf/Students_Take_on_Aeronautical_Design_Challenge.pdf
16 The Manufacturing Institute. (2012). Overview of the manufacturing skills certification
system. Retrieved from http://www.themanufacturinginstitute.org/~/media/040710883
45544D086449F2ABFF99754/Overview.pdf
149
Finance and Capital Markets
Introduction
This chapter begins with an overview of the financial health of the
U.S. aerospace industry. Following this review, the chapter addresses
recent changes in the capital markets and the impact of these changes
on the industry. The chapter also examines trends in financing options,
notable merger and acquisition (M&A) activity, and some of the
unique challenges facing small to medium-size aerospace manufac-
turers (SMMs). Understanding the full range of financial alternatives
can help industry leaders ensure that their plant, equipment and other
investments are financed in ways that will allow them to most effec-
tively meet their short and long-term business goals.
Financial Overview of the U.S. Aerospace Industry

The financial performance of the aerospace industry is closely related
to the ability of aerospace manufacturers to obtain capital at favorable
rates. Balance sheets, income statements, and ratios of various types
are among the most common tools used to assess the financial well-
being of firms and industries. Banks and lenders analyze these and
other measures to determine credit worthiness, interest rates, collateral

and other financing terms for loans. For publicly-traded firms, these
measures also influence stock prices and ratings.
The information in Table 9.1 is based on data published by the U.S.
Census Bureau and contains financial data and ratios for corpora-
tions in NAICS Manufacturing Industry Group 3364, Aerospace
Products and Parts. Since one of the objectives of this report is to
highlight the special challenges facing small and medium-size aero-
space manufacturers, the table also includes data on firms with assets
under $25 million.*
Changing Market Conditions

Since the end of the recession, and even during the past year, there
have been a number of significant developments in the aerospace
and defense industry. As previously noted, commercial aircraft orders
have continued to increase, while uncertainty in the defense sector has
grown substantially. In response to the changing market conditions,
the value of loans declined during and after the recession, but by the
end of 2012, had risen to over $1.5 trillion as depicted in Figure 9.1.
* Additional information on the special challenges facing small to medium-size aerospace manufacturers is
included in Chapter 10.
Table 9.1 Summary Income Statement, Operating Ratios and Balance Sheet
All Total Asset Sizes
1Q 2012 2Q 2012
Item Millions of U.S. Dollars
Net revenue 65,230 67,382
Income from operations 6,254 6,853
Income after income taxes 4,294 5,712
Income and Operating Ratios
Income from operations as percent of net sales 9.6% 10.2%
Income after taxes as percent of net sales 6.6% 8.5%
Income after taxes as percent of total assets 5.4% 6.8%
Balance Sheet Ratios
Total current assets to total current liabilities 1.4% 1.4%
Total cash, U.S. Gov’t and other securities, to total current liabilities 0.2% 0.2%
Total stockholders’ equity to total debt 1.3% 1.1%
Source: U.S. Census Bureau Quarterly Financial Reports, 2012.
Finance and Capital Markets 151
Even though interest rates are at historic lows, traditional sources of

capital remain scarce for small and medium-size firms, creating an
unprecedented environment for this critical segment of the industry.
The production of new commercial aircraft is expected to continue
to expand. Boeing and Airbus recently announced production rate
increases and some analysts expect production to increase as much
Figure 9.1 Aggregate Level of Commercial and
Industrial Loans at all Commercial Banks
1,700
1,509
1,500
1,300
1,100
900
700
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Ratios for Aerospace Manufacturers in 2012

Total Asset Sizes Under $25 Million
3Q 2012 4Q 2012 Year 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Year
66,586 70,640 269,838 1,019 1,093 1,079 1,043 4,234
6,089 6,248 25,444 130 193 127 93 543
5,195 4,641 19,842 112 175 109 73 469
9.1% 8.8% 9.4% 12.8% 17.7% 11.8% 8.9% 12.8%

7.8% 6.6% 7.4% 11.0% 16.0% 10.1% 7.0% 11.0%
6.1% 5.4% 5.9% 21.6% 32.4% 18.5% 11.1% 20.9%
1.3% 1.3% 1.4% 2.8% 3.2% 3.0% 2.7% 2.9%

0.2% 0.2% 0.2% 0.4% 0.6% 0.6% 0.5% 0.5%
1.1% 1.1% 1.2% 2.3% 2.9% 2.6% 2.3% 2.5%
as 35 percent over the next several years.1 Experts attribute much of

this demand to the combination of high fuel prices and the availability
of newer, more efficient aircraft, as well as low financing rates. Grant
Thornton LLP, a global accounting, tax and advisory organization,
notes that fuel costs as a percentage of total airline operating costs
have risen from 14 percent in 2003 to 30 percent in 2011.2
While escalating production rates may imply larger revenue streams for
the major manufacturers, there is growing concern about the ability
of the smaller firms in the supply chain to meet this demand.3 More
specifically, Tier III through Tier V manufacturers will be challenged
to keep pace with production increases,4 as well as potential shortages
of specialty raw materials.5 PricewaterhouseCoopers (PwC) conducted
a study on the capacity and financial readiness of 93 suppliers across
nine different component and systems segments, and concluded, “a
fifth of suppliers are at risk of not being able to deliver the ramp-up
that is required.”6
NetJets Places Largest General Aviation Order in History

In mid-2012, fractional-share provider NetJets ordered up to 425 Bombardier and Cessna
jets worth as much as $9.6 billion. The purchase is the largest general aviation aircraft
order in history and includes a firm order for 75 Bombardier Challenger 300s (plus
options on another 125), a firm order for 25 Challenger 605s (plus options on 50 more),
and a firm order for 25 Cessna Citation Latitudes (plus options on an additional 125).
Deliveries begin in 2014 for the 300s, 2015 for the 605s and 2016 for the Latitudes. The
Bombardier order is worth up to $7.3 billion and the Cessna order up to $2.3 billion.
The NetJets fleet includes a significant number of older airplanes that may soon be
retired and replaced by the aircraft NetJets has ordered. These include not only the
latest order from Bombardier and Cessna, but also NetJets’s planned purchase of
120 Bombardier Global jets worth $6.7 billion if all options are exercised, and 120
Embraer Phenom 300s, if all options are exercised.
The economic decision wasn’t because of rapidly growing fractional sales, according
to NetJets Chairman and CEO Jordan Hansell, but the optional orders allow NetJets
some flexibility. “We have a 10-year planning cycle at NetJets that we refresh every
year on a rolling basis … and we feel it’s prudent to expand now, to be sure that we’re
well positioned to compete over the longer term.”
None of the newly ordered airplanes is intended for the aircraft management
operation NetJets is building in China. “These aircraft will be devoted to our U.S. and
European fleets,” he said. “At some point we hope that the fractional market in China
will be a robust one, but we think that will take some time.”
Commenting on the NetJets order, financial newsletter publisher Stephen Leeb noted
that given the slump in private aviation, NetJets is “undoubtedly paying significantly
lower than list,” adding that “if ever there was an example of smart money anticipating
a turn in a cycle far ahead of the conventional wisdom, this is it … within five years we
think Wall Street will view this deal as one of the shrewdest Buffett has ever done.”
Source: Summary of article by Matt Thurber, Aviation International News. For complete article, see Thurber, M. (2012,
July1). NetJets makes biggest-ever aircraft order. Aviation International News. Retrieved from http://www.ainonline.com/
aviation-news/2012-07-01/netjets-makes-biggest-ever-aircraft-order-0
Small to medium-size aerospace manufacturers are faced with a

dilemma—should they expand to meet this historic and potentially
unsustainable increase in demand, or defer investing until financial
conditions improve? Moreover, if they do decide to invest, what is
the best way to finance growth? Although every situation is different,
some of the following information may help address this question.
Financing
Interest rates have not been this favorable to borrowers since before
the recession. Figure 9.2 shows the dramatic decline in rates as
reflected by the benchmark 10-year U.S. Treasury Bond.7
Figure 9.2 Yield on 10-Year Constant Maturity Bond
Percent
6.0
5.0
4.0
3.0
1.78
2.0
1.0
0.0
2002 2003 2004 2005 2006 2007 2009 2010 2011 2012
Yield on the U.S. Treasury 10-Year Bond

The 10-year Treasury is less than half the level it was just 10 years ago,
theoretically making it an ideal time to borrow. Low Treasury yields are
generally a signal of low inflation expectations. Current rates, however,
are the result of actions taken by the Federal Reserve to prompt banks
to lend—but by the end of 2012, these actions had been relatively
ineffective with many smaller firms still struggling to obtain the credit
they need.
Aerospace and Defense Bond Yield Spread

Figure 9.3 reflects the Aerospace and Defense (A&D) bond yield spread
over the past five years. This chart shows that the spread between the rates
paid by aerospace and defense companies has returned to a more normal
relationship with the underlying Treasury bond after several years of trad-
ing at a significant spread. This is a sign that bond investors (and by exten-
sion, lenders) regard the sector as more attractive and credit worthy than
over the past several years. This bodes well for borrowers in the sector.
Figure 9.3 Aerospace & Defense Bond Yield Spread
Basis Points
450
400
350
300
250
200
130
150
100
50
0
Aug 2007 Aug 2008 Aug 2009 Aug 2010 Aug 2011 Aug 2012
Source: Barclays, August 2012.
Traditional Lending
Loan Value Outstanding
Consumer loans have slowly but steadily declined and leveled off
since the end of 2009, reflecting household deleveraging.8 However,
commercial and industrial (C&I) loans have increased 28 percent since
bottoming-out in mid-2010. The total value of loans outstanding over
the past five and a half years is shown in Figure 9.4.*
New Commercial and Industrial Loan Value

The value of new C&I loans increased to over $84 billion in early April
2012 and then dropped, but still managed to end the year at slightly
over $80.4 billion (see Figure 9.5).
* The apparent jump in consumer loans in April to May 2010 was caused by a new reporting requirement
issued by the Financial Accounting Standards Board.
Figure 9.4 Total Value of Loans Outstanding

3,000
2,662
2,500
2,000
1,541
1,500
1,000
1,121
500
Commercial and Industrial Loan Value
Consumer Loan Value
Aggregate Loan Value
-
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan
2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013
Figure 9.5 Total Value of New C&I Loans

120
100
80.4
80
60
40
20
0
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan
2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013
Small Business Loan Value

While the total value of all commercial and industrial loans rose
slightly over the past five years, the value of commercial and industrial
business loans that are less than or equal to $1 million declined to
slightly over $278 billion as of September 30, 2012.9 This reflects the
generally accepted wisdom in the market that smaller borrowers are

having difficulty obtaining traditional bank credit. This assumption is
further supported by the declining percentage of small loans shown in
Figure 9.6.
Figure 9.6 Total Value of Small Business Loans
Billions of U.S. Dollars Small Loan Share Percent

35
370,000
Small Loan Share of all
Domestic C&I Loans 30
350,000
22 25
330,000
20
C&I Loans Less Than $1 Million
310,000
15
290,000 283, 728 10
270,000 5
250,000 0
2008 2009 2010 2011 2012
Source: FDIC, Loans to Small Businesses and Farms, Quarterly Banking Profile, March 2013.
Small Business Loan Size

Figure 9.7 shows the average, small business loan size from 2008
through 2012. Balances appear to have stabilized after declining since
2008. The FDIC notes that a large majority of banks have reported
stronger demand for C&I loans, citing increases in funding related to
inventories, accounts receivable, investments in plant or equipment,
and mergers and acquisitions.10
Increased Willingness to Lend

Despite the fact that a number of major banks have been downgraded
by credit-rating agencies, the Federal Reserve’s April 2013 Survey
of Senior Loan Officers indicates an increased willingness to lend.
Traditional lending conditions have been growing steadily more favor-
able since early 2010. Domestic banks have narrowed the spreads on
C&I loan rates and have reduced their use of interest rate floors.11
This is consistent with the trends shown in Figure 9.8, which shows
the net percentage of domestic respondents tightening standards for
Commercial and Industrial loans for firms of all sizes.
Figure 9.7 Small C&I Loan Balances

400
C&I Loans <$100K C&I Loans $100K–$250K C&I Loans $250K–$1MM
350
300
137
250 134
119 116 117
200
57 55
150 50 47 47
100
142 134 123 120 120
50
-
2008 2009 2010 2011 2012
Source: FDIC, Loans to Small Businesses and Farms, March 2013.
Figure 9.8 Net Percentage Tightening Standards for C&I Loans
Percent
100.0
Large and Medium Firms
Small Firms
80.0
60.0
40.0
20.0
0.0
-20.0
-40.0
2007 2008 2009 2010 2011 2012 2013
Source: Federal Reserve Bank of St. Louis, Senior Loan Officer Opinion Survey on Bank Lending Practices, April 2013.
Smaller Lenders Not Lending

The Small Business Administration (SBA) notes that even though
Senior Loan Officers appear to be more willing to lend, the loan
markets for small businesses have not yet fully recovered. However,
Table 9.2 shows that the market is beginning to open with the number
of loans increasing by more than 10 percent in 2012 over the previ-
ous year. Although this upward trend is encouraging, lending actually
decreased in banks with under $1 billion in assets—which is the

traditional source for most small business loans. The Small Business
Administration notes that small businesses are now more willing
to borrow, but a new report released by the Office of the Special
Inspector General for the Troubled Asset Relief Program (TARP)
suggests that there may be other reasons why firms have not been able
to obtain credit. According to INC. magazine, over $2 billion, or 80
percent of the funds that were provided to banks to encourage small
business lending, were used, instead, to pay back government loans
from the TARP program.12
Table 9.2 Number of Small Business Loans Outstanding

From Depository Lenders by Lender Size
Million of Loans Percentage
Change
Lenders by Total Asset Size 2008 2009 2010 2011 2012 2011–2012
Less than $100 million 0.41 0.41 0.31 0.28 0.24 -13.0
$100 million to $499.9 million 1.41 1.38 1.23 1.09 1.04 -5.1
$500 million to $999.9 million 1.83 1.85 1.94 1.69 1.58 -6.1
$1 billion to $9.9 billion 5.17 1.22 1.14 1.34 1.42 5.6
$10 billion to $49.9 billion 3.46 3.19 1.56 1.52 1.57 3.8
$50 billion or more 14.95 15.13 16.21 15.41 17.69 14.7
Total 27.22 23.18 22.39 21.33 23.54 10.4
Source: SBA Office of Advocacy, Small Business Lending in the United States, 2005–2012.
Alternative Lending
Despite loosening standards, bank loan activity remains lower than
historical averages. This has proven to be a substantial problem for
small and medium-size businesses seeking traditional bank loans. A
survey conducted by the SBA found that 43 percent of small busi-
ness respondents that needed extra funds over the past four years
were unable to obtain loans. Because of the struggle to find traditional
loans, smaller businesses have sought lending from alternative sources.
Asset-Backed Lending
This form of alternative lending is typically used by business-to-
business companies who may need access to capital before they
receive payment for their services. Asset-backed lending takes place
when a company sells its receivables, purchase orders, or contracts to
a factoring company.13 The factoring company, in turn, will give the
company a percent of the value (typically 80–90 percent) up front,
and the remainder when the invoices are paid off, thus providing
a source of cash flow for working capital. This form of lending is
different from more traditional bank lending because it is based on a
company’s receivables rather than their credit score. This method of
lending works especially well for manufacturers because of their more
substantial equipment, products, and orders.
Figure 9.9 shows that the change in asset-based credit commitments
improved rather dramatically in the latter half of 2011, but declined
almost equally dramatically in the first half of 2012. Commitments
increased, once again, in the latter half of 2012 and the fourth quarter
results marked the seventh consecutive quarter that asset-based lend-
ers increased their total credit commitments for U.S. businesses.14
Figure 9.9 Change in Asset-Based Credit Commitments
Percent
5.0
4.0 3.8
3.0 2.6
2.0
2.0 1.7
1.3
1.0
0.1 0.2
0.0
-1.0
-0.9
-2.0
1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012
Source: Commercial Finance Association. March 2013.
Cash Flow Lending

In asset-backed loans, the lender can look at a variety of different
assets to secure a loan. In a cash flow lending situation, the lender
looks at the expected income of the company, as well as its credit
rating. Because of this, cash flow lending is more desirable for compa-
nies with favorable credit ratings and well-documented, historical
cash flows. Borrowers are typically required to meet various finan-
cial covenants, such as meeting minimum Earnings Before Interest,
Taxes, and Amortization (EBITA) requirements and leverage restric-
tions.15 Unfortunately, since the financial crisis, many middle-market
companies’ revenue streams have become less predictable. This makes

meeting such covenants increasingly challenging.
The CDO/CLO Market

Collateralized Debt Obligations (CDOs) are broadly defined as structured
financial securities that are collateralized by a pool of bonds, bank loans,
and/or other debt instruments.16 Within this broader financial instrument,
Collateralized Loan Obligations (CLOs) have rebounded soundly since the
implosion of CDOs in 2008. These are generally collateralized by below
investment-grade syndicated bank loans. The remaining CLOs are collater-
alized by middle-market bank loans.* In more recent years, these financial
instruments have been upgraded by rating agencies. More specifically,
Standard and Poor’s (S&P) notes that since the fourth quarter of 2010, it
has upgraded about 60 percent of its CLO ratings. This is mostly due to
increased collateral and transaction performance, with defaults declining
from 11 percent in 2009, to less than one-half a percent in January 2012.17
In December 2012, The Wall Street Journal reported that CLO issuance
increased by almost 300 percent, an extraordinary rebound from 2009,
when almost no CLOs were issued. Experts report that the CLO
market may be even bigger next year with issuances expected to range
between $60 to $65 billion (see Figure 9.10).18
Figure 9.10 New CLO Issuances

100
92.6
90
79.8
80
70
60
51.1
50 46.3
40
30 27.6
19.0
20 15.4 15.1 12.9
10 3.3
0.3
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Royal Bank of Scotland, Fitch Rating; NAIC Capital Markets Special
Report, 2012 and The Wall Street Journal, December 13, 2012.
* These include loans to companies with less than or equal to $50 million operating cash flow and less
than $500 million in gross revenue.
While CDOs and CLOs are not of direct importance to small or

mid-size borrowers, the availability of loans and liquidity in the CDO/
CLO markets is indicative of the general availability of credit.
Private Equity
Private equity, which refers to equity capital available in non-public
markets, has become an increasingly important source of capital for
private company expansion. Privately-held companies can use private
equity to recapitalize their businesses for a number of purposes,
including assistance with succession, the funding of important growth
initiatives, or even an outright sale. Because of the constraints and
the increasingly unattractive regulatory environment for publicly-
held companies, many private companies are choosing to use private
sources of equity.
Numerous private equity pools exist and these sources have been
exceptionally active in the aerospace sector. Taking advantage of the
market slowdown, relatively tight loan requirements, and observed
opportunities for growth in the A&D sector, private equity firms
increased their activity in loans and acquisitions. According to a Grant
Thornton A&D update, U.S. market-wide private equity activity
increased by 13 percent in 2011 and was responsible for 17 percent of
all transactions.19 According to the same study, within the aerospace
and defense sector, private equity players were buyers in 30 percent of
the transactions in 2011. Furthermore, private equity providers have
become very active in the leveraged loan business as well, providing
yet another source of capital to aerospace companies. A credit markets
update by KPMG notes that private equity firms also ramped up
leveraged buyout loan activity to $465.2 billion in 2012—a 24 percent
increase over 2011.20
State of the Equity Markets

This section includes summary operating and market metrics on
the aerospace industry. These metrics represent information for the
companies in the Dow Jones Aerospace & Defense Index (Ticker:
ITA). This index is comprised of over 30 companies selected by Dow
Jones to represent the industry. It is a heavily manufacturing oriented
index and relevant to manufacturers in the industry. The iShares Dow
Jones U.S. Aerospace & Defense Index Fund includes manufacturers,
assemblers and distributors of aircraft and aircraft parts, as well as
producers of components and equipment for the defense industry,
such as military aircraft, radar equipment and weapons.21
Table 9.3 includes information on the mean and median operat-

ing metrics for the index as a whole, and for the largest and smallest
firms by market capitalization to highlight similarities and differences
between the two. While not perfect, these metrics provide useful
information on industry performance and valuation. Some of the key
insights revealed by these operating statistics include:
■■ Smaller companies grew their revenues faster than larger
companies, at 7.8 percent versus 5.2 percent.
■■ At 52.3 percent, larger manufacturers had a drastically higher
return on equity than smaller ones at 16.7 percent.
Table 9.3 Dow Jones Aerospace & Defense Index Fund Operating Statistics
TTM Net
TTM Net Rev Revenues— Annual TTM EBIT TTM EBITDA
($ Millions) 1 yr. Growth ROE ($ Millions) ($ Millions)
Dow Jones Aerospace Index
Mean $12,756 6.31% 37.53% $1,403 $1,741
Median $4,029 4.93% 15.49% $549 $678
Dow Jones Aerospace Index Top-Half by Market Cap
Mean $19,302 5.22% 52.34% $2,148 $2,712
Median $8,382 4.25% 18.97% $1,015 $1,509
Dow Jones Aerospace Index Bottom-Half by Market Cap
Mean $2,977 7.77% 16.73% $260 $346
Median $2,348 4.93% 12.21% $168 $249
Source: Factset, May 2013. Note: TTM = Trailing Twelve Months
Table 9.4 Dow Jones Aerospace & Defense Index Fund Market Statistics
Share Outstanding Market Cap Total Debt Book Value

Price Shares (mil) ($ Millions) ($ Millions) ($ Millions)
Dow Jones Aerospace Index
Mean $58.51 149.099 $11,038 $2,979 $3,673
Median $50.49 60.500 $2,683 $1,173 $1,339
Dow Jones Aerospace Index Top-Half by Market Cap
Mean $80.34 241.158 $20,141 $4,346 $5,428
Median $75.20 141.884 $7,761 $3,733 $2,237
Dow Jones Aerospace Index Bottom-Half by Market Cap
Mean $36.40 51.219 $1,443 $761 $940
Median $34.83 39.733 $1,107 $723 $988
Source: Factset, May 2013.
■■ Average EBITDA growth for the larger firms was 4.6 percent,
while smaller firms experienced slightly faster EBITDA growth at
5.6 percent.
■■ Average operating margins of 15.1 percent were higher for the
larger companies than the 9.4 percent operating margins of the
smaller companies.
Table 9.4 includes additional statistics on the aerospace market broken
down, once again, by market capitalization. Selected insights revealed
by these market statistics include:
TTM EBITDA 1 TTM 1 yr. Gross Operating Book

EBITDA/ yr. ago EBITDA Profit Profit Net Profit Value Per
TTM Rev ($ Millions) Growth Margin Margin Margin Share
0.158 $1,468 5.46% 25.81% 13.02% 7.01% 19.62

0.137 $476 4.25% 22.05% 10.75% 6.14% 14.41
0.180 $2,556 4.58% 27.99% 15.13% 8.41% 19.95

0.152 $1,161 3.82% 23.98% 12.39% 7.92% 14.08
0.122 $255 5.63% 22.13% 9.39% 4.62% 18.68

0.116 $198 4.08% 21.52% 8.70% 4.49% 14.41
Enterprise Enterprise Enterprise

Debt/Equity Value Value/ Value/ P/E Current Market/
Ratio ($ Millions) Sales EBITDA Price Book
1.539 $14,408 1.42 8.40 16.55 6.75

0.617 $3,848 0.83 7.86 14.28 2.29
2.288 $21,702 1.80 9.04 16.18 10.01

0.658 $11,556 1.47 8.72 16.55 2.96
0.476 $2,174 0.75 7.36 17.15 1.89

0.597 $2,517 0.66 6.40 13.03 1.48
■■ The larger companies are significantly more leveraged than smaller

companies: 2.3 on average for the larger companies versus 0.5 for
the smaller companies.
■■ The larger companies are valued at an Enterprise Value/Revenues
multiple of 1.8 versus 0.75 for the smaller companies, a significant
premium.
■■ Smaller companies trade at a lower multiple of EV/EBITDA of
7.4 versus 9.0 for larger companies.
Stock Market Performance of Aerospace Companies

As of May 2013, the Dow Jones Aerospace & Defense Index Fund
had increased over 10 percent since the end of 2011 and was trading
at over $80 a share. Figure 9.11 highlights the market’s perception of
the sector’s health, showing the relative price performance of the Dow
Jones Aerospace & Defense Index versus the S&P 500 Index.
Figure 9.11 Price Comparison S&P 500 Index vs. iShares

Dow Jones Aerospace & Defense Index Fund
Index (3 Jan 2007 = 100)

60%
DJ A&D Index S&P 500 Index
40%
20%
0%
-20%
-40%
-60%
5/16/2007 5/13/2008 5/11/2009 5/7/2010 5/4/2011 5/1/2012 5/1/2013
Source: Fidelity, May 2013.
While the curves are generally similar in shape, since January 1, 2007,
the Dow Jones Aerospace & Defense Index Fund has outpaced the
broader S&P 500 Index by over 30 percent. The equity markets have
clearly rewarded the industry.
Price-to-Earnings Comparisons
Figure 9.12 includes the Price-to-Earnings (P/E) ratios for selected
publicly-traded A&D companies. Although P/E ratios must be care-
fully evaluated, these ratios can tell us a lot about the industry and the
economy as well as the performance of individual firms. For example,
the P/E ratios for all these firms have remained relatively stable over
the past three years. That says a lot about the overall state of the
industry. Second, almost all of the ratios have been trending upward
since the beginning of 2013. That tells us something about the state
of the economy. Finally, most investors appear to view Boeing, with
its balanced portfolio spread across commercial, defense and space
markets, as a good long-term investment—and its P/E ratio is now
higher than most companies in the industry. That tells us a lot about
the public’s confidence in Boeing in particular.
Figure 9.12 Price-to-Earnings Ratios for Selected Corporations
United Technologies Lockheed Martin Boeing Precision Castparts

Raytheon Northrop Grumman Rockwell Collins L-3 Communications
24
22
20
18
16
14
12
10
6
December December December May
2010 2011 2012 2013
Source: Ycharts. Used with permission from YCharts.
Mergers and Acquisitions

M&A transactions have the potential to transform companies and
expand capacity to meet customer needs. The number of M&A deals
in the aerospace and defense sector grew by 20 percent in 2011,
and the aggregate value of publicly disclosed transactions increased
by more than 60 percent due, in large part, to the acquisition of
Goodrich by United Technologies.22
Industry transactions mostly targeted companies that would allow

manufacturers to gain responsibility for more stages of production
and increase delivery capacity. The Goodrich deal is expected to add
about $8 billion to United Technologies’ annual revenues and boost its
presence in the jet aircraft market.23
Table 9.5 is a list of aerospace and defense M&A deals with an
enterprise value greater than $1 billion in 2012. According to
PricewaterhouseCoopers, the deal value and volume both dropped in
2012 (see Figure 9.13). Initially, deals for the year totaled $19.5 billion,
but when the purchase of Hawker Beechcraft by Superior Aviation
Beijing was cancelled, the total value M&A deals for 2012 dropped
to $17.7 billion—a 59 percent drop from the previous year.24 Despite
this drop, 2012 was still a good year for M&A activity in the aero-
space industry with 23 transactions at over $100 million in enterprise
value each.25
Table 9.5 Top Aerospace & Defense M&A Deals in 2012

Value of
Transaction
Acquirer Acquirer in Billions of
Rank Target Name Country Name Status Nation U.S. Dollars
Avio SPA General
1 Italy Pending U.S. 4.30
Aviation Business Electric
Precision
Titanium Metals
2 U.S. Castparts Completed U.S. 2.61
Corp
Corp
Hawker Superior
Beechcraft Aviation
3 U.S. Withdrawn China 1.79
Acqustion Co Beijing
LLC Co Ltd
Source: PwC Mission Control, Fourth Quarter 2012.
This decline in deals and value in the A&D industry versus just the
aerospace industry can be explained by the uncertainty regarding the
sequestration-driven reductions in the defense budget. Aerospace and
MRO activity increased by almost 39 percent in 2012, while defense-
related M&A activity declined by 78 percent. The market outlook for
M&A activity in space is also positive and increased 63 percent in 2012
(see Figure 9.14).
Figure 9.13 Number of Aerospace & Defense M&A Deals
Number of Deals Billions of U.S. Dollars

330 50
Number of Deals Value of Deals 320
320 45
309 40
310
300 35
300
30
290 284
25
280
20
270 270
15
260 10
250 5
240 0
2008 2009 2010 2011 2012
Source: PwC, Mission Control, Fourth Quarter 2012.
Figure 9.14 Aerospace & Defense M&A Transactions by Category
Percent Space & Other Defense Aerospace & MRO

100.0
90.0
32
80.0 44 44
54
70.0 61
60.0
50.0
40.0 33 57 37 8
23
30.0
20.0
31
10.0 23 23 19
11
0.0
2008 2009 2010 2011 2012
Source: PwC Mission Control, Fourth Quarter 2012.

The financial condition of the overall industry continued to improve in
2012—for large firms as well as small and medium-size manufacturers.
But while interest rates have remained low and the number of loans has
increased, sources of capital for small and medium-size manufacturers
have remained scarce—which could make it difficult for them to meet
demand as orders increase and the economy recovers. The number of
mergers and acquisitions in the industry was also lower than normal due,
in part, to the uncertainty associated with sequestration.
Chapter Endnotes
1 PricewaterhouseCoopers. (2012). Aerospace & Defense 2011 year in review and

2012 forecast. Retrieved from http://www.pwc.com/en_GX/gx/aerospace-defence/
assets/aerospace-and-defence.pdf; and Gursky, J. (2012, August). Buckle Up for
Phase 2: Aerospace Recovery Cycle Update. Citigroup Investment Research &
Analysis. Retrieved from http://www.factset.com/
2 Grant Thornton. (2012). Aerospace and defense update: mergers, acquisitions and
the operating environment. Retrieved from http://www.grantthornton.com/staticfiles/
GTCom/Aerospace%20and%20Defense/AD_MA_Update_Spring_2012.pdf
3 The manufacturing supply chain is often described in terms of tiers of suppliers.
In general, a Tier I supplier has a direct relationship with the original equipment
manufacturer, while subsequent tiers provide goods and services to the tier above
them. For example, a Tier I supplier may provide sub-subsystems to the OEM, while the
Tier II supplier provides components that go into the sub-systems. Similarly, a Tier III
supplier may provide specialized parts that go into the components produced by the
Tier II supplier and so forth. For a summary of how aerospace supply chains work, see
ATKearney. (2008). Integrated value chains in aerospace and defense. Retrieved from
http://www.aia-aerospace.org/assets/smc_wp-valuechains.pdf
4 Ciarmoli, M. (2012, July). Aerospace and Defense: Farnborough Air Show Survey and
Recap. Capital Markets Inc., Research Division. Retrieved from http://www.factset.com/
5 PricewaterhouseCoopers. (2012, February). Soaring or stalling: can aircraft
manufacturers prevent rate ramp-up problems? Retrieved from: http://cfodirect.pwc.
com/CFODirectWeb/Controller.jpf?ContentCode=KOCL-8RHS7E&rss=true
6 Ibid.
7 Board of Governors of the Federal Reserve System. (2013, May 6). Selected Interest
Rates, Treasury Constant Maturity-10 Year. Retrieved from
http://www.federalreserve.gov/releases/h15/20120806/
8 Board of Governors of the Federal Reserve System. (2012, September). Charge-off
and delinquency rates on loans and leases at commercial banks, second quarter
2012. Retrieved from http://federalreserve.gov/releases/chargeoff/
9 Federal Deposit Insurance Corporation. (2012, July). Small business and farm loans.
Retrieved from http://www2.fdic.gov/QBP/timeseries/SmallBusiness&FarmLoans.xls
10 Ibid.
11 Board of Governors of the Federal Reserve System (2012, May). Senior loan officer
opinion survey on bank lending practices. Retrieved from http://www.federalreserve.
gov/boarddocs/snloansurvey/
12 Chen, L. (2013, April 10). Small banks used small business lending fund to exit TARP.
INC. Retrieved from http://www.inc.com/liyan-chen/banks-used-sblf-to-exit-tarp.html
13 Mount, I. (2012, August). When banks won’t lend, there are alternatives, though often
expensive. The New York Times. Retrieved from http://www.nytimes.com/2012/08/02/
business/smallbusiness/for-small-businesses-bank-loan-alternatives.html?_r=0
14 Commercial Finance Association. (2013, March 11). Asset-based lending index shows
lenders further increasing credit commitments to U.S. businesses. Retrieved from
https://www.cfa.com/eweb/docs/Documents/4QCFAABLIndex31113FINAL.pdf
15 Practical Law Publishing Limited and Practical Law Company. (2012, May). Middle
Market Lending: Overview: Cash Flow Loans. Retrieved from http://www.jonesday.
com/files/Publication/e873a75e-8666-420d-825d-9247ffd1590a/Presentation/
PublicationAttachment/53c79fa2-638e-455d-bf6d-d57b1580aa52/middlemarket.pdf
16 National Association of Insurance Commissioners Capital Markets Bureau. (2012,
April). Capital markets special report. Retrieved from http://www.naic.org/capital_
markets_archive/120611.htm
17 Ibid.
18 Burne, K. (2012, December 13). CLOs: Big in 2012, Likely even bigger in 2013.
The Wall Street Journal. Retrieved from http://blogs.wsj.com/deals/2012/12/13/
clos-big-in-2012-likely-even-bigger-in-2013/?mod=wsj_streaming_stream
19 Grant Thornton. (2012). Aerospace and defense update: mergers, acquisitions and the
operating environment.
20 Global Enterprise Institute. (2013, January 1). KPMG’s Capital Advisory Q4 2012
Credit Markets Quarterly Update. Retrieved from http://www.kpmginstitutes.com/
global-enterprise-institute/insights/2012/cf-q4-2012-credit-market-update.aspx
21 iShares Dow Jones U.S. Aerospace & Defense Index Fund. (2012). Index description.
Retrieved from http://us.ishares.com/content/stream.jsp?url=/content/en_us/
repository/resource/fact_sheet/ita.pdf&mimeType=application/pdf
22 Grant Thornton. (2012). Aerospace and defense update: mergers, acquisitions and the
operating environment.
23 Ibid.
24 PricewaterhouseCoopers. (2013). Mission control: fourth-quarter 2012 aerospace and
defense industry mergers and acquisitions analysis. Retrieved from
http://www.pwc.com/en_US/us/industrial-products/publications/assets/pwc-
aerospace-defense-mergers-acquisitions-q4-2012.pdf
25 HarrisWilliams&Co. (2013, March). Aerospace M&A update. Retrieved from
http://www.harriswilliams.com/sites/default/files/industry_reports/Aerospace_MA_
Update.pdf
171
10
Topics to Watch in 2013

and Beyond
Introduction
This chapter addresses a number of topics that are relevant to the U.S.
aerospace manufacturing industry. The chapter begins with a review
of the benefits and changing nature of aerospace clusters, and then
turns to the challenges facing small to medium-size aerospace manu-
facturers. Supply chain risk management is also addressed followed by
a discussion of three very real threats to aerospace supply chains: rare
earth elements, counterfeit parts, and the exponential growth in cyber-
attacks. The chapter also discusses America’s role in civil space, the
integration of unmanned systems into the national airspace system,
the impact of sequestration on the aerospace industry, and several
other topics that are important to watch in 2013 and beyond.
The Benefits of Aerospace Clusters

As stated in the Aerospace Industry Report (AIR) 2011, “even though
industry clusters have been studied for many years, the critical role
of clusters did not achieve widespread acceptance until the concept
was linked to Michael Porter’s work on competitive advantage in the

1990s.”1 According to Porter:2
A cluster is a geographically proximate group of interconnected
companies and associated institutions in a particular field, linked
by commonalities and complementarities. The geographic scope
of a cluster can range from a single city or state to a country or
even a network of neighboring countries.
Today, Professor Porter and his Institute for Strategy and
Competitiveness are continuing to add to our knowledge about the value
of clusters and what can be done to make them even more effective.
Clusters are Important

Drawing on last year’s report, aerospace clusters are important because they:
■■ Promote efficiencies.
■■ Encourage innovation.
■■ Enhance product improvements.
■■ Promote specialization.
■■ Allow members to benefit as if they had greater scale.
■■ Attract the attention of universities and Research and
Development (R&D) funding.
■■ Tend to be more profitable for members of the cluster.
■■ Create higher wage jobs.
■■ Drive prosperity for the city or region.
■■ Sustain and enhance national security.
However, new research from Delgado, Porter and Stern found that the
benefits of strong regional clusters are even greater than previously
thought.3 For example, strong clusters tend to result in:
■■ Higher rates of employment growth.
■■ Stronger wage growth.
■■ Higher rates of business creation.
■■ Greater numbers of patents issued.
Topics to Watch in 2013 and Beyond 173
■■ Lower costs of production.

■■ Better trading relationships.
■■ Higher rates of entrepreneurship.
Furthermore, these authors found that new regional industries tend to
be born out of strong regional clusters, whereas narrow industry special-
ization is likely to result in fewer opportunities for growth. In summary,
the results of Delgado, Porter and Stern’s work suggests that:4
Regional economic performance depends crucially on the
cluster composition across nearby regions rather than within
narrow political boundaries. The benefits arising from clusters
span multiple jurisdictions (and even states). Policies that
enhance complementarities across jurisdictions, such as
supporting infrastructure and institutions that facilitate access
to demand, skills or suppliers in neighboring clusters, are
important tools for regional development.
A recent survey of the Lt. Governors of the United States, conducted
by Embry-Riddle Aeronautical University–Worldwide on behalf of the
Aerospace States Association (ASA), found that the benefits of clusters
were widespread (see Figure 10.1). Even though only 13 states responded,
the results are consistent with previous claims about the benefits of clusters.
Figure 10.1 Benefits of Aerospace Clusters
Creating or maintaining jobs 4.55
Generating revenue for the 4.45

local community
Creating higher paying jobs 4.36
Creating a positive brand image or
4.18
reputation for the local area or region
Generating new patents 4.11
Creating new products and services for 4.10

the aviation and aerospace industries
Attracting R&D funds 4.10
Creating new businesses 4.09
Forging new alliances with partners in the U.S. 4.00
Generating revenue for the state 4.00
Stimulating exports 4.00
5 = Very Important 1.0 2.0 3.0 4.0 5.0

Source: Embry-Riddle Aeronautical University–Worldwide and the Aerospace States Association, 2012.
These results provide information that might be useful for leaders inter-
ested in promoting or creating clusters. For example, it is clear that leaders
from states that have aerospace clusters believe that their clusters help
create or maintain jobs, generate revenue for the community and state,
and create a positive brand image for their local area or region. Effective
clusters also attract R&D funds, generate new patents, and create new
businesses, products and services. Finally, the respondents indicated that
clusters helped stimulate exports and forge new alliances within the United
States—which reinforces the comments made earlier about the importance
of reaching out, across boundaries, to enhance cluster performance.
The Role of Location in a Networked World

Given the importance of clusters and cluster composition across nearby
regions, many would argue that deciding where to locate might be more
important than ever. There is ample evidence to support that view. Dennis
Donovan, one of the leading specialists in the field of site selection,
recently listed a number of drivers for aerospace industry firms. Donovan
states aerospace firms that are setting up new sites are looking for:5
■■ At least a small critical mass of companies with complimentary
interests.
Table 10.1 Aerospace Vehicles and Defense Clusters, Top 15 Economic Areas
2010 Total 2010 Share of
Economic Area Employment National Employment
1 Seattle-Tacoma-Olympia, WA 65,421 19.6
2 Los Angeles-Long Beach-Riverside, CA 42,807 12.8
3 Wichita-Winfield, KS 36,658 11.0
4 Dallas-Fort Worth, TX 31,150 9.3
5 New York-Newark-Bridgeport, NY-NJ-CT-PA 22,441 6.7
6 Tucson, AZ 18,021 5.4
7 San Jose-San Francisco-Oakland, CA 11,065 3.3
8 Hartford-West Hartford-Willimantic, CT 9,943 3.0
9 Denver-Aurora-Boulder, CO 8,369 2.5
10 St. Louis-St. Charles-Farmington, MO-IL 8,358 2.5
11 Atlanta-Sandy Springs-Gainesville, GA-AL 8,105 2.4
12 San Diego-Carlsbad-San Marcos, CA 7,849 2.4
13 Savannah-Hinesville-Fort Stewart, GA 7,680 2.3
14 Phoenix-Mesa-Scottsdale, AZ 7,121 2.1
15 Philadelphia-Camden-Vineland, PA-NJ-DE-MD 5,980 1.8
* DS = Data suppressed. Some wage data is suppressed for confidentiality, see project methodology for further discussion.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School;
■■ A surplus labor market enhanced by technical training and education.

■■ Adequate sites or buildings and fast track construction.
■■ A right-to-work environment.
■■ A superior utility and transportation infrastructure.
■■ Enlightened leadership that is willing to invest in the removal
of entry barriers, aerospace education and training, physical
infrastructure, and partnerships to oversee the industry’s needs.
Donovan indicates that locating next to a customer is often a key require-
ment in the aerospace industry.6 These factors tend to reinforce the
belief that, despite recent advances in information technology, geography
still matters and being located next to one’s partners and suppliers is still
preferred and, in some cases, essential. However, as discussed later in this
chapter, new forms of collaboration are being explored which may alter
our thinking about the role of location and new product innovation.
America’s Leading Aerospace and Defense Clusters

Table 10.1 lists the top 15 aerospace and defense clusters in the United
States ranked by employment in 2010. Although this information is
by Employment, 2010
CAGR of Employment 2010 Employment 2010 Average CAGR** of Average Wages
1998–2010 Location Quotient Wages 1998–2010
-3.3 12.5 $70,154 DS*
-7.1 2.2 $82,732 4.3
0.5 29.6 $48,632 2.1
-1.2 3.5 $71,036 2.8
5.7 0.9 $66,048 3.2
5.6 17.7 $55,599 DS*
-5.1 1.1 $66,747 DS*
-1.9 3.7 $51,057 DS*
-0.3 1.8 $62,909 2.6
-12.3 2.1 $57,242 DS*
-0.4 1.0 DS* DS*
3.3 2.4 $56,335 0.1
5.8 10.8 DS* DS*
0.8 1.5 $57,027 3.2
-3.8 0.7 DS* DS*
** CAGR = Compound Annual Growth Rate
Richard Bryden, Project Director. Copyright © 2012 by the President and Fellows of Harvard College. All rights reserved.
somewhat dated, it is still useful to look at the size, scope, and changes
that were taking place within the industry at that time. The Seattle-
Tacoma-Olympia region topped the list in terms of employment, even
though other regions had higher average wages.
In Table 10.2, the Hartford-West Hartford-Willimantic, CT engine
cluster had the greatest number of employees in 2010, followed by the
Cincinnati-Middletown-Wilmington cluster in southwest Ohio (see
Table 10.2).
Figure 10.2 illustrates the percentage change in share of national clus-
ter employment from 1998 through 2010 for selected industries. The
vertical axis represents the 2010 share of national cluster employment,
while the horizontal axis represents the percentage change in share of
national cluster employment from 1998 through 2010.
The share of national cluster employment for aerospace engine manu-
facturing decreased by almost 17 percent between 1998 and 2010,
while national cluster employment for aerospace vehicles and defense
decreased by almost 27 percent over the same period. When review-
ing these charts, it is important to remember that the past recession
Table 10.2 Aerospace Engine Clusters, Top 15 Economic Areas by Employment, 2010
2010 Total 2010 Share of
Economic Area Employment National Employment
1 Hartford-West Hartford-Willimantic, CT 9,740 11.9
2 Cincinnati-Middletown-Wilmington, OH-KY-IN 8,485 10.4
3 Phoenix-Mesa-Scottsdale, AZ 8,391 10.2
4 Boston-Worcester-Manchester, MA-NH 8,086 9.9
5 Indianapolis-Anderson-Columbus, IN 4,420 5.4
6 New York-Newark-Bridgeport, NY-NJ-CT-PA 3,862 4.7
7 Kansas City-Overland Park-Kansas City, MO-KS 3,790 4.6
Washington-Baltimore-Northern Virginia,
8 2,975 3.6
DC-MD-VA-WV
9 Cleveland-Akron-Elyria, OH 2,415 2.9
10 Portland-Lewiston-South Portland, ME 2,310 2.8
11 Chicago-Naperville-Michigan City, IL-IN-WI 1,830 2.2
12 Detroit-Warren-Flint, MI 1,759 2.1
13 San Diego-Carlsbad-San Marcos, CA 1,750 2.1
14 Los Angeles-Long Beach-Riverside, CA 1,673 2.0
15 Syracuse-Auburn, NY 1,555 1.9
* DS = Data suppressed. Some wage data is suppressed for confidentiality; see project methodology for further discussion.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
officially ended in June 2009, and that the aerospace industry and
the overall economy have generally been improving from 2009 to
the present.
Cluster Registry Formed

In October 2011, Michael Porter’s Institute for Strategy and
Competitiveness and the U.S. Department of Commerce’s Economic
Development Administration announced the launch of a new beta
site designed to strengthen U.S. competitiveness. The site is a regis-
try which has been designed to help firms and government agencies
identify other parties with complementary interests. As noted by
the Assistant Secretary of Commerce for Economic Development,
“the registry is just the first phase of this groundbreaking project to
produce an interactive and dynamic geographic map that captures
regional clusters and cluster-based initiatives across the nation.”7
The cluster registry site can be found at www.clustermapping.us. This
site appears to be particularly well-suited for small to medium-size
aerospace manufacturing companies that are interested in connecting
with other firms, universities, government agencies or other parties to
create or join an existing aerospace cluster.
CAGR of Employment 2010 Employment 2010 Average CAGR** of Average Wages

1998–2010 Location Quotient Wages 1998–2010
-4.4 14.8 $67,241 1.5
0.3 12.6 DS* DS*
0.7 7.3 $59,280 DS*
-0.7 3.1 $66,413 DS*
-0.3 4.8 DS* DS*
-3.8 0.6 $66,389 3.0
54.8 5.0 DS* DS*
11.9 1.1 DS* DS*
1.1 1.9 $54,657 1.3

2.1 8.5 DS* DS*
6.9 0.6 DS* DS*
6.7 1.1 $63,037 2.7
-0.3 2.2 DS* DS*
-4.3 0.4 $59,459 4.2
-3.3 3.2 DS* DS*
** CAGR = Compound Annual Growth Rate
Figure 10.2 Percentage Change in Share of National Cluster Employment 1998–2010
Share of National Cluster Employment

6.0
5.0
Business Services
4.0
3.0
Education and
Knowledge Creation
2.0
Information Technology
Distribution Transportation
Services and Logistics
Metal Financial
Manufacturing Services 1.0
Automotive Aerospace Vehicles
Plastics and Defense Oil and Gas Products
Apparel Textiles
Heavy Machinery and Services
Communications Aerospace 0.0
Footwear Equipment Engines
-1.0
-90.0 -80.0 -70.0 -60.0 -50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0
Percentage Change in Share of National Cluster Employment

Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School;
The Path to Regional Innovation

While there may be no single path to regional innovation, Figure 10.3
illustrates, in general terms, how the process often works. As depicted
in this diagram, the process begins with a small group of parties that
share similar interests. Over time, a network emerges and a core group
is formed. The core group includes firms that have complementary
interests and, in many cases, includes government agencies, universi-
ties, and other interested parties. As the core group grows and the
network matures, a common vision is developed based on knowledge
sharing, collaboration, and shared marketing, branding, and infrastruc-
ture investments. The final step occurs when participants recognize
the benefits of adding complementary activities across jurisdictions
and other boundaries to optimize the effectiveness and efficiency of
their new regional innovation cluster.
Figure 10.3 Path to Regional Innovation
Value
• More jobs
• Higher wages Regional
Innovation
• More patents and innovation Cluster
• Lower costs of production, etc.
Cluster of • Common vision
Innovation expanded
Community • Regional network
• Common vision grows across
of Practice created geographic and
Community • Network grows political boundaries
of Interest • Expanded knowledge • Extensive knowledge
• Network emerges
sharing and sharing and
• Core group formed collaboration collaboration
• Shared interests
identified • Strategy evolves • Shared investments • Expanded investments
• Little knowledge • Some knowledge in branding, in branding,
sharing and sharing and marketing, and marketing, and
collaboration collaboration infrastructure infrastructure
Time
Source: Based, in part, on Morris, E. (2011, February). Presentation on How Regional Innovation Clusters
Form: The Case of the Space Coast Energy Consortium. Purdue Center for Regional Development.
Guidelines for Building Effective Regional Clusters

The AIR 2011 report highlighted a number of actions that can be
taken by the government, firms, and other institutions to create and
build clusters.8 Based on the latest research, Delgado, Porter and Stern
offer the following additional guidelines for building effective clusters
at the regional level:9
■■ Prioritize complementarities across related economic activities
rather than trying to attract just any type of investment.
■■ Offer incentives that benefit a small number of firms where the
region is trying to build strength.
■■ Focus on how to leverage a region’s strong clusters since new
industries will grow out of the most successful existing clusters.
The Council on Competitiveness provides additional insight when it
states that regional leadership is not a one size fits all strategy and that
it is possible to transform a competitive disadvantage into a
collaborative advantage. Some additional guidelines suggested by
the Council include:10
■■ Effective regional leadership requires an on-going intermediary
organization to keep regionalism alive.
■■ Regions need identities and a story to tell.
■■ Regional leaders and regional leadership are both made and born.
■■ Worry less about defining the region and more about enabling it.
Professor Ernest Wilson, Dean of the Annenberg School for
Communication and Journalism at the University of Southern
California notes that for regional clusters to be effective, leaders from
government, business, civil society (not-for-profit organizations), and
academia must work together to:11
Washington State Aerospace Products and Parts Cluster

Washington State has one of the most robust and dynamic aerospace clusters
in the world. With Boeing as its anchor, this cluster includes approximately 650
aerospace-related companies located in 28 counties. Employment at Boeing and
the other aerospace–related firms across the state totaled approximately 96,500 in
March 2013. Each job in the industry generates nearly three additional jobs resulting
in over 200,000 jobs state-wide that can be attributed to this cluster. The cluster is
built around six integral subsectors: airframe manufacturing; avionics; composites;
engineering and research; tooling; and interiors.
According to the Washington State Department of Commerce, “the companies within
these sectors supply every major OEM in the country.” This cluster is supported by the
Aerospace Innovation Partnership Zone, a unique economic development effort that
promotes collaboration leading to new technologies, marketable products, company
formation, and job creation. Furthermore, the Washington State Aerospace Bulletin
distributes information on the cluster, local companies, and emerging technologies.
Although aerospace tends to be a capital intensive, high-risk industry, this cluster
is doing well. From January 2011 to January 2012, aerospace product and parts
manufacturing employment increased by 9,200 and continued to grow in 2013.
Source: Washington State Department of Commerce, 2012 and 2013.
Aerospace Product and Parts Manufacturing Employment in Washington State
Employment
100,000
90,000
96,500
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Washington State Employment Security Department, 2013. Excludes temporary dips in employment caused by
union strikes.
■■ Construct cross-sector networks that are richer, more diverse, and

more deliberately structured than those of the past.
■■ Continually reform the way their organizations are managed—
creating a climate that fosters innovation, and adjusting the
incentives and organizational structures to reward creativity
and collaboration.
■■ Invest in talented, innovative individuals, attracting, retaining,
and empowering the right mix of people who can foster serial
innovation.
Wilson also notes that by reviewing lessons learned and following the
guidelines listed above, it is possible to accelerate the process of build-
ing regional innovation clusters.12
Collaboration Strategies for the Aerospace Industry

Since the 1970’s, the just-in-time demands of industry have often
made the co-location of manufacturers and their suppliers an
economic imperative. Today, however, there is a small but grow-
ing trend toward electronically enabled open collaboration that could
fundamentally change how some firms collaborate. For firms that are
considering creating or entering into a cluster, Pisano and Verganti
(2008) provide some useful guidelines for thinking about different
forms of collaboration.13
Pisano and Verganti describe four scenarios for selecting the most
appropriate strategy. In the first scenario, a select group of participants
is chosen by the company to come up with a solution. The company
leading the effort defines the problem and also selects the solution.
Decision-making in this environment is hierarchical and the number
of participants is limited. Within the aerospace industry, most would
agree that this sounds like a reasonably accurate description of the way
in which the government works with contractors and the contractors,
in turn, often work with their lower-tier suppliers.
In the second scenario, the lead firm may pose the problem, invite
anyone to propose solutions, and then choose the solution that works
best. In the third scenario, participants jointly select problems, decide
how the work will be done, jointly choose solutions, and share the
resulting intellectual property with each other. In the fourth and final
scenario, any firm can propose problems, offer solutions, and decide
which solution to use.
The Cincinnati-Dayton Aerospace Corridor

According to the Cincinnati Ohio Economic Development Agency, the Cincinnati-Dayton
region has one of the nation’s greatest concentrations of aerospace engineering expertise.
This pool includes 50,000 scientists and engineers within a 50-mile radius of Cincinnati,
including 10,000 engineers and scientists at Wright-Patterson Air Force Base alone.
GE Aviation, which has its headquarters in Cincinnati, is one of the world’s leading
producers of commercial and military jet engines and components, as well as
integrated digital, electric power, and mechanical systems for aircraft. The company
also has a global network to service its products.
Source: Cincinnati USA Partnership, City of Cincinnati Economic Development, 2012.
Employment and Establishments in the Cincinnati-Middletown

Aircraft Engine and Engine Parts Cluster
Despite the economy, the number of employees producing aircraft engine and engine
parts in the Cincinnati-Middletown area has remained relatively stable over the past
five years, and the number of establishments has actually grown.
Average Annual Wage Number of Establishments

$102,000 40
Number of Establishments 37
Average Annual Wages 36
$100,000 35
33 $100,089
$98,000 29 30
$96,000 $98,029
24 25
$94,000
$94,363
20
$92,000
$91,281 15
$90,000
$89,879
10
$88,000
$86,000 5
$84,000 0
2007 2008 2009 2010 2011
Source: Ohio Labor Market Information, 2012. See OhioLMI.com.
While some might question whether these more open approaches can
be applied within the aerospace and defense industry, there is evidence
to suggest that some of the nontraditional approaches described in
this framework can lead to faster and better solutions than traditional
product development strategies. Even though security and intellectual
property rights must still be addressed, DARPA and NASA are explor-
ing ways to use crowdsourcing, social networking and prize challenges
to develop new systems and solutions.14
The UAVForge competition is an example:15

UAVForge is a crowdsourcing competition sponsored by
DARPA and the Space and Naval Warfare Systems Center
Atlantic to design, build and manufacture advanced small
unmanned vehicle (UAV) systems. The goal is to facilitate the
exchange of ideas among a loosely connected international
community united through common interests and inspired by
innovation and creative thought. By using a crowdsourcing
competition format, DARPA seeks to lower the threshold
to entry for hobbyists and citizen scientists, hoping to yield
greater innovation, shorter timelines, better performance,
and more affordable solutions. The goal for participants is to
win a flyoff competition and the opportunity to work with a
manufacturer to build a limited number of systems.
As stated by a DARPA program manager, U.S. firms do not have a
monopoly on good ideas, and if companies or government agencies
can determine how to access and organize ideas from outside their
boundaries, the opportunities for innovation expand tremendously.16
For primes and OEMs, these new forms of collaboration represent
new opportunities to source parts and components faster, better,
and cheaper than previously possible. For creative small to medium-
size aerospace manufacturers, this new paradigm has the potential to
significantly expand the number of opportunities available.
The State of Small and Medium-Size

U.S. Aerospace Manufacturers
The Center for Aviation and Aerospace Leadership (CAAL) has been
concerned about the state of small to medium-size aerospace manu-
facturers for a number of years. Firms with less than 1,000 employees
account for over 93 percent of the companies that produce aerospace
products and parts—while firms with 1,000 or more people employ
about 88 percent of the aerospace manufacturing workforce (see
Figure 10.4). We also know, from Chapter One, that firms with less
than 1,000 employees account for almost 25 percent of domestic
Research and Development expenditures, so small to medium-size
firms play an important role in the aerospace and defense industry and
U.S. economy.
Figure 10.4 Number of Employees and Size of Firm
Number of Employees Percent of Employees Percent of Firms
0.5
1 to 9
44.3
9.2
10 to 499
47.3
2.5
500 to 999
1.8
9.9
1000 to 4,999
3.4
77.9
5,000 or More
3.2
0 10 20 30 40 50 60 70 80 90
Source: U.S. Census Bureau, March 2013.
Figure 10.5 was constructed from data obtained from the U.S. Census
Bureau’s Quarterly Financial Reports.17 This figure reveals a troubling
trend, which, if not checked, could lead to the loss of an important
part of the U.S. aerospace industrial base. Unfortunately, in the latter
half of 2012, the gap between the larger and smaller aerospace manu-
facturers continued to expand.
Figure 10.5 Index of Net Sales by Size of Aerospace Manufacturer
Index 4Q 2000 = 100 Firms with Assets Equal to or Greater Than $25 Million
Firms with Assets Less Than $25 Million
180
160
140
120
100
80
60
40
20
0
4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: U.S. Census Bureau. Quarterly Financial Report for Corporations in NAICS Manufacturing Industry Group 3364, March 2013.
Two additional indicators of the health of firms are the Income from
Operations Ratio and the Net Income after Tax Ratio (see Figures 10.6
and 10.7). What these figures tell us is that even though the sales gap
between large and small to medium-size aerospace manufacturing
firms may be growing, the income ratios of SMMs have improved
dramatically over the last two years.
Figure 10.6 Income from Operations Ratio
Percent Firms with Assets Equal to or Greater Than $25 Million

Firms with Assets Under 25 Million
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
2008 2009 2010 2011 2012
Figure 10.7 Net Income After Tax Ratio
Percent Firms with Assets Equal to or Greater Than $25 Million

12.0
10.0
8.0
6.0
4.0
2.0
0.0
2008 2009 2010 2011 2012
Two additional ratios that are useful for assessing this issue are Total Current
Assets to Total Current Liabilities and Total Cash, U.S. Government and other
Securities to Total Current Liabilities. As can be seen in Figure 10.8, the ratio of
Total Current Assets to Total Current Liabilities for both large and small firms is
above 1.0. At the risk of over-simplification, this indicates that these firms,
both large and small, are relatively liquid and have the cash and other assets
to pay off their short-term obligations. It is also interesting to note that
the ratios for small to medium-size aerospace manufacturers were at least
double those of the larger manufacturers in four out of the last five years.
Figure 10.8 Total Current Assets to Total Current Liabilities
Ratio Firms with Assets Equal to or Greater Than $25 Million

3.50
3.00 2.90
3.03
2.60 2.56
2.48
2.50
2.00
1.50 1.36 1.35

1.22 1.29
1.13
1.00
0.50
0.00
2008 2009 2010 2011 2012
When comparing Total Cash, U.S. Government and other Securities, to Total
Current Liabilities, the difference between small firms and large firms is
even greater (see Figure 10.9). While the U.S. Census Bureau provides
no clear explanation for these differences, one reason may be the lack
of credit available to SMMs, forcing them to maintain and use relatively
more cash than their larger counterparts.
Given the challenges of the recession and the nation’s current
economic situation, another good indicator is the number of days that
firms are late in paying their commitments. Experian tracks this type
of information using a statistic called days beyond contracted term or DBT.
With the exception of the very smallest of firms, companies of all
sizes reported fewer days late in 2011 than in the previous year.*
* The upturn in the ratio for larger firms on the right side of Figure 10.10 is usually attributed to the use of more
sophisticated cash management strategies. At the time of printing, the data for 2012 had not yet been released.
Figure 10.9 Total Cash, U.S. Government and Other

Securities to Total Current Liabilities
Ratio Firms with Assets Equal to or Greater Than $25 Million

0.80
0.70
0.70
0.60 0.55 0.54
0.50
0.50
0.40
0.34
0.30
0.20 0.16 0.16 0.16

0.12
0.09
0.10
0.00
2008 2009 2010 2011 2012
Figure 10.10 Days Beyond Terms
Days Beyond Terms Dec 2010 Dec 2011

10
9 8.5 8.52 8.68
8.39 8.12 8.22 8.14
7.9 7.65
8 7.54 7.5
7.13
7 6.7
6 5.4
5.2
5 4.8
4.4 4.4
4
3
2
1
0
1–4 5–9 10–19 20–49 50–99 100–249 250–499 500–999 1000
or More
Number of Employees
Source: Experian Benchmark Reports. Reproduced with permission, July 2012.
While some of these signs are encouraging, small and medium-size

firms still have their challenges.
Challenges Facing Aerospace Suppliers

In an article about some of the issues facing aerospace suppliers, Lee
Mason, a Vice President at Clarke Gear Company, observed that the
preferred strategy used by prime aerospace manufacturers to reduce
costs is to apply pressure on suppliers to reduce their prices with an
understanding that those who fail to meet their new productivity goals
will eventually be dismissed.18
Even though Mason’s article was written in 2004, her list of challenges
facing small to medium-size manufacturers remains valid today. Some
of these challenges include the following:
■■ Continuous pressure to reduce costs and improve productivity.
■■ Pressure to hold inventory while meeting the just-in-time needs of
the primes.
■■ Pressure to move manufacturing to lower labor cost countries.
■■ The increasing cost of doing business in the United States.
■■ Technology-enabled changes in how, where, and when people work.
To respond to these pressures, the author provides a number of
recommendations. They include the following:
■■ Seek to become a true low-cost supplier by reducing costs and
applying best practices. The goal is not to shift your position on an
existing cost curve, but to move to another cost curve altogether.
■■ Use manufacturing technologies that make comparisons difficult.
■■ Use critical components in complex systems, which make it harder
for the OEMs to resource.
■■ Be careful with multi-year contracts that demand annual
downward price adjustments.
■■ Maintain a positive relationship with your prime, regardless
of pressure.
■■ Model your manufacturing processes after those which are
considered best in class.
■■ Know your metrics and teach your people how to make the
continuous adjustments that may be necessary to meet your goals.
Opportunities and Challenges in Civil Space

For some, America’s current vision for space is a controversial topic.
This section addresses three opportunities and challenges associated
with America’s role in civil space: restoring America’s human access
to space; maintaining America’s leadership in space science and earth
observation; and preserving America’s weather satellite capabilities.
Restoring Human Access to Space

In the years following the NASA Authorization Act of 2010, NASA’s
human spaceflight program has made steady progress in restoring inde-
pendent, U.S. domestic access to space. NASA’s approach develops new
capabilities for exploration beyond Earth’s orbit, as well as new systems
for transportation to the International Space Station (ISS).
The 2010 Act established a capabilities-based plan for human explora-
tion beyond Earth’s orbit that supports the development of the Orion
Multi-Purpose Crew Vehicle and the Space Launch System (SLS).
While a definite path has not been widely agreed upon for human
space exploration destinations in the out years, the Act establishes
Orion and SLS as the building blocks for NASA to go beyond Earth’s
orbit, no matter the destination. Orion will be the astronaut-carrying
spacecraft that rides on top of the SLS heavy-lift launch vehicle.
Several key milestones for the development of new systems are
planned for the near-term. Orion is expected to makes its first test
launch into space in 2014 on a Delta IV launch vehicle. This mission
will produce important test data needed for a spacecraft returning
from beyond Earth’s orbit. Work on the SLS is also well underway,
with a target flight test scheduled in 2017. Technical review of the
core stage design of the SLS has already been completed. The first
crewed flight of the SLS is scheduled for 2021.
As work continues on Orion and SLS, NASA’s Commercial Crew
program industry partners are also building capabilities for transporta-
tion to the International Space Station. NASA intends to utilize the
ISS until at least 2020, and may extend its use well beyond that date.
NASA’s Commercial Crew Program has held multiple competitions
since 2010 that fund demonstration of industry capabilities for crew
transportation to the ISS. The latest round of Commercial Crew
competition finances the development of several fully-integrated
crew transportation systems through May 2014—with the option
to go beyond that period, leading up to fully operational systems.
Restoration of domestic crew access to the ISS is targeted by NASA
for 2017, but it is not yet clear how many Commercial Crew providers
NASA will ultimately fund for full ISS transportation.
Maintaining Leadership in Space Science

and Earth Observation
Another area of special attention is NASA’s science program. NASA’s
priority science mission, the James Webb Space Telescope (JWST),
continues to meet key objectives ahead of its scheduled launch date in
2018. As the successor to the Hubble Space Telescope, JWST will be
NASA’s premier telescope for answering bold, paradigm-shifting ques-
tions, including questions about the origin and nature of the universe,
galaxies, stars, and planets. In August 2012, NASA landed its largest
Mars rover to date, the Mars Science Lab, better known as Curiosity.
Curiosity is capitalizing on the successes of the Spirit and Opportunity
Mars rovers and uncovering new insights on Mars’ past and current
capacity to support life.
Recently, pressure has been placed on the JWST and NASA Mars
science program to cut costs and accelerate development, despite
unprecedented technical challenges. Many such science missions must
also grapple with the limited capacity of affordable, domestic space
launch systems to low Earth orbit. When these challenges are coupled
with an occasional launch failure and annual budget constraints, an
environment has been created in which space science missions face
a daunting future. The National Research Council recently reported,
“the nation’s earth observing system is beginning a rapid decline in
capability, as long-running missions end and key new missions are
delayed, lost, or cancelled.”19 In this increasingly difficult environment,
it is critical for the U.S. government to maintain its cadence of future
missions to protect the unique skills and industrial base required to
continue America’s leadership in space science and Earth observation.
Preserving Weather Satellite Capabilities

As the primary provider of satellite-based environmental observa-
tion systems for the public and private sector, the U.S. government
funds and operates key satellite networks that enable the high fidelity
weather forecasts and natural observations that America depends on
daily. Space-based environmental observation programs at NASA,
NOAA, and the USGS, enable scientists and reporters to develop
and deliver routine weather forecasts, as well as advanced warning of
deadly storms—often days in advance.
The need for prediction and response systems for natural disasters
could not be more evident. In 2011, there were 14 weather events
that inflicted at least $1 billion in damage and in 2012, there were 11
such events.
Alarmingly, a number of U.S.-based environmental observation satel-
lites are past their planned life span. With an average life of 15 years
for environmental observation satellites, and development spans on
the order of seven to eight years, advanced planning and commit-
ment is needed to avoid near-term data gaps in daily weather forecasts,
as well as weather research and modeling. If there were to be addi-
tional funding shortages and delays to the NOAA Joint Polar Satellite
System, Geostationary Operational Environmental Satellite – R series,
or the USGS Landsat Program, the United States could see gaps in
weather and environmental data collection. Such gaps could signifi-
cantly degrade our ability to accurately forecast the timing and location
of major weather events and natural disasters.
Weather forecasting is not a given, it is the product of continuous
investment. Steadfast support and funding from the U.S. government
will be crucial to maintaining America’s weather forecasting capabili-
ties in the years to come.
Integrating UAS into the U.S. National Airspace

Commercial applications for Unmanned Aircraft Systems (UAS) are
growing exponentially.* This section addresses recent legislation affect-
ing the approval and control of UAS operations, anticipated commer-
cial uses of unmanned systems, and issues and benefits associated with
the integration of unmanned aircraft into the U.S. National Airspace
System (NAS).
Recent Legislation and Anticipated Applications

In February 2012, the President signed into law legislation requir-
ing the integration of unmanned aircraft into the NAS.20 Unmanned
aircraft systems have tremendous potential to contribute to the
economic, technological, and competitive well-being of the United
States. Realizing this, Congress put forth specific provisions in the
FAA Modernization and Reform Act of 2012 mandating integration
of UAS into non-segregated airspace by 2015. The legislation is timely
since the FAA predicts there will be approximately 10,000 commercial
* Throughout this chapter, the acronym UAS is used to refer to both Unmanned Aircraft Systems and
Unmanned Aerial Systems. The term Unmanned Aerial Vehicle (UAV) is also used and refers to the vehicle
that is part of the Unmanned Aerial System.
UAS operating in the United States within five years.21 Some of the
most commonly cited uses for UAS include law enforcement, pipe
and power line surveillance, traffic monitoring, flood mapping, disas-
ter response management, damage assessment, aerial news coverage,
atmospheric and weather research, mail and freight transport, critical
infrastructure monitoring, real-estate mapping, aerial photography,
wildlife monitoring, sporting event coverage and others.
At the present time, however, there are two critical issues that are
delaying the implementation of UAS into the national airspace.
■■ First, the FAA believes that unmanned aircraft might not be as safe
as manned aircraft and should require special permission to fly.
■■ Second, privacy advocates are demanding new safeguards
regarding the collection and use of surveillance data.
To address the first concern, the FAA established a Certificate of
Authorization (CAO) process to ensure that UASs are safely integrated
into the national aerospace system. As the number of requests has
grown, the FAA has been working with its government partners and
other stakeholders to streamline the COA process. A July 2012 report
by the U.S. Government Accountability Office, states that between
January 1, 2012 and July 17, 2012, the FAA issued 201 COAs to 106
federal, state, and local government entities and academic institutions,
plus eight special airworthiness certifications to four UAS manufactur-
ers.22 Solutions to the second concern are still being debated.
Need for a National Plan and Benefits of Integration

Integrating UAS into the NAS could create tremendous economic
opportunities. For example, the Association for Unmanned Vehicle
Systems International (AUSVI) estimates that 23,000 new jobs and
$1.6 billion in wages will be generated over a 15-year period at an aver-
age wage of almost $70,000 per year.23
As UAS capabilities continue to evolve, however, it has become clear
that a national plan for the operation of UASs is needed. Such a plan
is currently being developed. Key elements of the plan include the
goals, objectives, capabilities, priorities, and guidelines for operation.
Once completed, this plan will specify the policies, procedures and
global harmonization actions required. It will also lay the foundation
for more productive government-industry collaboration. Delaying
integration into the national airspace system could negatively impact
the U.S. economy and the UAS market as other countries develop their
own systems and standards for UAS operation.
Managing Risk in Aerospace Supply Chains

Today’s supply chains are more complex than ever because suppliers
are not constrained to a city, state, or country. As a result, managing
supply chains can be a daunting task where a single disruption can
adversely affect the entire supply chain. This section addresses the
topic of risk in aerospace supply chain networks.
In the financial industry, risk management has been used for years
to identify, assess, prioritize risks, and to use internal and external
resources to mitigate, monitor, and control the impact of uncertain
events. Similar techniques are now being used to manage risks in
modern supply chain networks. Today, this practice is referred to as
supply chain risk management (SCRM).
Why Risk is an Issue in Supply Chain Networks

In recent years, supply chain managers have put more emphasis on
making supply chains more efficient with little concern for the expo-
sure and vulnerability of their supply chains. Svensson described
this vulnerability as “exposure to serious disturbance, arising from
risks within the supply chain as well as risks external to the supply
chain.”24 According to the Department of Defense definition, “risk is
a measure of future uncertainties in achieving program performance
goals and objectives within defined cost, schedule and performance
constraints.”25 By relying on outside providers, organizations can reap
the benefits of their suppliers’ core competencies but, at the same
time, such dependencies often put them at greater risk.
Supply chain disruptions can be caused by a number of natural and
man-made disasters. Some of the major drivers of supply chain risk are
globalization, lean supply chain management, outsourcing, and single
sourcing. Risks associated with globalization include those associated
with transportation, cultural differences and misunderstandings, exchange
rate fluctuations, government policy changes, and others disturbances
which can lead to delays or disruption in a supply chain. The President’s
Comprehensive National Cybersecurity Initiative (CNCI) recognized
that the majority of transactions among supply chain partners inside
and outside the United States are electronic, and that safeguarding these
chains is very important to maintain a smooth flow of information and
materials between partners. As stated in a 2008 study by the Aberdeen
Group, 99 percent of the companies surveyed had a supply chain disrup-

tion in 2007 and 58 percent suffered financial losses.26
The focus of lean supply chain management is on streamlining supply
chain processes and reducing inventory levels by collaborating with
suppliers to deliver components more frequently and in smaller batches.
But low inventory levels with little safety stock make supply chains
vulnerable to even minor disruptions. Similarly, outsourcing increases
dependency and complexities in the network and the more complex a
network is, the higher the vulnerability. Finally, single sourcing makes a
firm dependent upon the financial condition of the sole supplier, which
can cause disruption in the event of the supplier’s insolvency.
In addition to supply disruptions, phenomena such as the bullwhip
effect and counterfeit components can also adversely impact supply
chains. The bullwhip effect is a well-known concept that refers to
the increasing amplification of inventory levels as an order moves
from the customer to the retailer, and further up into the supply
chain. Counterfeit components are another risk faced by companies,
as outsourcing increasingly moves into emerging economies where
anti-counterfeiting laws are not as strict as in the United States. A 2008
BusinessWeek report noted that counterfeit microchips made in China
had entered the supply chains of several major U.S. defense contrac-
tors.27,28 Furthermore, a 2012 report by the Senate Armed Services
Committee concluded that many of the country’s supply chains are
now contaminated, and that counterfeit parts are threatening the
performance and reliability of some of America’s state-of-the-art
aerospace systems.29 A number of actions are being taken at both the
federal and corporate level to proactively respond to this particular
threat. These actions are addressed in more detail later in the chapter.
SCRM is characterized by the identification and reduction of risks
associated with three different types of flows: material flows, financial
flows, and informational flows. Though risk management practices
have been used extensively in the financial industry for some time, the
application of these principles to supply chain risk management is still
relatively new.
Examples of “Risk Events” and Their Impact

Examples of disruptions in these three flows abound, but the follow-
ing examples illustrate the scale and scope of the problem.
Material Flows
■■ A 15 day Teamsters’ strike in 1997 had a severe impact on UPS’
logistics operations.30
■■ A fire at Ericsson’s sole supplier of memory chips led to an
estimated loss of $400 million to Ericsson.
■■ Within a few days of the September 11, 2001 terrorist attacks,
Ford had to discontinue production due to import delays at the
Canadian and Mexican borders.31
Financial Flows
■■ PricewaterhouseCoopers found that in a study of 14 aerospace
and defense companies that reported supply chain failures, they
experienced an average drop of 4.5 percent in their stock values
in the two days following the disruptions. A year later, these firms
were performing nine percent below the unaffected group.32
■■ Another study of 519 publicly announced disruptions revealed
that shareholders lost 10 percent of the stock’s value over a two-
day period.33
■■ Due to the weak dollar, Volvo cars reported a 28 percent
reduction of overall sales in 2008.34
Informational Flows
■■ A glitch in the demand planning software at Nike caused a supply
disruption for Air Jordan shoes that cost the company $100 million.
■■ The 2006 earthquake in Taiwan adversely impacted the Internet
due to breaks in the undersea cables, which led to extended delays
for the containers sitting in Shanghai’s seaport.35
Risk Management Concepts

To avoid or mitigate the impact of such risks, a number of risk
management models have been proposed by industry, DOD, and the
academic community. Juttner, Peck, and Christopher describe four
constructs for managing supply chain risk: risk sources, risk drivers,
risk consequences, and risk mitigation strategies.36 These constructs
are highlighted in Figure 10.11.
Figure 10.11 Model of Supply Chain Risks and Consequences
Supply Chain
Risk Drivers
Supply Chain Supply Chain Risk

Risk Sources Consequences
Supply Chain
Risk Mitigation
Strategies
Source: Juttner, Peck, and Christopher. Supply Chain Risk Management: Outlining an Agenda for Future Research, 2003.
A similar model by the DOD, called the Risk Management Process Model,
includes the following key activities performed on a continuous basis:
risk identification, risk analysis, risk mitigation planning, risk mitiga-
tion plan implementation, and risk tracking.37 These steps are illus-
trated in Figure 10.12.
There are other models that are variants of the two models presented
above. The major activities in each of the models include identifying the
risk, assessing the risk, planning to mitigate the risk, mitigating the risk,
and tracking the risk as part of a continuous improvement process.
Characteristics of Aerospace Supply Chain Risk

Sinha, Whitman, and Malzahn discuss a generic Supply Chain
Operations Reference model for the aerospace industry to aid in
evaluating and understanding how Tier One or Tier Two suppliers
and OEMs interact.38 Based on this model, the following observations
were made:
■■ Aerospace supply chains operate in a make-to-order environment.
■■ There was no overall planning; each company planned in isolation
and the supply chain was not integrated.
■■ There was an overlap in the metrics that were serving the same
purpose, but from a different perspective.
Figure 10.12 Risk Management Process Model
Risk
Identification
Risk Analysis
Risk Mitigation
Planning
Risk Mitigation
Plan
Implementation
Risk Tracking
Source: Department of Defense. Risk Management Guide for DOD Acquisition, 2006.
These authors developed a methodology for mitigating these risks and

others that are common to the aerospace industry. The methodology
differentiates between foreseen, perceived, controllable, and uncon-
trollable risks and prioritizes risks so that resources can be used more
efficiently. This methodology is good for deciding what actions to take
to mitigate risks once identified.
Lessons Learned in Aerospace Supply Chain Management

Given the critical role of supply chains in designing, manufacturing,
and supporting complex systems, some of the lessons learned in aero-
space supply chain management include:
■■ Major outsourcing decisions must be thoroughly examined. The
outsourcing of specialized components is sometimes necessary
due to a lack of in-house expertise or cost efficiencies, but
outsourcing the entire design process is usually not advisable. It
is often less risky to keep supply chain operations inside until the
product and its associated supply chain processes reach maturity.
■■ Collaboration among partners is important. OEMs should strive

to have a presence in every major supplier’s facilities.
■■ Constant communication with suppliers can prevent unexpected
delays. OEMs should establish some form of central command
to track the progress of key parts and communicate their status to
appropriate stakeholders.
■■ Single sourcing of critical components puts a company at high
risk. Risk should be shared between multiple suppliers both within
the country and outside.
Best Practices in Managing Risk

Generally speaking, risk management techniques can be divided into
four categories: risk avoidance, risk reduction, risk transfer, and
risk retention.
Risk avoidance is the simplest way to manage risk. As the name
implies, it refers to avoiding risk-related activities. For example, if
there is evidence of a trend in receiving counterfeit components from
a supplier, the simple solution would be to ban that supplier.
Risk reduction techniques involve managing risk by sharing it with
partners, such as distributing the supply of critical components among
multiple suppliers.
Risk transfer techniques are used when a company deems a problem
too difficult or time consuming to manage. Insurance, outsourcing, or
other approaches can be used to transfer risk.
Risk retention techniques are used to deal with risks that have a low
probability of occurrence, or that will not have a significant impact on
the supply chain. In this situation, the organization itself retains the
risk. A 2005 study by the Aberdeen Group, shows organizations which
manage their risk proactively tend to out-perform others in a number
of performance measures as illustrated in Figure 10.13.39
To effectively manage risk, Tang suggests four basic approaches
including Supply Management, Demand Management, Product Management,
and Information Management.40 The four approaches are intended to
enhance collaboration among the supply chain partners to improve
supply chain operations (see Figure 10.14).
Figure 10.13 Percentage Change in Key Performance Areas
Percent Best in Class Norm Laggards

50.0
40.5 40.7
40.0
31.5
30.0 28.6
20.0
12.2 11.1
9.6 9.3
10.0 7.3
4.6
1.1
0.0
-10.0 -6.6
Supplier Quality Improvement in Improvement in Reduction in
Improvement Lead-Times On-Time Delivery Supply Crises
Source: Aberdeen Group, September 2005.
Figure 10.14 Approaches to Supply Chain Risk Management
Product
Management
Supply Supply Chain Demand

Management Risks Management
Information
Management
Source: Tang. Perspectives in Supply Chain Risk Management, 2006.
For Supply Management, the main issues involve network design,

supplier relationships, supplier selection processes, supplier order allo-
cation, and supply contracts. To be effective at supply chain manage-
ment, a firm must collaborate with its upstream partners to ensure the
efficient flow of materials. A study by AlixPartners notes:41
While order books look healthy and Tier One equipment

suppliers are expected to do well, OEMs should be worried
about whether their supply chains will be able to keep up.
OEMs, such as Boeing and Airbus, and engine suppliers such
as GE/Safran, Rolls Royce and Pratt & Whitney, will need
to considerably ramp-up their supply chains. To mitigate
their risk, AlixPartners says OEMs should be driving greater
integration of their operational environments—working far more
closely with suppliers, putting in place early-warning systems
to improve response time to issues, and getting ready to
provide operational and financial support to suppliers—even
for acquisitions as a last resort.
Some of the main issues for Supply Management include:
■■ Managing exchange rate fluctuations in multiple countries with
multiple suppliers can help a company reduce costs and operate
more efficiently. This can also make supply chains more resilient
during major financial and exchange rate-related disruptions.
■■ Revenue-sharing contracts can also make supply chains more
efficient and resilient as partners share information about demand
and potential financial risks.
For Demand Management, a firm can collaborate with downstream part-
ners to influence demand in a beneficial manner. Such strategies can
shift demand across time, markets, and products. Some of the more
robust strategies for managing demand include:
■■ Responsive pricing strategies, which enable a company to increase
profits by shifting demand across products, which can also
improve resiliency.
■■ Demand postponement, which gives a partner the capability to
shift some demand to a later period, which can help manage both
operational and disruption risks.
For Product Management, a firm can modify the product or process to
make it easier to match supply with demand. Strategies in this category
include:
■■ Product substitution.
■■ Process sequencing.
■■ Postponement.
In terms of robustness, postponing product customization provides

manufacturers with the opportunity, but not the obligation, to custom-
ize products at a later date, resulting in less rework and unsold inven-
tory, which, in turn, lowers costs.
For Information Management, supply chain partners can improve collabo-
ration by sharing information. This is referred to as Collaborative
Planning, Forecasting, and Replenishment (CPFR). CPFR helps part-
ners work together to develop mutually agreeable demand forecasts,
resulting in more accurate forecasts of future demand for each supply
chain partner.
Developing an Adaptive Enterprise

All of these techniques can help firms be more adaptive. Mukherjee
offers the following four principles to help senior executives develop
adaptive businesses.42
■■ Embed sense-and-respond capabilities within normal plan-and-
execute processes. The focus here is on detecting a problem
early and reacting effectively as part of a daily routine to achieve
competitive advantage.
■■ Adopt strategies that promote collaboration among network
partners. This principle emphasizes collaboration between
partners to improve visibility into the competitive landscape.
■■ Value and nurture organizational learning. This principle
emphasizes the need to collect, analyze, and share knowledge
across networks about what works and what does not.
■■ Deploy technologies that enable intelligent adjustment to major
environmental shifts. The focus here is on the need to deploy
information technologies that can support the other three principles.
The increase in globalization of aerospace supply chains has led to lower
costs for customers, but higher risks for manufacturers. As a result,
organizations have acknowledged the need to develop systems, protocols,
and processes to track and manage supply chain risks. Planning, monitor-
ing, and managing these risks can reduce or avoid losses in the long term,
and is far cheaper than resolving the effects of unplanned supply chain
disruptions. Managing these threats by proactively tracking foreseen,
perceived, controllable, and uncontrollable risks, generally results in lower
costs and better performance. Most companies that have embraced these
principles have seen significant improvements in performance.
The Continuing Threat of Counterfeit Parts

In early 2012, the Senate Armed Services Committee released a
summary of findings from a year-long investigation into the growing
threat of counterfeit electronic parts in the U.S. defense supply chain.43
Performance, Reliability, Safety and Security Threatened

According to the report, such parts threaten the performance and
reliability of some of the military’s state-of-the-art systems and are
a direct threat to the security of the United States and our military
personnel. In addition to affecting the performance and reliability of
systems, counterfeit parts can result in the loss of intellectual property,
revenue, and jobs. As stated in the study’s findings, the Semiconductor
Industry Association estimates that counterfeit electronic parts cost
the U.S. semiconductor industry more than $7.5 billion in lost revenue
each year and nearly 11,000 jobs. Perhaps even more sinister is the
knowledge that, in some cases, these parts can be used to collect and
transmit critical information to potential adversaries.
Scale, Scope, and Primary Source of the Problem

Although the full scale and scope of the problem is not well known, it
is significant. For example:
■■ Counterfeit parts have been found on military helicopters, fighters,
transport aircraft, UAVs, and missile systems;
■■ The Senate Armed Services Committee report estimates that
the number of counterfeit parts in the DOD supply chain could
exceed one million;
■■ The Defense Logistics Agency reports that at least one suspect
counterfeit part has been used in 176 different weapon systems; and
■■ When over 100 suspected counterfeit parts were traced back
through the supply chain, more than 70% of the parts appeared to
come from China.44
Industry Actions to Address the Issue

Well before the Senate Armed Services Committee released their 2012
report, the Aerospace Industries Association and its member compa-
nies formed a Counterfeit Parts-Integrated Project Team (CP-IPT)
to proactively address how to deal with this issue in the aerospace
and defense supply chain. The CP-IPT included representatives from
relevant industries and government institutions and following two
years of intense work, the team published recommendations in each

of the following areas:45
■■ Procurement/supplier selection;
■■ Suspected counterfeit part reporting;
■■ Counterfeit part disposition;
■■ Component obsolescence;
■■ Counterfeit parts control plan;
■■ Standards for mechanical parts and materials;
■■ Training;
■■ Duties of importers; and
■■ Disposal of electronic waste.
Today, many of these recommendations have been incorporated into
a broader multi-industry, risk-based, quality-assurance framework for
detecting and disposing of counterfeit parts using commercial innova-
tion and state-of-the-art technologies.
Rare Earth Elements and the Aerospace Industry

Since this topic was introduced in the AIR 2011 report, concerns
about rare earth elements (REEs) have declined somewhat, but their
impact on the aerospace industry is still significant. Even though it
is estimated that DOD only accounts for 5% of domestic consump-
tion,46 REEs are used to produce a variety of aerospace components
including avionics, jet engines, missile guidance systems, magnets,
satellites, actuators and airframes.
Rare Earth Applications for Aerospace and Defense

Some of the more specific aerospace and defense applications that
rely on the use of rare earth elements include:47
■■ Guidance and control systems for Tomahawk cruise missiles,
smart bombs, Joint Direct Attack Munitions, and Predator
unmanned aircraft.
■■ Electronic warfare systems such as jamming devices, the
electromagnetic railgun, long-range acoustical devices, and area
denial systems.
■■ Laser targeting systems, air-based lasers, counter improvised

explosive device (IED) lasers, and photonic disruptors.
■■ Electric drive motors for the Joint Strike Fighter, the Zumwalt
1000 guided missile destroyer, and the Future Combat Vehicle.
■■ Surveillance and detection systems such as sonar transducers,
radar, enhanced radiation detection systems, and multipurpose
integrated chemical agent alarm devices.
Since the U.S. defense industry is dependent on the rare earth elements
that go into these systems, Congress, through the National Defense
Authorization Act for FY 2011, directed the Secretary of Defense to
assess the impact of REEs on the Department’s supply chain and to
develop a plan for addressing any vulnerabilities. The purpose of the
assessment was to identify rare earth materials that would be:48
■■ Critical to the production, sustainment, or operation of significant
United States military equipment; or
■■ Subject to interruption of supply, based on actions or events
outside the control of the Government of the United States.
For every rare earth material that met these criteria, the Secretary of
Defense was also tasked to develop a plan for assuring the long-term
availability of materials for critical defense applications.
DOD’s Response and Other U.S. Actions

In March 2012, the Department of Defense responded by reporting that
seven of the 17 REEs met the criteria specified above, but the U.S. could
produce enough REE material to meet DOD’s needs, with the exception
of yttrium.49 In April 2012, the Defense Department confirmed that they
were closely monitoring the REE market for any projected shortfalls—
and suggested that if shortages were projected, the Department of
Defense would seek congressional approval to stockpile materials, or use
other measures, if necessary, to meet their requirements.50
During this same period, the United States joined with the European
Union and Japan to ask the World Trade Organization (WTO) to
assist in resolving their disputes with China over its limits on rare earth
exports. Subsequently, the U.S. has submitted at least two reports to
the WTO claiming that China has failed to comply with its commit-
ments to the World Trade Organization and that China should adjust
its policies to conform to WTO protocols.
Impact on Small to Medium Aerospace Manufacturers

Any limitations on the supply of rare-earth materials are likely to
affect small to medium-size aerospace manufacturers first because
the REEs are generally used in products made by lower tier suppli-
ers. Larger prime contractors generally do not purchase rare earth
elements directly, but REEs are included in many products that go
into major systems and subsystems. This makes it more difficult to
forecast shortages given the dispersion of demand.
Options for Dealing with Rare Earth Element Issues

Some of the options being considered by Congress to deal with rare
earth elements include the following:
■■ Convene defense suppliers to discuss supply chain issues;
■■ Convene the Strategic Materials Protection Board;
■■ Require stockpiling of specific materials;
■■ Fund the downstream supply capacity;
■■ Fund rare earth research;
■■ Institute a new Critical Minerals Program; and
■■ Develop partnerships with allies to diversify the supply source.
More detail on these options can be found in the 2012 Congressional
Research Service report on Rare Earth Elements in National Defense
referenced earlier.
Outlook for Rare Earth Elements in the Foreseeable Future

At the present time, the U.S. Geological Service estimates that rare
earth reserves total more than 110,000,000 metrics tons. Figure 10.15
reflects a breakdown of the reserves by country.51
Until alternatives for rare earth elements can be developed, world
demand for REEs is expected to increase. The good news is that
U.S.-based Molycorp Inc. has reopened its Mountain Pass mine in
California and has also discovered new deposits of some of the rarest
of these elements. In June 2012, Molycorp also announced that it
had acquired Neo Material Technologies of Toronto, Canada which,
among other things, should provide the company with additional
access to raw materials in China.52 Furthermore, new mines are being
opened in Canada, Greenland, South Africa, Australia and other
Figure 10.15 Rare Earth Element Reserves
Australia
U.S. 1.4%
11.4%
Other Countries
19.3%
India
2.7%
CIS
16.7% China
48.3%
Source: U.S. Geological Survey. Mineral Commodity Summaries, January 2012.
countries, which should increase the availability of these critical, but

limited, resources over the next two to five years.53 Collectively, these
actions have reduced concerns about the price and availability of rare
earth elements in the foreseeable future, but it is also likely that REEs
will continue to be a topic to watch in the years to come.
International Specifications for

Technical Documentation
The Aerospace and Defence Industries Association of Europe (ASD),
Airlines for America (A4A), and the Aerospace Industries Association
(AIA) have been working together for over a decade to encourage the
adoption of S1000D™ International Specification for Technical Publications
Utilizing a Common Source Database. Although its roots are in the avia-
tion industry, the specification can be used for authoring, storing, and
publishing maintenance and operational information for any type of
air, land, or sea system.
The benefits of S1000D include the following:
■■ Reduced support costs through content modularity and reuse.
■■ Improved data sharing across different computing platforms.
■■ The ability to view electronic documentation via a common web
browser or text viewer.
AIA and ASD are also collaborating on:
■■ SX000i International Guide for the use of the S-Series Integrated Logistics
Support (ILS) Specifications.
■■ S2000M International Specification for Materiel Management–Integrated
Data Processing.
■■ S3000L International Specification for Logistics Support Analysis–LSA.
■■ S4000M International Specification for Developing Scheduled
Maintenance Programs.
■■ S5000F International Specification for Operational and Maintenance
Data Feedback.
■■ S6000T International Specification for Training.
■■ S9000D Dictionary for the S-Series ILS Specifications.
S1000D facilitates the exchange of information between manufacturers
and their customers, as well as end-users. From a military perspective, it
is well known that net-centric warfare will require data interoperability
that can only be achieved through industry standards and specification.
The Army, Navy, and Air Force are in various phases of review and
implementation. From a commercial point of view, Boeing and Airbus
have adopted S1000D, and it is anticipated that this specification will
have numerous additional commercial and military applications.
Lead-Free Electronics
The global legislation of hazardous substances, such as the Restrictions
of Hazardous Substances (RoHS), continues to affect the A&D indus-
try. The banning of lead in consumer electronics sold in the European
Union is particularly troublesome. Under RoHS, lead, mercury, cadmium,
hexavalent chromium and flame-retardants, such as polybrominated
biphenyls or polybrominated diphenyl ethers, were to be restricted in
their use. These substances are used routinely by the aerospace industry,
and alternatives may not presently exist for all of their uses.
AIA and the Pb (lead)-free Electronics Risk Management Consortium
(PERM), a group sponsored by the AIA Technical Operations Council
and supported by TechAmerica, the U.S. Department of Defense,
and other agencies, are working to help industry cope with this situ-
ation. However, funding for lead-free electronics research is needed
to develop the industry’s ability to identify alternatives for the tin-lead
solder that has traditionally been used in electronic parts for aerospace
and defense systems.
The shift to lead-free electronics is impacting the use of commercial-

off-the-shelf (COTS) electronics in aerospace and defense because
industry does not presently have the technical knowledge or data
necessary to measure and test the reliability of lead-free alternatives.
Furthermore, A&D systems tend to have a longer service life and
operate in harsher environments where the consequences of failure
can be high (see Figure 10.16).
Figure 10.16 Lead-free Electronics Operating Environment
High 8% <1% High

Satellites
Medical Equipment
Missiles
Harshness of Service Environment
Submarines
Consequences of Failure
Aircraft
Cars Ships
Ground Vehicles
Network Servers Industrial Products
Cell Phones
Major Home Appliances
Desktop PCs
62% 29%
Low Low
1 3 5... 10 20 30
Expected Operational Service Life (Years)

Source: AIA. Technical Briefing on the Pb-free Electronic Risks Mitigation Project. January 30, 2012.
The two, basic reliability issues are:

■■ The potentially higher probability of failure due to tin whiskers in
applications involving pure tin finishes on part terminations.
■■ Reduced joint reliability in applications employing assembly solder
alloys with significantly different material properties than the
traditional tin-lead alloys.
These challenges make it difficult for electronics manufacturers to
transition to lead-free materials that comply with European Union
directives for electrical waste and hazardous substances. To meet this
need, AIA and the other members of PERM have developed a multi-
year strategy for reducing lead-free electronics. Deliverables from this
project include the following:
■■ Detailed design guidelines for the use of lead-free COTS electronics.

■■ Validated life-prediction models based on the physics of failure.
■■ Methodologies for assessing new materials.
■■ Assembly and repair process definitions.
A multi-year budget has been developed for this project, but given the
scope and complexity of the issue and the current economic environ-
ment, mitigating the risks of lead-free electronics may be a topic to
watch for years to come.
Cyber-Warfare and the U.S. Aerospace

and Defense Industry
Another topic to watch is the growing threat of cyber-warfare. The
Department of Defense has been battling individual hackers and state-
sponsored cyber-terrorists for years. Air Force Magazine states that
DOD’s networks are probed almost 10,000,000 times a day and that
the attacks are becoming more numerous and sophisticated.54
A recent report by the U.S. Office of the National Counterintelligence
Executive makes it clear that cyber-warfare is not only a threat to the
nation’s military, but is now a very real threat to the broader economic
interests of the United States. The aerospace and defense industry is at
the top of the target list for cyber-terrorists. The Executive Summary
of the report states that:55
Foreign economic collection and industrial espionage against
the United States represents a significant and growing threat
to the nation’s prosperity and security. Cyberspace—where
most business activity and development of new ideas now
takes place—amplifies these threats by making it possible
for malicious actors, whether they are corrupted insiders or
foreign intelligence services (FIS), to quickly steal and transfer
massive quantities of data while remaining anonymous and
difficult to detect.
Information targeted by hackers includes sales figures, financial
reports, strategic plans, and virtually everything associated with new
product development, including R&D data, blueprints, manufacturing
specifications and software.
Primary Aggressors and Main Areas of Interest

The National Counterintelligence report states that many nations
today view economic espionage as an essential tool in achieving national
security and economic prosperity. At the present time, China and
Russia are the most aggressive collectors, but the list is growing.56
The U.S. aerospace and defense industry, UAVs, and advanced mate-
rials and manufacturing techniques are among their main areas of
interest,57 but the very nature of supply chains means that virtually
every supplier and end-user could be vulnerable.58 Unfortunately, the
United States is not the only country that is under attack. Sky News,
an international television broadcaster located in the U.K., reports that
Internet spies have targeted the European aerospace industry as well.59
Within the United States, one of the most publicized attacks on the
aerospace industry occurred in 2011 when RSA, one of the world’s
premier providers of network encryption devices, was attacked.
Whoever carried out the attack used data collected from RSA to
duplicate Lockheed Martin employee credentials and subsequently
penetrate the company’s network.60 Aerospace Corporation was also
a victim of industrial espionage that originated from China.61 These
attacks were a wake-up call for the industry. Lockheed Martin is now
collaborating with the DOD to assist in fighting this growing threat to
America’s national security and economic interests.
Impact on Small to Medium-Size Aerospace Manufacturers

Unfortunately, such attacks have not been limited to large firms or the
government. New evidence suggests that over one-third of all cyber-
attacks are now directed at businesses with less than 250 employees.62
Best Practices in Data Protection and

Due Diligence for Corporations
To deal with this emerging crisis, the Office of the National Counter-
intelligence Executive (ONCIX ) provides the following guidelines for
protecting corporate data.63
Information Strategy
Develop a transparency strategy that determines how closed or open the
company needs to be, based on the services provided.
Insider Threat Programs and Awareness

■■ Institute security training and awareness campaigns. Convey
threats to company information accessed through portable devices
and when traveling abroad.
■■ Establish an insider threat program that consists of information
technology-enabled threat detection, foreign travel and contact
notifications, personnel security and evaluation, insider threat
awareness and training, and reporting and analysis.
■■ Conduct background checks that vet users before providing them
company information.
■■ Implement non-disclosure agreements with employees and
business partners.
■■ Establish employee exit procedures. Most employees who steal
intellectual property commit the theft within one month of
resignation.
Effective Data Management

■■ Get a handle on company data. This includes data in databases,
e-mail messages, individual computers, and web portals. Such data
must be categorized and classified, using the most appropriate
set of controls for each class of data. Finally, someone must
determine which data should be kept and for how long.
Understand that it is impossible to protect everything.
■■ Establish compartmentalized access programs to protect
unique trade secrets and proprietary information and centralize
intellectual property data. This will increase security and facilitate
information sharing.
■■ Restrict distribution of sensitive data. Establish a shared
data infrastructure to reduce the quantity of data held by the
organization and discourage unnecessary printing and reproduction.
Network Security, Auditing, and Monitoring

■■ Conduct real-time monitoring and auditing of the networks.
Maintain thorough records of who is accessing servers, and
modifying, copying, deleting, or downloading files.
■■ Install software tools for content management, data loss
prevention, and network forensics on individual computer
workstations to protect files. Encrypt data on servers and

password-protect company information.
■■ Incorporate multi-factor authentication measures such as biometrics,
PINs, and passwords combined with knowledge-based questions, to
help verify users of information and computer systems.
■■ Create a formal, corporate policy for mobility. Develop measures
for centrally controlling and monitoring which devices can be
attached to corporate networks and systems and what data can be
downloaded, uploaded, and stored on them.
■■ Formalize a social media policy for the company and implement
strategies for minimizing data loss from on-line social networking.
Contingency Planning
■■ Establish a continuity of operations plan. Back up data and
systems, create disaster recovery plans, and plan for data breach
contingencies.
■■ Conduct regular penetration testing of the company infrastructure,
as well as third-party shared service-provider systems.
■■ Establish document creation, retention, and destruction policies.
Resources for Help

Contact ONCIX at http://www.ncix.gov/or the FBI for assistance
in developing effective data protection strategies. If a data breach is
suspected, contact the FBI or other law enforcement organizations for
help in identifying and neutralizing the threat.
Fuel Efficiency and the Aviation Industry

Through the design and development of fuel-efficient aircraft, aero-
space manufacturers play a crucial role in improving aviation’s carbon
footprint. After safety, fuel efficiency is often cited as the most impor-
tant design criteria for jet aircraft—averaging over a quarter of the
operating costs for airlines, and this number is increasing. As a result
of this strong market incentive, engine and airframe manufacturers
design and produce the most fuel-efficient aircraft possible.
Airports, commercial airlines, business aviation and private pilots also
reduce carbon dioxide (CO2) emissions by employing fuel-efficient
operational procedures. Air navigation entities, such as the Federal
Aviation Administration and the European Union’s Eurocontrol,
contribute to aviation’s overall fuel efficiency by implementing state-

of-the-art communications, satellite surveillance, and performance-
based navigation procedures. Thus, advances in air traffic management
and flight procedures play an important role in reducing the industry’s
greenhouse gas emissions.
Commercial Aviation’s Strategy to Reduce Global CO2 Emissions

In 2008, airlines, manufacturers, and air navigation service providers
took the unprecedented step of setting three global commitments
for reducing aviation emissions. The timeline for these three commit-
ments are as follows:
■■ Today through 2020: 1.5 percent efficiency improvement per year—
Operational, technological, and infrastructure measures should
increase fuel efficiency by 17 percent over the coming decade.
■■ From 2020: Carbon neutral growth—The aviation sector has
committed to cap its net emissions at the 2020 level.
■■ By 2050: 50 percent of 2005 Level Emissions—The civil aviation
industry also has adopted a long-term, aspirational emissions
reduction goal that will take advantage of further advancements
in engine and aerodynamic design, air traffic management systems
and sustainable biofuels.
The civil aviation industry is one of the few economic sectors with a
coordinated, global approach to reducing emissions. Each step of the
plan is defined by its contribution to improving fuel efficiency. The
steps include advances in systems, airframes, engines and technologies;
transformational air traffic management (ATM) investments, like the
Next Generation Air Transportation System (NextGen); more efficient
air carrier operations; and sustainable aviation biofuels. The net effect
of these changes on CO2 emissions is illustrated in Figure 10.17.*
Technology and Innovation

Since the first generation of commercial jet engines came into wide-
spread use in the 1950s and 1960s, the aviation industry has consis-
tently introduced new technologies and innovations to improve
aviation’s environmental performance (see Figure 10.18). Jet aircraft
and engines are over 70 percent more fuel-efficient and 90 percent
quieter than the first jet aircraft.64 During this same period, passenger
* There are several versions of this figure. See ICAO Environment Report 2010, p. 94 or Boeing’s Current
Market Outlook 2012–2031, p. 10.
and cargo traffic increased more than six-fold, making the industry an
extremely efficient economic driver.
Figure 10.17 Key Drivers of Emissions Reduction
res
asu
n Me
ctio
edu
o u tR
ith
th w nt
row pme
CO 2 Emissions
ns G
D evelo
io logy
iss hno
Em Tec
sted al /
eca Ren
ew
For leet
g F ts
oin vemen
Ong ts / Impro
e n
vestm
ATM In
Low Carbon Fuels
Baseline
2006 Carbon Neutral Timeline 2050

Source: Aerospace Industries Association, August 2012.
Figure 10.18 Fuel Efficiency Gains Since the Early Jet Age
Comet 4
100.0
707-120
90.0
80.0
Percent of Base (Comet 4)
747-100
70.0 Engine Fuel
747-400 Consumption
A380
60.0 DC-8-63
777-200 49%
50.0 777-300 ER 787
40.0 Aircraft Fuel Burn
per Seat
30.0 A380
777-200
20.0 777-300 ER 82%
787
10.0
0.0
1950 1960 1970 1980 1990 2000 2010
Year of Model Introduction

Source: Aerospace Industries Association and ICAO Environment Report 2010, p. 72.
These environmental improvements have been achieved through

technological advances in aerodynamics, materials, systems, engines,
and design integration. Today’s aircraft are designed for more than a
15 percent improvement in fuel burn than comparable aircraft of a
decade ago, and will deliver 40 percent lower emissions than aircraft
previously designed.65
The airlines also have undertaken a range of operational, maintenance
and planning procedures to ensure that today’s aircraft fly at opti-
mal levels of efficiency. Such measures include continuous descents
and tailored arrivals where available, flying aircraft slower and using
delayed flap approaches, reverse idle thrust on longer runways, single
engine taxi-in, reducing the use of auxiliary power units, and just-in-
time fueling.66
Air Traffic Management

The successful deployment of NextGen is a key component of
the United States’ plan for reducing aviation-related CO2 emissions.
NextGen combines operational and technological advancements to
reduce fuel burn and CO2 emissions by eliminating airport congestion
and en route delays through an evolving system that is safe, secure,
and more efficient than the present network of legacy systems
and capabilities.
Sustainable Aviation Biofuels

Biofuels are produced from renewable resources, such as plant mate-
rial, animal fats and municipal solid waste, rather than traditional
fossil fuels like coal, oil and natural gas. There has been a great deal
of success in the area of sustainable aviation biofuels. Though testing
continues, several biofuels have already been approved for commercial
use. These fuels will help the industry reach the International Civil
Aviation Organization (ICAO) goal of carbon neutral growth by 2020.
Sustainable aviation biofuels are expected to provide up to an 80 percent
reduction in overall CO2 life cycle emissions compared to fossil fuels.67
Aviation uses only newer generation biofuels, which can be derived
from non-food crop sources and do not compete with food supplies.
Bio-derived oil, sourced from sustainable crops such as algae, jatropha,
halophytes and camelina, or from other sources such as municipal waste,
can be processed to make high-quality jet and diesel fuels.
Next-generation biofuels have already been used on a limited number
of passenger flights with several airlines planning to use them for
regular routes in the near future. The aviation industry is committed

to ensuring that biofuels are sustainable and have a positive impact on
local communities and the global environment.
International Coordination
Aviation is an inherently global activity. It provides an interconnected
network of air services that spans continents and crosses national
jurisdictions on a daily basis. Even flights within state boundaries
can have implications for international aviation, as domestic flights
often serve as critical feeders for the international network. To avoid
a patchwork of overlapping and potentially conflicting national and
regional policies, a framework for addressing aviation CO2 emissions
must be developed at the global level.
The fundamental principle protecting the integrity of the international
aviation system is Article 15 of the Chicago Convention, which limits
the ability of any one country to impact the flying rights of another
country. The European Union’s unilateral decision to subject non-EU
aviation to its Emissions Trading System (ETS) puts this principle at
risk and preempts the international treaty rights of other countries.
In addition to the European Union, specific countries like the U.K.,
Germany and Austria have started imposing a myriad of climate change-
related operating restrictions, taxes and charges on airlines, passengers
and freight. This is a detriment to the development of global solutions
to environmental issues and can impair aviation and economic growth.
The United States must remain committed to an ICAO-led, global-
sectoral approach to reducing aviation’s CO2 emissions.
The industry conducts internationally coordinated efforts under its
dedicated United Nations agency, the ICAO. This agency is currently
working to implement a global plan for reducing civil aviation emis-
sions with support from the international community. Recognizing the
specific nature of the aviation sector, governments at the 37th ICAO
Assembly in October 2010 demonstrated that multilateral, global
collaborative action is the most appropriate mechanism to effectively
address international aviation emissions in a post-2012 framework.
International aviation was the first sector with a shared global commit-
ment to the environmental goals of increasing fuel efficiency and
stabilizing its global CO2 emissions in the medium-term.
U.S. leadership in ICAO, combined with the technical expertise of the
Committee on Aviation Environmental Protection (CAEP), provides
a framework to ensure that U.S. aviation environmental issues are well
represented in the global aviation community. U.S. commitment to

support ICAO as the preeminent global body responsible for all civil
aviation environmental matters is essential to the industry.
U.S. participation in ICAO’s development of international aviation
standards and recommended practices should guide U.S. policies. As
such, any environmental measures affecting aviation should be in
conformity with the policies being developed cooperatively by the 190
contracting states of the Chicago Convention through ICAO.
Greenhouse Gas Emissions

Aviation emissions were officially brought into the European Union’s
Emissions Trading Scheme (EU ETS) on January 1, 2012. This
required that operators pay for their carbon emissions for each trip
that departs or arrives in an EU country, even for portions of the trip
that do not occur over their airspace. Additionally, because the EU
ETS creates a tax for actions occurring outside of EU territory, there
is a sovereignty issue. This unilateral action threatens a global environ-
mental plan being developed by the ICAO.
International opposition to the EU ETS has been steadily increas-
ing. At the beginning of 2013, the European Union announced that
it would put a one-year hold on some countries’ compliance with the
EU ETS, giving credit to the work done within ICAO on Market-
based Measures (MBMs). Flights still covered under the scheme are
from the European Economic Area states of the EU, plus Iceland,
Liechtenstein, Norway, Switzerland, and Croatia. The European
Commission, however, has threatened that if there is not enough
progress on the matter during the 2013 ICAO Assembly, it will rein-
state the scheme on non-EU countries by January 1, 2014. MBMs are
just one of the many elements of a comprehensive mitigation strategy
to address greenhouse gas (GHG) emissions from international avia-
tion being discussed by the industry.
Recent Actions
■■ Indian and Chinese airlines have refused to comply with EU ETS
and have not submitted any data to the European Union. U.S.
carriers, however, have.
■■ The Moscow Declaration of February 2012 was signed by the
‘Coalition of the Unwilling’ and describes eight possible measures
that the signatory countries could take in retaliation, including
filing an Article 84 dispute under ICAO, prohibiting carriers from
taking part in the scheme, and mandating that EU carriers submit

flight details (similar to what the U.S. DOT has demanded), as well
as other options.
■■ Perhaps the most impactful move by a country since the
Declaration was the recent suspension of Airbus orders by China.
This move is estimated to be worth over $12 billion.
■■ The CEOs of Airbus, Safran and MTU Aero Engines, plus major
European flag carriers such as Air France, Lufthansa, Iberia,
British Airways, Virgin Atlantic, and Air Berlin, have written letters
to the Prime Ministers of France, Germany, Spain and the United
Kingdom warning of the growing probability of a trade conflict
with China and other major nations over the EU ETS.
■■ A House resolution passed last year (HR. 2594) forbids flights
departing the United States from participating in the EU ETS, and
a similar resolution is being considered in the Senate.
■■ Some airlines are urging the U.S. government to file a complaint
under Article 84 of the Chicago Convention. An Article 84
allows ICAO members to file a complaint against other members
for violating “the cardinal principle of state sovereignty”
outlined in the Convention on International Civil Aviation
(the Chicago Convention).
Many industry experts believe that any MBMs should be implemented
under the direction of the ICAO, and progress has been made within
ICAO by an Ad hoc Working Group on Market-Based Measures. The
Ad hoc Working Group has been tasked to come up with a single,
market-based mechanism and an implementation framework in prepa-
ration for the next ICAO Assembly in late 2013. This plan will be
underpinned by the 15 guiding principles adopted by the 37th Session
of the Assembly, listed below.68
ICAO Guiding Principles for Market-Based Measures

1. MBMs should support sustainable development of the
international aviation sector.
2. MBMs should support the mitigation of GHG emissions from
international aviation.
3. MBMs should contribute toward achieving global aspirational goals.
4. MBMs should be transparent and administratively simple.
5. MBMs should be cost-effective.

6. MBMs should not be duplicative, and international aviation CO2
emissions should be accounted for only once.
7. MBMs should minimize carbon leakage and market distortions.
8. MBMs should ensure the fair treatment of the international
aviation sector in relation to other sectors.
9. MBMs should recognize past and future achievements and
investments in aviation fuel efficiency and other measures to
reduce aviation emissions.
10. MBMs should not impose inappropriate economic burden on
international aviation.
11. MBMs should facilitate appropriate access to all carbon markets.
12. MBMs should be assessed in relation to various measures—on
the basis of performance measured—in terms of CO2 emissions
reduction or avoidance, where appropriate.
13. MBMs should include de minimis provisions.
14. Where revenues are generated from MBMs, it is strongly
recommended that they should be applied in the first instance to
mitigating the environmental impact of aircraft engine emissions,
including mitigation and adaptation, as well as assistance to and
support for developing States.
15. Where emissions reductions are achieved through MBMs, they
should be identified in States’ emissions reporting.
The ICAO Ad hoc Working Group on Market-Based Measures has
been working on several framework proposals to the Council, with the
final selection going into effect after 2020. The Group has narrowed
the list to the following approaches: global offsetting that would have
operators paying for their emissions to a central fund that will finance
the offsets; global emissions trading in a cap-and-trade system; and
emissions trading scheme through a baseline-and-credit model.
Two issues still remain to be addressed: How revenues raised through
the sale of offsets or emissions-trading credits would be applied to
greenhouse gas mitigation, and who would administer the program
with ICAO. The full body of ICAO still must vote to adopt it at the
next meeting, which occurs in the fall of 2013.
Meanwhile, in July 2012, the ICAO’s Committee on Aviation

Environmental Protection agreed on a metric system and certification
procedures that will be used to define a global CO2 standard for new
commercial aircraft. CAEP is now working on the Standard’s scope
of applicability.69
The Impact of Sequestration

One of the biggest challenges facing the U.S. aerospace and defense
industry at this time is adjusting to the changes caused by seques-
tration. When Congress and the White House agreed to address
the nation’s debt-ceiling, a poison pill was embedded in the Budget
Control Act of 2011 (BCA). The agreement called for a congressional
Joint Select Committee on Deficit Reduction (sometimes called the
Super Committee) to produce a deficit reduction bill with $1.2 trillion in
budget cuts over the next 10 years. The Super Committee deadlocked,
and the automatic, mandatory sequestration cuts were implemented on
March 1, 2013.
These cuts will require a $500 billion reduction in defense spending
from FY 2013 through FY 2021, and an additional $500 billion reduc-
tion in non-defense spending during the same period. The remaining
savings are due to come from reduced debt service costs. All of these
cuts are in addition to $487 billion in defense cuts that were previously
agreed to—and which are being implemented—regardless of whether
Congress acts to repeal sequestration.
To achieve the $487 billion in defense cuts, the Pentagon plans to trim
$259 billion in military inefficiencies, restructure the armed forces, and
adjust personnel costs. The remaining $228 billion in savings will be
accomplished by repositioning the Department’s presence overseas
and resizing its current fleet of ships, planes, tanks, and other vehicles
and equipment.
Using data from the Congressional Budget Office (CBO), Figures
10.19 and 10.20 graphically illustrate their view of GDP growth and
unemployment through the end of 2022—including the impact of
sequestration.70 In their Budget and Economic Outlook for Fiscal Years 2013
to 2023, the CBO states that they expect the GDP to grow at just 1.4
percent in 2013 but to increase to 3.4 percent in 2014.

of Sequestration on GDP Growth

30,000 5.0
GDP Percentage Change in GDP 4.5
25,000
4.0
3.5
20,000
3.0
15,000 2.5
2.0
10,000
1.5
1.0
5,000
0.5
0 0.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Congressional Budget Office, 2013.

of Sequestration on Unemployment
Percent Unemployment Rate Percentage Change in Unemployment Percent

9.0 0.0
8.0
-2.0
7.0
-4.0
6.0
5.0 -6.0
4.0 -8.0
3.0
-10.0
2.0
-12.0
1.0
0.0 -14.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Congressional Budget Office, 2013.
The CBO expects unemployment to remain above 7.5 percent through

2014, which will make it the sixth consecutive year that unemploy-
ment has exceeded 7.5 percent—the longest such period in the past
70 years.71 However, the CBO also expects new housing construction
to increase, real estate and stock prices to rise, and credit to open up,
resulting in faster growth in employment, income, consumer spending,

and business investment over the next few years—which all bode well
for the economy.72
Former Secretary of Defense Leon Panetta raised the alarm about
sequestration defense cuts, noting they would be “devastating” for
the Department of Defense. “Facing such large reductions, we would
have to reduce the size of the military sharply,” Secretary Panetta
wrote to Senator John McCain last year. “Rough estimates suggest
after 10 years of these cuts, we would have the smallest ground force
since 1940, the smallest number of ships since 1915, and the smallest
Air Force in its history.” Panetta added, “We would also be forced to
terminate most large procurement programs in order to accommodate
modernization reductions that are likely to be required.”73
Sequestration will also impact federal agencies that oversee and manage
civil aviation and aerospace programs. For example, NASA’s FY 2013
budget top line will be $16.9 billion, roughly $1.2 billion below its FY
2012 funding level. Future sequestration cuts could slow the develop-
ment of the next generation of launch vehicles and spacecraft and
delay commercial crew services well beyond the time when our leaders
said we would no longer be reliant on the Russians for transportation
to space. Sequestration will also strain NASA’s efforts to launch impor-
tant Earth science, planetary exploration and astrophysics missions, and
hinder NASA’s critical aeronautical research programs.
The Federal Aviation Administration’s $12.7 billion budget (exclud-
ing FAA’s budget-protected Grants-in-Aid for Airports program)
will be cut by $600 million in FY 2013 as a result of sequestration.
Responding to public outcry about air transportation delays, Congress
acted in April 2013 to ensure that air traffic controllers will not be
furloughed and air traffic control towers will not be closed due to
sequestration. However, future sequestration cuts could still negatively
affect the traveling public and air cargo services. The cuts might also
impact improvements to the nation’s air transportation system. An
Econsult Corporation study conducted for AIA estimates $80 billion
in lost economic output by 2035 if upgrades to the NextGen program
are delayed beyond the planned 2025 completion date.74
Despite the imposition of sequestration, in March 2013, Congress
provided the National Oceanic and Atmospheric Administration
(NOAA) nearly $2 billion to keep the Joint Polar Satellite System
(JPSS) and other weather satellite programs on track. However,
“NOAA is also supposed to use some of the funding to figure out
how to fill a 17- to 53-month-long gap in data provided by the satel-

lites, which could begin as early as 2014.”75 Sequestration in FY 2014
and beyond could slow down NOAA’s weather satellite programs, but
in the wake of Superstorm Sandy and other severe storms, Congress
has apparently gotten the message that the public greatly values the
services these satellites provide and does not want to have their capa-
bilities degraded.
Summary
The aviation, aerospace, and defense industries are dynamic and vital
to the U.S. economy and national defense. As a result, there are a
number of topics that are important to watch in 2013 and beyond.
First, there is a growing awareness of the potential benefits of regional
aerospace clusters. By working together, industry and community lead-
ers can create more jobs, generate more income, and produce more
products and services than might otherwise be possible. The launch of
the Cluster Registry by the Institute for Strategy and Competitiveness
and the U.S. Economic Development Administration could play a
significant role in promoting regional clusters in the aerospace and
defense industry.
Small to medium-size aerospace manufacturers also play a critical role
in the U.S. aerospace industry and national economy. These compa-
nies account for thousands of high-paying jobs and are an important
source of new ideas in an industry that is dependent on creativity and
innovation. Unfortunately, there is evidence which suggests that the
sales gap between small to medium-size manufacturers and the larger
manufacturers is growing. This gap increased during the latter half of
2012, as the SMMs struggled to find qualified workers and affordable
credit while complying with new regulations, high taxes, and other
industry challenges.
Other areas that were addressed included America’s role in civil space,
integrating UAS into the national airspace, fuel efficiencies and CO2
emissions, lead-free electronics, and international specifications for
technical publications.
The management of supply chain risk was also covered, and several
concepts and best practices for managing risk were presented.
Following the discussion of supply chain risk, three very specific
examples of risk were addressed including REEs, counterfeit parts, and
the growing threat of cyber-enabled economic espionage—all of which
are significant challenges for the U.S. aerospace and defense industry.
The last topic, and perhaps the most controversial, was the issue of
sequestration. Although sequestration was officially implemented on
March 1, 2013, the full impact on the U.S. economy is not yet known.
What is known is that it will have a significant impact on the outlook
for the aviation, aerospace, and defense industries—which is the
subject of the next chapter.
Chapter Endnotes
1 Chadwick, W. A., Ellis, B. W. C., Mansfield, R. E., & Materna, R. [Equal Contributors]
(2011). Aerospace Industry Report 2011: Facts, figures & outlook for the aviation
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Aeronautical University–Worldwide, pp. 118-126.
2 Porter, M. E. (1998). On Competition. Boston, MA: Harvard Business School Press,
p. 199.
3 Delgado, M., Porter, M. E., & Stern, S. (2010). Clusters and entrepreneurship. Journal
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4 Delgado, Porter & Stern. (2011). p. 33.
5 Donovan, D. J. (2011, 12 May). Aerospace site selection trends. Retrieved from
http://www.tradeandindustrydev.com
6 Ibid.
7 Atwood, J. (2011, October 6). U.S. EDA announces registry to connect industry
clusters across the country. Retrieved from http://cluster mapping.us/index.html
8 Chadwick, Ellis, Mansfield & Materna. (2011). pp. 124-125.
9 Delgado, Porter & Stern. (2011). p. 33.
10 Council on Competiveness. (2010). Collaborate. Leading regional innovation
clusters. Retrieved from http://www.compete.org/publications/detail/1384/
leading-regional-innovation-clusters
11 Wilson, E. J. III. (2012, Spring). How to make a region innovative. Strategy+Business,
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12 Ibid., p. 2.
13 Pisano, G. P., & Verganti, R. (2008, December). Which kind of collaboration is right for
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15 DARPA Tactical Technology Office. (2012, March 19). UAVFORGE. Retrieved from
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16 Ibid.
17 U.S. Census Bureau. (2013, March). Quarterly financial report for Manufacturing,
Mining, Trade, and Selected Service Industries 2012, Q4. Retrieved from
http://www2.census.gov/econ/qfr/current/qfr_pub.pdf
18 Mason, L. (2004, January). Staying aloft as an aerospace supplier. [White Paper].

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19 The National Academies. (2012, May 2). Report warns of rapid decline in U.S. earth
observation capabilities; Next-generation missions hindered by budget shortfalls,
launch failures. Retrieved from http://www8.nationalacademies.org/onpinews/
newsitem.aspx?RecordID=13405
20 Hinton, M. (2012, July 19). Unmanned aircraft industry backs privacy legislation. The
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23 Association for Unmanned Vehicle Systems International (2010). An assessment
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24 Svensson, G. (2002). Dyadic vulnerability in companies’ inbound and outbound
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25 Department of Defense (2006). Risk management guide for DOD acquisition (6th Edition).
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26 Sadlovska, V., Spinks, M., & Shecterle, R. (2008). Supply chain risk management:
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28 Brady, G., Kinman, B., Lekstutis, M., & Hampson, N. (2009, January). How to fortify
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29 U.S. Senate Armed Services Committee. (2012, May 21). Senate Armed Services
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30 Basu, G., Ben-Hamida, M., Butner, K., Cope, E., Dao, H., Deleris, L., … & Torpy, J.
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31 Sheffi, Y. (2001). Supply chain management under the threat of international terrorism.
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32 Brady, et. al. (2009, January). How to fortify your supply chain through collaborative
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33 Hendricks, K. B., & Singhal, V. R. (2003). The effect of supply chain glitches on
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35 Ibid.
36 Juttner, U., Peck, H., & Christopher, M. (2003). Supply chain risk management: outlining
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37 Department of Defense. (2006). Risk management guide for DOD acquisition (6th
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38 Sinha, P. R., Whitman, L. E., & Malzahn, D. (2004). Methodology to mitigate supplier
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39 Sadlovska, V., Spinks, M., & Shecterle, R. (2008). Supply chain risk management:
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40 Tang, C. S. (2006). Perspectives in supply chain risk management. International Journal
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41 AlixPartners. (2012). Aerospace supply chain faces harsh reality of having to deliver
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aircraft-orders-in-2011.aspx
42 Mukherjee, A. S. (2008). The spider’s strategy: creating networks to avert crisis, create
change, and really get ahead. FT Press. Retrieved from http://www.ftpress.com/store/
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43 U. S. Senate Committee on Armed Services. (2012, May 21). Senate armed services
committee releases report on counterfeit electronic parts. Retrieved from
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44 Fulghum, D., Sweetman, B. & Dimasco, J. (2012, June 4/11). China Chips: counterfeit
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45 Aerospace Industries Association. (2011, March). Counterfeit parts:
increasing awareness and developing countermeasures. Retrieved from
http://www.aia-aerospace.org/assets/counterfeit-web11.pdf
46 Ratnam, G. (2012, April 9). Rare earth shortage would spur Pentagon to action.
Retrieved from http://www.bloomberg.com/news/2012-04-09/rare-earths-shortage-
would-spur-pentagon-to-action.html
47 Grasso, V. B. (2012, September 5). Rare earth elements in national defense:
background, oversight issues and options for Congress. Washington, DC:
Congressional Research Service.
48 Ibid., p. 3.
49 Kendall, F. (2012, March 12). Report to Congress—rare earth materials in defense
applications. Washington, D.C.: U.S. Department of Defense.
50 Ratnam, G. (2012, April 9). Rare earth shortage would spur Pentagon to action.
51 U.S. Department of the Interior. (2012, January). U.S. geological survey, mineral
commodity summaries. Retrieved from http://minerals.usgs.gov/minerals/pubs/
commodity/rare_earths/mcs-2012-raree.pdf
52 Molycorp. (2012, June 11). Molycorp announces successful close of
Neo Materials acquisition. Retrieved from http://www.molycorp.com/
molycorp-announces-successful-close-of-neo-materials-acquisition
53 Humphries, M. (2012, June 8). Rare earth elements: The global supply chain.
Washington, DC: Congressional Research Service.
54 McCullough, A. (2012, June). At a cyber crossroads. Air Force Magazine, 95(6), 54.
55 Office of the National Counterintelligence Executive. (2011, October). Foreign spies
stealing U.S. economic secrets in cyberspace. Report to the Congress on Foreign
Economic Collection and Industrial Espionage. 2009–2011. Washington, D.C. Author.
56 Ibid., p. 4.
57 Ibid., p. 8.
58 Krekel, B., Adams, P., & Bakos, G. (2012, March 7). Occupying the information high
ground: Chinese capabilities for computer network operations and cyber espionage.
Prepared for the U.S.-China Economic and Security Review Commission. Northrop
Grumman Corporation, p. 11.
59 Cyber spies target Euro aerospace industry. (2012, June 21). Sky News. Retrieved from
http://www.myfoxdc.com/story/18846955/cyber-spies-target-european-aerospace-
industry-uk-experts-claim
60 Krekel, Adams & Bakos. (2012, March 7). Occupying the information high ground.
p. 103.
61 Riley, M., & Walcott, J. (2011, December 14). China-based hacking of 760 companies
shows cyber cold war. Bloomberg. Retrieved from http://www.bloomberg.com/
news/2011-12-13/china-based-hacking-of-760-companies-reflects-undeclared-global-
cyber-war.html
62 More Than a Third of Global Cyber Attacks Aimed at Small
Businesses, Research Shows. (2012, July 17). Based on a report from
Symantec. Retrieved from http://www.supplychainbrain.com/content/
nc/industry-verticals/aerospace-defense/single-article-page/article/
more-than-a-third-of-global-cyber-attacks-aimed-at-small-businesses-research-shows/
63 Office of the National Counterintelligence Executive. (2011, October). Foreign Spies,
pp. A4-A5.
64 Rahman, S. (2011, October 23). Flying Green. Gulfnews Retrieved from
http://gulfnews.com/business/features/flying-green-1.913738
65 International Civil Aviation Organization. (2010). Environmental report. Retrieved from
http://www.icao.int/environmental-protection/Pages/EnvReport10.aspx
66 Ibid.
67 Air Transport Action Group. (2009, May). Beginner’s guide to aviation biofuels.
Retrieved from http://www.enviro.aero/Content/Upload/File/BeginnersGuide_Biofuels_
WebRes.pdf
68 See ICAO Resolution A37-19.
69 International Civil Aviation Organization. (2012, July 11). New Progress on aircraft
CO2 standard. Retrieved from http://www.icao.int/Newsroom/Pages/new-progress-on-
aircraft-CO2-standard.aspx
70 Congressional Budget Office. (2013, February 5). The budget and economic outlook:
Fiscal Years 2013 to 2023. Retrieved from http://www.cbo.gov/sites/default/files/
cbofiles/attachments/43907-BudgetOutlook.pdf
71 Ibid., p. 1.
72 Ibid., p. 35.
73 Sonmez, F. (2011, November 14). Debt-panel failure would result in ‘devastating’
defense cuts, Panetta says. The Washington Post. WP Politics. Retrieved from
http://www.washingtonpost.com/blogs/2chambers/post/debt-panel-failure-would-
result-in-devastating-defense-cuts-panetta-says/2011/11/14/gIQAW1u5LN_blog.html
74 Econsult Corporation. (2012, August 13). New report: sequestration will ground air
travelers, cargo and the U.S. economy. Report prepared for the Aerospace Industries
Association. Retrieved from http://www.aia-aerospace.org/newsroom/aia_news/
new_report_faa_sequestration_will_ground_air_travelers_cargo/
75 Mervis, J. (2013, March 25). Congress completes work on 2013 spending bill. Science
Insider. Retrieved from http://news.sciencemag.org/scienceinsider/2013/03/congress-
completes-work-on-2013-.html
229
11
Industry Forecasts and Outlook
Introduction
There are numerous forecasts that attempt to predict what the future
may hold for the aerospace industry. Taken together, they provide a
reasonably clear view of what an economy, industry or a particular
firm’s performance may look like in the near term, as well as decades
into the future. Like virtually all forecasts, the further the horizon, the
less accurate the forecast. Yet, without some understanding of what
may lie ahead, poor decisions can be made and opportunities missed.
Within the aerospace industry, multiple organizations provide esti-
mates of future demand. These forecasts are routinely updated
based on actual experience and changing conditions to improve their
usefulness in planning and decision-making. An understanding of the
demand for aerospace products and services that drive the industry
is essential.
This chapter includes a review of the major forecasts by government
agencies, consulting firms, major aerospace and defense businesses,
and industry associations. This information is then combined with data
from previous chapters to provide an overall outlook for the industry

in the next several years as well as twenty years into the future.1
Industry Overview
The U.S. aerospace industry has been a bit of a bright spot in the
national and global economy over the past two years. Although the
general aviation (GA) sector has struggled, the General Aviation
Manufacturers Association (GAMA) reported an increase in both
shipments and billings in the first quarter of 2013. Commercial avia-
tion is poised for significant growth as the demand for passenger
travel and the movement of high-value air cargo increases. In addi-
tion to the growth in demand for passenger travel, the scheduled air
carriers will need to replace aging fleets and less fuel-efficient aircraft.
Military aviation is at an inflection point, and there are not likely to be
many new, manned military aviation programs coming into produc-
tion in the near term. However, there are some areas where growth
can be expected, such as the production of unmanned aircraft and the
commercial space sector.
General Aviation
According to GAMA, general aviation “encompasses the manufacture
and operation of any type of aircraft that has been issued a certificate
of airworthiness by the FAA, other than aircraft used for scheduled
commercial air service (airlines) or operated by the U.S. military.”2
In this section, the forecasts and outlook for GA are reviewed using
data obtained predominately from the GAMA, Bombardier, and
Honeywell.
The scope of GA is broad. GAMA reports that there are over 360,000
GA aircraft worldwide, and of that number, 223,370 are in the United
States. In 2012, the U.S. portion of GA contributed more than $150
billion in sales to the economy, and employed more than 1.3 million
people. Of the 25 million GA hours flown, over two-thirds were for
business purposes, and 166 million passengers were carried. Aircraft
flown include single-engine and multi-engine piston, turboprop, jet
engine, rotorcraft and light sport aircraft, as well as some experimen-
tal aircraft. GAMA data shows that GA aircraft operate from some
5,194 paved runways in the United States, compared to less than 500
airports used by scheduled air carriers. Also, GA is increasingly being
used by young aviators as a path to becoming commercial airline pilots
as the pool of transitioning military pilots continues to decline.3
Industry Forecasts and Outlook 231
Figure 11.1 shows only a 0.6 percent increase in the number of

GA aircraft shipped and a 0.9 percent decline in billings worldwide
between 2011 and 2012.4
Figure 11.1 Worldwide GA Shipments and Billings
Units Millions of U.S. Dollars

4,500 30,000
Total Shipments
4,000 Estimated Billings
25,000
3,500
18,873
3,000 20,000
2,500 2,133
15,000
2,000
1,500 10,000
1,000
5,000
500
0 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: General Aviation Manufacturers Association, 2013.

Note: Cessna Aircraft Company C162 SkyCatcher and Diamond Aircraft HK36 Motor Glider models are
not included. See GAMA General Aviation Airplane Shipment Report, 2012 Year-end revised.
Weak economic conditions over the past two years have dampened the
expected recovery of the GA market. However, things began to turn
around in the first quarter of 2013. GAMA reported shipments of
458 units during the first three months of 2013. This represents a 9.6
percent increase in shipments over the first quarter of 2012. And, as
shipments rose, so did the value of those shipments. In the first quar-
ter of 2013, billings increased by 32 percent compared to the same
quarter in 2012. According to GAMA, shipments of piston-driven
aircraft increased by 3.8 percent; single-engine turboprop airplane
shipments were up 14.6 percent; shipments of multi-engine turboprop
aircraft increased by 78.9 percent; and business jet shipments increased
by 4.0 percent (see Figure 11.2).5
Within the United States, piston-driven aircraft represent the larg-
est segment of the general aviation market (see Figure 11.3). Overall,
the U.S. accounts for about 50 percent of the worldwide market for
piston-driven aircraft, turboprops, and business jets (see Figure 11.4).
Figure 11.2 Comparison of Shipments and Billings for Q1 2012 to Q1 2013
Piston Single-Engine Turboprops Multi-Engine Turboprops

Units Business Jets Total Billings Billions of U.S. Dollars
500 5.0
418 458
450 4.6 4.5
400 4.0
3.5 129
350 3.5
124 34
300 3.0
19
250 2.5
89 102
200 2.0
150 1.5
100 1.0
186 193
50 0.5
0 0.0
Q1 2012 Q1 2013
Figure 11.3 Active U.S. General Aviation Aircraft by Type, 2010
6,528
24,784
Piston Engine Airplanes

3,785
Turboprop Airplanes
1,899
Turbojet Airplanes
10,102
Rotorcraft
Gliders
11,484
Lighter-Than-Air
Experimental
9,369
Light Sport Aircraft
155,419
Given this data for GA manufacturers and service providers, the

implications appear to include the following:
Figure 11.4 Global Market Distribution of General Aviation Aircraft, 2012
North America ∆ Europe ∆

Jets 50% -.6% Jets 21% +3.0%
Turboprops 49% -7.6% Turboprops 13% -10.6%
Pistons 50% -12.7% Pistons 20% +63.3%
Middle East/Africa ∆
Latin America ∆ Jets 6% -10.3% Asia Pacific ∆
Jets 12% +14.9% Turboprops 7% +30.2% Jets 12% -8.5%
Turboprops 15% +6.6% Pistons 4% -10.9% Turboprops 17% +20.8%
Pistons 10% -3.0% Pistons 16% +4.5%
Source: General Aviation Manufacturers Association. State of the Industry Presentation, February 12, 2013.
■■ Near market saturation in the single-engine and multi-engine piston

engine population. The production of new airframes in the piston
category will be problematic at best and this sector is unlikely to be
profitable. However, the demand for piston engine aircraft for flight
schools will probably increase as the global demand for air travel grows.
■■ The population of GA aircraft will continue to age, and aging
airframes tend to require more regular maintenance along with
maintenance engineering (upgrades and structural modifications)
to keep older aircraft airworthy.
■■ The performance differences between existing general aviation
single-engine and multi-engine aircraft populations and newly
built airframes are minimal. Key differences between the existing
GA population and new build aircraft generally do not reside
in aerodynamics, but in integrated communications, navigation,
identification, cabin entertainment, data-link, and other electronics.
■■ Growth for GA will be found in turboprops and jet engine GA
aircraft. While emerging markets will grow at an increased rate, the
North American and European markets will account for most of the
demand. Medium and large category aircraft are likely to dominate.
■■ The global economy will slowly recover through 2013 and beyond.
The GA sector of the industry will recover in relationship to
global economic conditions.
Commercial Aviation
Large Commercial Aircraft
The global market for Large Commercial Aircraft (LCA) is dominated
by Boeing in the United States and Airbus in Europe. Every year
both manufacturers prepare new forecasts and outlooks for twenty
years into the future. The most current are Boeing’s Current Market
Outlook 2012–2031 and Airbus’ Global Market Forecast 2012–2031.
These forecasts have become quite detailed over the years and today
are very comprehensive. They use models, information, and analyses
from multiple sources to develop estimates of future demand for
their products. Embraer, while not a maker of LCA, also reviews the
total demand for air travel in their Market Outlook 2012–2031. The
conclusions drawn by these firms are very similar and can be useful to
aerospace manufacturers, service providers, and others seeking avia-
tion and aerospace-related business opportunities.
These forecasts provide good information on the “drivers of
demand” discussed earlier. Boeing, for example, considers economic
growth and global trade to be the primary drivers of travel demand
(see Figure 11.5).
Figure 11.5 Boeing’s Drivers of Air Travel
60%–80% 20%–40%
Travel Additional
demand travel demand
Economic Global Value

growth trade of service
Fuel Capability
Environment Infrastructure Safe,

efficient,
Airline Market competitive
strategies evolution
industry
Emerging Market
markets liberalization
Source: Boeing. Current Market Outlook 2012–2031.
As has been the trend, the emerging markets are projected to grow
faster than North America and Europe, with the Asia Pacific region
generally poised to become the largest market by 2031. The Embraer
Market Outlook makes the generally recognized forecast that, “from

2012 to 2031, the center of gravity of aviation will move east-
ward, most notably to Asia and, to some extent, southward to Latin
America.”6 All forecasts point to the same conclusion and this infor-
mation, in turn, points to significant opportunities for aerospace
manufacturers and service providers (see Figure 11.6).
Figure 11.6 Projected Worldwide RPK Growth, 2012–2013
Asia Pacific 3,544
North America 1,286
Europe 1,201
Other Areas 2,079
0 500 1000 1500 2000 2500 3000 3500 4000

Billions of RPK
Source: Japan Aircraft Development Corporation. Worldwide Market Forecast for Commercial Air Transport, 2012–2031.
The overall growth in demand will result in a considerable increase

in the production of airplanes. The production of passenger aircraft
forecast for the next twenty years varies somewhat by the different
types of aircraft included in the forecasts. Boeing’s analysis includes
smaller regional aircraft where Airbus excludes passenger aircraft with
less than a 100-seat capacity.
Boeing points out that global economic growth is the best indicator
of future demand for air travel and air freight. The Boeing Company
expects global economic growth to average 3.2 percent over the
forecasted period resulting in a projected fleet size of nearly 40,000
airplanes by 2031 (see Figure 11.7).7
Figure 11.7 Fleet Development 2011–2031
2011 2021 2031
4% 8% 3% 5% 3%
14%
19% 21% 23%
63% 69%
68%
19,890 29,610 39,780

airplanes airplanes airplanes
747 or Larger Twin Aisle Single Aisle Regional Jets
By 2031, Boeing expects approximately 69 percent of new deliver-

ies will be for single aisle airplanes—many destined for emerging
markets. Twin aisle aircraft are expected to account for approxi-
mately 23 percent of the fleet in 2031, with regional jets and 747 or
larger aircraft making up the remainder. It is also important to note
the number of new aircraft needed to support new growth and the
replacement of older aircraft will be substantial (see Figure 11.8).
Figure 11.8 Boeing’s Estimate of New Deliveries by 2031
40,000
30,000
19,890 — 59%
20,000
34,000
14,110 — 41%
10,000
0 5,780
2011 2031
Airplanes Airplanes
19,890 39,780
Fleet growth Fleet replacement Fleet retained

The Airbus Global Market Forecast 2012–2031 has a somewhat differ-

ent view, but projects similar growth over the next 20 years (see Figure
11.9). Worldwide, Airbus projects traffic to grow at a rate of 4.7
percent per year.8 In terms of market size, Airbus expects that China
will become the largest market in 2031 with 10.4 percent of all RPKs
flown; surpassing the United States, which will become the second larg-
est market also with 10.4 percent of all RPKs flown (see Table 11.1).9
Figure 11.9 Airbus Predicted Demand for 2012–2031
Fleet Size
35,000
32,551
30,000
25,000
Growth 16,995
20,000 New
aircraft
15,556 27,347
15,000
Replaced 10,352
10,000
5,000
Stay in service
& recycled 5,204
-
Beginning 2012 2031
Source: Airbus. Global Market Forecast 2012–2031, Navigating the Future.
Urbanization of the world’s population is a growing driver of the

demand for air travel and air freight. As stated in the Airbus report:10
Cities have become a major driver of globalisation. The world
will have more and more large urban centres. In 2025, the
90 largest cities will represent 1 billion people, one eighth of
the world’s population. The largest 500 cities will represent
2 billion people, one quarter of the world’s population. The
share of the world’s population in just the top 100 cities will
equal more than 13 percent in 2025.
Table 11.1 Airbus Forecast of Top 10 Countries in

New Passenger Aircraft Deliveries, 2012–2031
Passenger Aircraft Demand By U.S. $ Value (Billions)
1 US 5,289 1 China 634.0
2 China 4,272 2 US 544.0
3 India 1,232 3 UAE 223.9
4 Germany 986 4 India 173.7
5 UK 979 5 Germany 138.1
6 Russia 958 6 UK 129.8
7 UAE 882 7 Russia 113.7
8 Brazil 781 8 Australia 102.1
9 Ireland 702 9 Brazil 100.1
10 Australia 652 10 Japan 98.2
Futhermore, the Airbus Global Market Forecast reports that the number
of Avation Mega-cities, or the number of cities with 10,000 or more
daily long-haul passengers, will increase from 42 today to 92 by 2031.
Since one of the key variables in predicting air traffic demand is GDP
growth, Figure 11.10 provides useful insight into the growing impor-
tance of large urban centers.11
Figure 11.10 GDP Comparison Between Large Urban Centers and Countries
Billions of Dollars (2008 PPP)

2,500
2,288
2,176 Countries
Cities
2,000
1,542 1,479
1,456 1,406
1,500
1,214
1,000
792 763
672
574 565 564
500
0
ia
yo
ity
lia
go
on
ris
le
ad
ai
ic
n
U
ss
ra
C
k
Pa
nd
la
ca
ge
Sp
ex
To
an
Ru
st
Po
k
hi
Lo
M
An
r
Au
C
Yo
C
s
ew
Lo
N
Source: PricewaterhouseCoopers. UK Economic Outlook. November, 2009.

Given these large aircraft forecasts, the implications for aerospace

manufacturers and service providers include the following:
■■ The large commercial aircraft population will grow considerably
over the next twenty years. The growth will be global, with
emerging economies driving a significant portion of the
opportunity. LCA fleets could double, creating opportunities
for multiple manufacturers, and new entrants will continue to
challenge established firms.
■■ The most important factor to achieve forecasted growth is a
healthy global economy—particularly the economies of the
United States, China, and the EU.
■■ Fuel costs, should they rise appreciably, could dampen growth.
While increased fuel costs have driven the industry to develop
more fuel-efficient aircraft and cut costs, the impact on the
demand for air travel could hinder growth.
■■ Political turmoil and economic uncertainty in various parts of the
world could impact growth in some regions.
Regional Aircraft
For the purpose of this section, regional aircraft are defined as single-
aisle airframes with less than 120 passenger seats. The Embraer Market
Outlook 2012–2031 estimates the demand for 6,795 new aircraft in the
30–120 seat segment over the next two decades, with a market value
of $315 billion (see Table 11.2). Over the next decade, 3,005 new
aircraft will be delivered, with 3,790 deliveries between 2022–2031.
Overall, the 91–120 seat segment will be the largest with 3,765 aircraft
(55 percent), followed by the 61–90 seat segment at 2,625 (39 percent),
followed by the 30–60 seat segment with 405 aircraft (six percent).
Table 11.2 Embraer Outlook for 30–120 Seat Commercial Jet

Delivery by Seat Segment, 2012–2031
Commercial Jet Demand by
30–120 Seat Capacity 2012–2021 2022–2031 2012–2031
30–60 0 405 405
61–90 1,325 1,300 2,625
91–120 1,680 2,085 3,765
Total 3,005 3,790 6,795
Source: Embraer. Market Outlook 2012–2031.
During this same 20-year time frame, the world’s fleet of regional
aircraft is expected to grow from approximately 6,220 to approxi-
mately 10,610 units, reflecting a compounded annual growth rate of
2.7 percent (see Table 11.3).
Table 11.3 Embraer Outlook for World Fleet in Service by

Seat Segment and Type of Aircraft
World Fleet by 30–120 Seat Capacity and Type 2011 2031
30–60 Seat Turbo Prop 1,275 800
60+ Seat Turbo Prop 795 2,435
Total Turbo Prop 2,070 3,235
30–60 Seat Jet 1,620 625
61–90 Seat Jet 1,095 2,730
91–120 Seat Jet 1,435 4,020
Total Jet 4,150 7,375
Total Regional Aircraft in 30–120 Seat Category 6,220 10,610
Source: Embraer. Market Outlook 2012–2031.
Boeing sees the global, regional jet fleet being approximately six
percent of the total new aircraft delivered, and accounting for 2,020
new deliveries with a value of $80 billion (see Figure 11.11).
Figure 11.11 New Aircraft 2012–2031
World Regions
Market Value $4,470 Billion
Delivery Units
Share of Fleet
100% 2% 6%
24%
75%
50%
25% 68%
0%
2011 2031 2012–2031
Airplanes Airplanes New Airplanes
19,890 39,780 34,000
747 and Larger Twin Aisle Single Aisle Regional Jets

Bombardier’s Commercial Aircraft Market Forecast 2012–2031 provides

a comprehensive outlook at the under 150-seat regional market, and
breaks the market into three segments: 20 to 59 seats; 60 to 99 seats;
and 100 to 149 seats. Consistent with the other OEM forecasts, their
forecast describes the economic environment and key factors they
believe drive and influence the demand for air travel. Bombardier
notes that while profitability for the airlines was fragile in 2011, it was
a record year for aircraft orders. They point out that the “growing
backlog in the large single-aisle aircraft segment remains a concern,
as a sharp increase in traffic demand would be required to absorb the
excess capacity represented by these orders.”12
During the forecast period, Bombardier’s predicts that the 20 to 59
seat segment will shrink from 3,600 aircraft to approximately 1,200
in 2031 (see Figure 11.12). While 300 new aircraft are expected to be
delivered in this segment, 2,700 are expected to be retired. Bombardier
sees significant growth in the 60 to 90 seat segment, with the number
of aircraft jumping from 2,500 to a fleet of 6,800 between 2012 and
2031. In this segment, there will be 5,600 new aircraft and 1,300 retire-
ments. In the 100 to 149 seat segment, the current base of roughly
5,100 will grow to a fleet of about 9,000; with 6,900 new deliveries
and 3,000 retirements. The forecast sees an overall fleet growth of 52
percent by 2031 with new aircraft deliveries reaching 12,800 at a value
of more than $630 billion.13
Figure 11.12 Regional Fleet Size, 2011 to 2031
Number of Aircraft
10,000
2011 Fleet 2031 Fleet 9,000
9,000
8,000
6,800
7,000
6,000
5,100
5,000
4,000 3,600
3,000 2,500
2,000
1,200
1,000
-
20–59 Seat 60–99 Seat 100–149 Seat
Source: Bombardier. Commercial Aircraft Market Forecast 2012–2031.
Civil Cargo Aircraft

Boeing estimates air cargo traffic is likely to grow at 5.2 percent over
the next 20 years.14 Global economic growth and the need to replace
aging aircraft will create a requirement for 2,760 freighter deliveries
over the period (see Figure 11.13). Of these, approximately two-
thirds (1,820) will be passenger-to-cargo conversions. Boeing believes
that the relatively low acquisition and modification costs associated
with passenger-to-cargo conversions makes them attractive for low-
demand, standard-body requirement routes. The balance, approxi-
mately 940 airframes, will be new aircraft.
Figure 11.13 Boeing Air Freighter Forecast
Air Cargo Market

940 New and 1,820 Converted
Share of Fleet Delivery Units

100%
250
75%
1,120
680
50%
25%
0% 450 260
2011 2031
Freighters Freighters 2012–2031
1,740 3,200 Freighters 2,760
Standard Medium Large

Less than 45 tonnes 40–80 tonnes More than 80 tonnes
New Converted New Converted New Converted
Airbus expects the market for cargo aircraft will show an average
growth rate of 4.9 percent through 2031. To meet this growth, the
world’s cargo aircraft inventory is forecast to expand from approxi-
mately 1,615 aircraft to 2,938 by 2031. Of the total, Airbus expects
more than 851 will be newly-built freighters (see Figure 11.14).15
Figure 11.14 Airbus Freighter Forecast Growth, 2012–2031
Number of Aircraft
1,400
Conversions
New Freighters
1,200
1,000
800 847
423
600
400
523
200 411 440
-
Small Jets Regional & Long Range Large
Given these large aircraft forecasts, there are several important impli-
cations for aerospace manufacturers and service providers, including
the following:
■■ Growth in the cargo segment beyond 2012, particularly in the all-
cargo aircraft category, will offer opportunities for manufacturers.
■■ Air cargo’s sensitivity to economic conditions indicates that in
domestic markets, ground transportation will continue to be
a significant competitor. Improving economic conditions may
reverse this to some degree.
■■ The passenger-to-cargo conversion of older airframes represents
a business opportunity for design, engineering, and certification
companies along with the Part 145 maintenance providers that will
supply the labor for conversions.
Unmanned Aircraft Systems

An Unmanned Aircraft System (UAS) is much more than the vehicle itself.*
It is a set of components that allows the vehicle to be used for its intended
purposes and outcomes (see Figure 11.15). As stated in an unpublished
white paper produced by the Aerospace Industries Association:16
* The terms UAS and UAV are often used interchangeably. However, as noted above, the term UAS is used
to describe unmanned aircraft systems, while the term UAV refers to the unmanned aerial vehicle itself.
In the broadest terms, UAS includes three components–the

unmanned aircraft (UA), the ground control station (GCS),
and the communications link between the UA and the GCS.
This distinction between UAS and UA is important because a
single UAS can contain multiple UAs. For example, some UAS
consist of four UAs but only one GCS.
Clearly, there are some common characteristics that define these
aircraft. The first is self-evident–they have no human pilots
aboard. Second, in contrast to radio-controlled model aircraft,
most UAS can automatically fly along preprogrammed routes.
Although a ground-based pilot can always intervene, there is
seldom a need to continuously hand fly the aircraft. This advanced
technology allows most modern UAS to operate beyond radio
line-of-sight (BLOS) through a communications satellite, which
gives them much longer range than radio-controlled aircraft flown
within radio line-of-sight (LOS) of the GCS.
Figure 11.15 Common Elements of an Unmanned Aircraft System
Source: Aerospace Industries Association. Unmanned Aircraft Systems: Perceptions & Potential, 2013.
Almost every forecast sees the uses and numbers of UAS increasing,
and this rapidly evolving segment of the industry is creating multiple
opportunities for innovators, designers, software developers, manu-
facturers and service providers. However, given the infancy of the
UAS industry, the scale and scope of potential applications is not well
understood. At the present time, there are three market segments for
UAS: military, civilian and commercial.
Military Systems
For classification purposes, the Department of Defense (DOD)
categorizes UASs based upon maximum take-off weight, normal oper-
ating altitude, and speed as follows:17
■■ Group 1: These are usually hand-launched, self-contained,
portable systems weighing less than 20 pounds that are typically
employed for a small unit or base security. They are capable
of providing over the hill or around the corner reconnaissance and
surveillance. They operate within visual range and are analogous
to radio-controlled model airplanes as covered in the FAA’s
Advisory Circular 91-57.30.
■■ Group 2: These small to medium-size systems weigh less than 55
pounds and usually support brigade and intelligence, surveillance,
reconnaissance, and target acquisition requirements. They
predominately operate from unimproved areas and are launched
via catapult. Payloads may include a sensor ball with electro-optic/
infrared (EO/IR) and laser range finder/designator (LRF/D)
capability. They typically perform special purpose operations or
routine operations within a specific set of restrictions.
■■ Group 3: These systems are lighter than Group 4 and Group
5 systems and operate at medium altitudes with medium-
to-long range and endurance. Their payloads may include a
sensor ball with EO/IR, LRF/D, signal intelligence (SIGINT),
communications relay, and chemical biological radiological nuclear
explosive detection. They usually operate from unimproved areas
and may not require an improved runway.
■■ Group 4: These are relatively large in size, weigh over 1,320
pounds, and operate at medium-to-high altitudes with extended
range and endurance. They normally require improved
areas for launch and recovery, beyond line-of-sight (BLOS)
communications, and have stringent airspace operations
requirements. Payloads may include EO/IR sensors, radars, lasers,
communications relay, SIGINT, automatic identification system,

and weapons.
■■ Group 5: These are the largest systems, which operate at medium-
to-high altitudes, and have the greatest range, endurance, and
airspeed capabilities. They weigh over 1,320 pounds and require
improved areas for launch and recovery, BLOS communications,
and the most stringent airspace operations requirements. Group 5
UAS perform specialized missions such as broad area surveillance
and penetrating attacks.
More detail and examples of each group are displayed in Figure 11.16.
Figure 11.16 DOD Categories of UAS

Maximum Normal
Weight Operating
UAS (lbs) Altitude Speed
Groups (MGTOW) (ft) (kts) Representative UAS
Raven
<1200 (RQ-11)
Group 1 0–20 100
AGL
WASP
<3500
Group 2 21–55 Scan Eagle
AGL
<250
Shadow
Group 3 <1320 (RQ-7B)
Tier II/STUAS
<FL 180 Fire Scout

(MQ-8B, RQ-8B)
Predator
Group 4
(MQ-1A/B)
Sky Warrior
Any ERMP (MQ-1C)
>1320
Airspeed
Reaper (MQ-9A)
Global Hawk
Group 5 >FL 180
(RQ-4)
BAMS (RQ-4N)
Source: Joint UAS Center of Excellence. Concepts of Operations, Joint Concept of

Operations for Unmanned Aircraft Systems, Chapter 2, Version 1.5, 2011.
The U.S. military has taken the lead in the research, development and
use of UAVs and UASs. In 2000, the U.S. DOD had fewer than 50
systems,18 yet today has in excess of 7,000.19 The majority of DOD
vehicles are less than 20 pounds in size. Figure 11.17 summarizes the
military’s UAS inventory by model and group.
Figure 11.17 DOD UAS Inventory by Model and Group
Raven RQ-11 6,987
WASP 916
Puma 912
Shadow RQ-7 499
T-Hawk RQ-16 322

Predator/Gray Eagle
227
MQ-1 B/C
Scan Eagle 128
Reaper MQ-9 89
Hunter MQ-5 45
Global Hawk RQ-4 30

Group 1
Fire Scout MQ-8B 13
Group 2
EUAS 13 Group 3
Group 4
A160T Hummingbird 7 Group 5
1 10 100 1,000 10,000

Number of Aircraft
Source: DOD. UAS Integration Program Briefing, Aug 9, 2012.
Note: Color coding refers to DOD Group classifications of UAVs.
The military has demonstrated the efficiency of using UASs in a vari-

ety of ways. Military applications for unmanned aerial systems include:
■■ Targets and Decoys
■■ Intelligence, Surveillance and Reconnaissance
■■ Search and Rescue
■■ Security and Force Protection
■■ Air Refueling
■■ Communications
■■ Logistics Missions
■■ Munitions Delivery
The market for military UASs is likely to be reasonably strong in the

near term, but the civilian market for UASs could be even greater.
Civil and Commercial Systems

While the military has been the early adopter of UASs, there is a grow-
ing interest in the civil and commercial sectors. In fact, greater use of
UASs may well come from outside of the military as UAS technology
advances and the infrastructure grows.
Civil and commercial applications include:
■■ Fire Fighting
■■ Power and Pipeline Monitoring
■■ Agriculture
■■ Search and Rescue
■■ Border Surveillance
■■ Imagery and Mapping
■■ Communications
■■ Pollution Monitoring
■■ Disaster Relief
■■ Atmospheric and Oceanographic Monitoring
■■ Wildlife Monitoring and Management
■■ Advertising and Sky Banners
■■ Science and Research
■■ Entertainment and News Media
■■ Maritime and Shipping Monitoring
■■ Law Enforcement and Investigation
■■ Traffic Monitoring
■■ Mail/Freight
The civil/commercial UAS market has the potential to be a very
dynamic growth sector in the aerospace industry. Globally, their uses
will develop at varying rates, but the market potential for civil/commer-
cial uses is likely to be greater than those of the military over time.
Survey Indicates High Level of Awareness of Non-Military Use of

Unmanned Aircraft Systems
In June, 2013, the Christian Science Monitor conducted a survey of readers on the
potential for increased non-military use of Unmanned Aircraft Systems (UAS). The
survey was sponsored by the Aerospace Industries Association and represented
a broad range of views from almost 5,000 respondents across the U.S., Canada,
Asia, and Europe. The purpose of the survey was to assess the level of awareness
of readers regarding the issues associated with the non-military use of UAS and top
areas for non-military use.
The results of the survey revealed a high level of awareness of the issues surrounding
the non-military uses of UAS. Within the U.S., 81% of the respondents indicated
that they were at least somewhat aware of the issues, while 76% of the non-U.S.
respondents said that they were aware of the issues.
Based on the survey results, the respondents’ top two issues are individual privacy
(60%), and safety of those on the ground (57%). If these issues are addressed, fully
74% do not oppose increased non-military use of UAS.
Readers see today’s top areas for non-military UAS use as:
■■ Border protection
■■ Law-enforcement support
■■ Search and rescue
■■ Severe-weather monitoring
The study also revealed that a majority of readers (60%) sees no difference between
manned and unmanned aircraft in terms of protecting individual privacy; and that non-US
respondents are even more supportive of increased UAS use than U.S. respondents.
Top Issues that Need to be Addressed
Individual privacy 60%
Safety of people & property

on the ground 57%
Keeping terrorists from getting

UAS technologies 31%
Safety of other aircraft 30%
Interference with
9%
telecommunication signals
0% 25% 50% 75%
Source: Aerospace Industries Association and the Christian Science Monitor. (2013). Reader survey on the potential for
increased non-military use of Unmanned Aircraft Systems (UAS). [PowerPoint Presentation.]
The Teal Group’s 2012 Market Forecast estimates that total world-
wide spending on UASs could top $89 billion by 2022, despite cuts in
defense spending. WinterGreen Research estimates that:20
Unmanned aircraft systems promise to achieve a more

significant aspect of commercial presence. Markets at $363.7
million [2012] are anticipated to reach $2.8 billion by 2018.
Growth will come as the lighter and less expensive devices
are performing commercial tasks remotely, with less cost and
more versatility than is available in any other manner.
While the outlook for civil/commercial UASs has significant potential,
there are challenges. First and foremost, is the use of the National
Airspace System (NAS) which is controlled by the government. In the
United States, the FAA is working with state and local governments
and the aerospace and defense industry to ensure safe access to the
NAS. With the recent passage of the FAA Reform and Modernization
Act of 2012, there is now a legal mandate to accomplish UAS integra-
tion into the nation’s airspace by 2015. The FAA announced in May
2012 that it is making progress in expediting the FAA Certificate of
Waiver or Authorization (COA) process to fly UASs in the NAS.21
Access to the NAS, and streamlining of the COA process, are impor-
tant milestones in the continuing development of the UAS market.
Much of the strength of the market and innovations in UASs has
come as a result of the conflicts in Iraq and Afghanistan. As the United
States draws down its forces in these areas, limitations on the airspace
for UAS operations could greatly dampen the growth of the industry.22
The implications of UAS on the aerospace and defense industry are
as follows:
■■ The military market will remain the leading user of UASs, but
the civil/commercial market will continue to grow. The greatest
challenge for the civil and commercial market will be access to
the NAS. Access will be influenced by the command and control
capabilities of UASs and the speed with which regulatory agencies
can promulgate policy.
■■ Since the civil/commercial UAS segment is still developing, there
is plenty of room for growth by firms currently in the market, as
well as for new entrants.
■■ Advances in computers, communications, navigation, and
identification systems will make UASs less expensive and expand
their use in a variety of non-military applications.
■■ Universities have, and will continue to develop, education and

training programs for development and use of UASs. Research in
multiple areas of UAS use will grow.
■■ Competition among established firms will increase, as will
competition from global competitors. Specialty products are likely
to be developed to meet specific UAS uses.
■■ Overall, the future for Unmanned Aircraft Systems looks
promising. Nevertheless, users must demonstrate that they are
more cost efficient and effective than current systems, at least as
safe as manned systems, and able to deliver capabilities that do not
exist today.
Commercial Space
In June 2007, Wired Magazine ran a feature story called “Rocket
Boom,” which heralded “the dawn of the private space age.”23 The
article provided a glimpse into the activities of one firm in particular,
Space Exploration Technologies (SpaceX) and its Falcon rocket. On
May 22, 2012, under contract to NASA, the SpaceX Falcon 9 rocket
launched their Dragon spacecraft toward the International Space
Station (ISS), and on May 25, the Dragon successfully berthed with
the ISS. Five months later, a Dragon spacecraft conducted the first
commercial cargo resupply mission to the International Space Station.
The commercial resupply mission was years in the making and was
part of NASA’s Commercial Orbital Transportation Services (COTS)
program, which launched in 2005. But this is not a new concept.
Commercial initiatives like the current public-private partnership
between NASA and SpaceX and Orbital Sciences in the COTS
program have existed from almost the very beginning of the U.S.
space program. Possibly the first commercial space venture was the
experimental communications satellite, Telstar, launched in the early
1960’s. Today, satellite telecommunications is a multi-billion dollar
industry, which has enabled new business concepts, such as cable and
direct-to-home broadcast systems to expand and flourish.
More recently, commercial space activity got a boost when President
Obama released the National Space Policy of the United States of America.
The President’s policy, announced in June 2010, emphasizes increasing
commercial participation in low earth orbit resupply and crew rotation
to the ISS, while NASA focuses on missions beyond Earth orbit.
The National Space Policy includes a number of principles, goals and

guidelines that provide a framework for U.S. activities in space. Those
specifically related to commercial space include:24
Principle: The United States is committed to encouraging and
facilitating the growth of a U.S. commercial space sector that
supports U.S. needs, is globally competitive, and advances U.S.
leadership in the generation of new markets and innovation-
driven entrepreneurship.
Goal: Energizing competitive, domestic industries to
participate in global markets and advance the development of
satellite manufacturing, satellite-based services, space launch,
terrestrial applications, and increased entrepreneurship.
Guidelines:*
■■ Purchase and use commercial space capabilities and services
to the maximum practical extent when such capabilities
and services are available in the marketplace and meet U.S.
Government requirements.
■■ Modify commercial space capabilities and services to
meet government requirements when existing commercial
capabilities and services do not fully meet these requirements
and the potential modification represents a more cost-effective
and timely acquisition approach for the government.
■■ Actively explore the use of inventive, nontraditional
arrangements for acquiring commercial space goods and services
to meet U.S. Government requirements, including measures
such as public-private partnerships, hosting government
capabilities on commercial spacecraft, and purchasing scientific
or operational data products from commercial satellite operators
in support of government missions.
■■ Develop governmental space systems only when it is in the
national interest and there is no suitable, cost-effective U.S.
commercial or, as appropriate, foreign commercial service or
system that is or will be available.
* As stated on the U.S. Department of Commerce website on space policy, these guidelines define
“commercial” space as referring to goods, services, or activities provided by private sector enterprises that
bear a reasonable portion of the investment risk and responsibility for the activity, operate in accordance
with typical market-based incentives for controlling cost and optimizing return on investment, and have the
legal capacity to offer these goods or services to existing or potential non-governmental customers.
■■ Refrain from conducting U.S. Government space activities that

preclude, discourage, or compete with U.S. commercial space
activities, unless required by national security or public safety.
■■ Pursue potential opportunities for transferring routine,
operational space functions to the commercial space sector
where beneficial and cost-effective, except where the
government has legal, security, or safety needs that would
preclude commercialization.
■■ Cultivate increased technological innovation and
entrepreneurship in the commercial space sector through the
use of incentives such as prizes and competitions.
■■ Ensure that U.S. Government space technology and
infrastructure are made available for commercial use on a
reimbursable, noninterference, and equitable basis to the
maximum practical extent.
■■ Minimize, as much as possible, the regulatory burden for
commercial space activities and ensure that the regulatory
environment for licensing space activities is timely and
responsive.
■■ Foster fair and open global trade and commerce through the
promotion of suitable standards and regulations that have
been developed with input from U.S. industry.
■■ Encourage the purchase and use of U.S. commercial
space services and capabilities in international cooperative
arrangements.
■■ Actively promote the export of U.S. commercially developed
and available space goods and services, including those
developed by small- to medium-sized enterprises, for use in
foreign markets, consistent with U.S. technology transfer and
nonproliferation objectives.
Commercial Space Outlook

Federal Aviation Administration
Unlike other sectors of the aviation and aerospace industry, there are
few readily available resources from which to gain a full perspective on
the outlook for commercial space. This is partly because commercial
space is still an immature market. However, there are a few sources
that can provide some insight to the future of this important market.
The Federal Aviation Administration, through its Office of
Commercial Space Transportation, and the Commercial Space
Transportation Advisory Committee, provides a review of recent
commercial space activity and a 10-year forecast into the future.
Figures 11.18 through 11.23 show both geosynchronous (GSO) and
non-geosynchronous (NGSO) launches and payloads between 2012
and 2021. These forecasts are based on survey data from global satel-
lite operators, manufacturers and service providers.25
Figure 11.18 Total Forecasted Launches
Launches GSO Launches NGSO Launches

35
30
25 15
11
17 12
13 13 11
13 12
20 11
15
10 19 18 17 17
16 15 16 15 15 15
5
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: FAA. 2012 Commercial Space Transportation Forecasts, May 2012.
Figure 11.19 Total Forecasted Payloads
Total Satellites NGSO Satellites GSO Satellites

80
70
60
50
44 49
40 37 35 42
28
30 16 15
16 15
20
10 23 21 20 23 21 20 20 20 22 22
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 11.20 Forecasted GSO Launches
Launches
20
18
16
14
12
10
19
18
8 17 17
16 16
15 15 15 15
6
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 11.21 Forecasted GSO Payloads
Satellites
25
20
15
23 23 22 22
10 21 20 21 20 20 20
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 11.22 Forecasted NGSO Launches by Type
Launches Commercial Telecommunications Commercial Remote Sensing

18
Science and Engineering Commercial Cargo and Crew
16 Transportation Services
3 Other Payloads Launched
14 2 Commercially
3
12 2 2
3 3 1
1 3
10 2
1 3 3 3 3
2 4
8
1 3
6 4
6
4 8
4 6 8 8 8 8
6
3 5
2
3
1 1 1
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 11.23 Forecasted NGSO Payloads by Type
Satellites Commercial Telecommunications

60 Commercial Remote Sensing
Science and Engineering
Commercial Cargo and Crew
50 Transportation Services
Other Payloads Launched
Commercially
40
16 27
11
30
27
1 3 18
11
20
7
18 4 2 1
21 2
7 7 7 7 7
10 8
8 7
4 6 8 8 8 8 8
3 5 6
1 3 1 1
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
The Tauri Group

In 2012, The Tauri Group released a forecast of demand for subor-
bital reusable vehicles (SRVs) which was funded by the FAA Office
of Commercial Space Transportation and Space Florida. The report,
Suborbital Reusable Vehicles: A Ten-Year Forecast of Market Demand,
describes the market drivers for SRVs.26 The report envisions the
following eight markets:
■■ Aerospace Technology Test and Demonstration
■■ Basic and Applied Research
■■ Commercial Human Space Flight
■■ Education
■■ Media and Public Relations
■■ Point-to-Point Transportation
■■ Remote Sensing
■■ Satellite Deployment
To help in standardizing forecasts for each market, the report proj-
ects seat and cargo equivalents. Cargo space is based on standard
sized lockers of two cubic feet used in the Space Shuttle program;
seat space is based on passenger seats—exclusive of crew, and
standardized by the number of individuals; and dedicated missions use

a standard configuration of three seats or 10 lockers.
The Tauri Group forecasts three scenarios: Baseline, Growth, and
Constrained. Table 11.4 lists the projected demand and revenue for
each scenario over the 10-year period.
Table 11.4 Tauri Group Forecasted SRV Demand and Revenue

Scenario 10-Year Total Demand Forecasted Revenue
Constrained 2,378 Equivalents $300 Million
Baseline 4,518 Equivalents $600 Million
Growth 13,134 Equivalents $1.6 Billion
Source: The Tauri Group. Suborbital Reusable Vehicles: A Ten-Year Forecast of Market Demand, August 2012.
The report’s data is based on “more than 120 interviews, a survey

of high net-worth individuals … a poll of suborbital researchers …
market studies, data on analog markets, government budgets, and
performance information on competing platforms.”27 Even though
the report clearly points out that the forecast is highly sensitive to the
assumptions used, it provides a reasonable prediction of what can be
expected given today’s capabilities and best estimates for the future.
The Space Foundation

While not a forecast of the space industry per se, one of the most
comprehensive reviews of the state of the space industry is produced
by the Space Foundation. The annual Space Report: The Authoritative
Guide to Global Space Activity, provides a large amount of detail from
which to gain a reasonably good outlook for the industry. Each
current year’s report is available for purchase from the Foundation.
The Space Report is divided into five major sections: Space Products
and Services; the Space Economy; Space Infrastructure; Workforce
and Education; and Outlook. Highlights from the Space Report 2012
include the following:28
■■ The global space economy has grown during the past six years
(2006–2011) with 2011 growth 12 percent greater than in 2010,
reaching an estimated level of $289.77 billion.
■■ The commercial infrastructure and support industries saw a 2011
increase of 22 percent for a total of $106.46 billion.
■■ Commercial space products grew at nine percent about 2010 levels
to $110.53 billion.
■■ While government spending on space increased in real terms, it

declined as an overall percentage of the space economy from 27
percent in 2010 to 25 percent in 2011. Total U.S. and non-U.S.
government spending was $72.77 billion in 2011.
■■ The U.S. government spent $47.25 billion in 2011, spread across
the Defense Department, NASA, the National Oceanic and
Atmospheric Administration, the Federal Aviation Administration,
and other government agencies—a decline of .4 percent from the
$47.44 billion spent in 2010.
■■ In 2011, 133 space payloads were carried on 84 launches. These
included satellites, interplanetary probes, and flights to the ISS,
resulting in a 14 percent increase over the 74 launches in 2010.
One method of understanding financial performance of a firm or indus-
try is by the market value placed on it by the equity markets. Commercial
space is no different. The Space Foundation has created the Space
Foundation Indexes (SFI) that “consist of three weighted indexes that track
the performance of the overall space industry, as well as space infrastruc-
ture and services segments in the U.S. public markets.”29 These indexes
can be useful for determining how well the commercial space industry
is doing in relationship to the market. The criteria for adding companies
into the SFI includes percentage of revenues obtained from space-related
products and services, market capitalization, and trading volume, among
others. Figure 11.24 shows the SFI in relationship to the Standard and
Poor’s 500 Index from mid-March through mid-November 2012.
Figure 11.24 Space Foundation Indexes versus S&P 500
Space Foundation Infrastructure Index 13.45% Space Foundation Services Index 26.83%
Space Foundation Index 18.95% S&P 500 12.74%
20%
10%
0%
Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12

Source: Space Foundation. Space Foundation Indexes, November 2012.
Futron Corporation
Since 2008, Futron Corporation has published an annual Space
Competitiveness Index (SCI), which ranks the leading nations within the
space industry Futon’s index “is a globally-focused, analytic frame-
work that defines, measures, and ranks national competitiveness in
the development, implementation, and execution of space activity.”30
The SCI assesses each indexed country’s abilities, and evaluates their
performance relative to one another across 50 individual qualitative and
quantitative metrics. These metrics span the dimensions of govern-
ment, human capital and industry using a proprietary data model.
The index includes the following fifteen countries:
■■ Argentina
■■ Australia
■■ Brazil
■■ Canada
■■ China
■■ Europe (treated as a single integrated actor)
■■ India
■■ Iran
■■ Israel
■■ Japan
■■ Russia
■■ South Africa
■■ South Korea
■■ Ukraine
■■ United States
Access to the SCI is by subscription only. Several points from the
publicly available Executive Summary and other sources are particularly
significant when creating an overall outlook for commercial space.
Some of these points are:
■■ Argentina is emphasizing its satellite-manufacturing sector
for international markets and is exploring commercial and
government-to-government deals.
■■ Australia has reentered space at the national level and is in the

process of developing new policies for how they can use space
to tackle climate change, weather forecasting, natural resource
management, forestry and agriculture, disaster management, and
national security.31
■■ Brazil is increasing funding and has plans for a new launch vehicle.
■■ In 2012, the number of Chinese launches surpassed the United
States for the first time.
■■ Iran has progressed faster than any other newly, emergent
space nation.
■■ Russia remains the world’s launch leader, although there are
growing concerns about quality control, which has led to several
launch failures.
■■ South Korea is determined to achieve independent spaceflight.
■■ The Ukraine, which has a significant space industrial base, is
aggressively seeking overseas partners. In early 2012, the Ukraine’s
approved a new five-year space plan for the period of 2013–2017.
According to government sources, the new plan places greater
emphasis on public-private partnerships, commercial space, and
international cooperation.32 It will be interesting to see how their
new plans affect existing and emerging commercial markets.
■■ The United States is the overall leader in space competitiveness,
but has seen its relative position decline for five consecutive years.
■■ The largest relative gains in space competitiveness since the index’s
inception are: China—47 percent; Japan—37 percent; Russia—
11 percent; and India—10 percent.
The Implications of Commercial Space for

the Aviation and Aerospace Industry
Similar to unmanned aircraft systems, commercial space is still evolv-
ing. While commercial space applications have been envisioned for
decades, the economics of developing, launching, and retrieving
both manned and unmanned space vehicles has been a huge hurdle.
Furthermore, some of the more innovative technologies, materials,
and concepts needed to make commercial space affordable and safe
still need to mature. The ability to reach space in a routine and safe
manner has always been as challenging as the cost to achieve it.
Government support has been important to overcoming the barriers

of making commercial space affordable and accessible on a market
scale,33 and NASA’s proposed FY 2013 budget provides $830 million
for its partnerships with the commercial space industry.34
The overall outlook for commercial space is largely positive. Key
considerations include:
■■ Multiple nations are engaging in commercial space activity,
which should result in growing commercial opportunities. The
supportive relationship between NASA and commercial providers
should grow and continue to evolve.
■■ Globally, national budgets will be pressured to find reductions,
leading to varying levels of programmatic uncertainty in the near
term, yet growth will continue.
■■ Like other segments of the aviation and aerospace industry, a
significant number of employees in the space workforce are
approaching retirement. The need for replacements with Science,
Technology, Engineering, and Mathematics (STEM) skills is growing.
■■ Products and services, based on space technologies like the Global
Positioning System, are likely to grow in areas from personal use
to law enforcement, disaster relief, environmental monitoring, and
scientific research.
■■ The space infrastructure will grow. This will include upgrades to
current facilities and the building of additional spaceports. Satellite
usage will grow as communications demands increase for TV and
Internet services.
■■ Given the current workforce and economic uncertainties, there is
likely to be a need for increased collaboration between commercial
partners and space-faring nations. New business models are likely
to develop as well.
Outlook for 2013 and Beyond

Forecasting is difficult for complex systems. As a result, we prefer to
use the term “outlook” to describe the general direction or vector in
which the industry is heading. While our intention is to help reduce
uncertainty about the future, each decision maker must ultimately
decide what is significant and relevant to his or her situation. Given
what has been documented in this report, we believe the outlook for
2013 and beyond is as follows.
Challenges in the Short-Term

The aerospace industry has proven to be remarkably resilient over the
years, but faces a number of challenges in the short-term. Some of
these include:
■■ Following the implementation of sequestration on March 1, 2013,
the DOD, NASA, NOAA and the FAA are now dealing with the
reality of how to make the cuts demanded. The specific impacts
depend on how each department or agency chooses to comply
with the mandatory reductions.
■■ The future of the aerospace industry in the United States is
dependent upon a skilled workforce. Unfortunately, as the demand
for air travel and air freight grows, and UAS and commercial space
operations expand, it is apparent that there will be a gap between
the number of workers required and those who can do the work.
If enough skilled workers are not found in the United States, an
increasing amount of work will shift to Europe, Brazil, India,
China, Japan and other countries that are aspiring to build their
own aerospace and defense capabilities.
■■ Related to the aging workforce is the need for more STEM
education in grades K-12. It is clear that young people need to be
encouraged to enter professions that require STEM disciplines.
Thanks to the work of Norm Augustine, Aviation Week & Space
Technology, the Aerospace Industries Association and other public
and private initiatives, progress is being made, but more needs to
be done.
■■ The demand for pilots and maintenance technicians will grow as
air travel increases. Shortages of pilots in some regions of the
world are already being seen.35
■■ Fuel prices have been a major component of the cost of operating
aircraft. As these costs are passed on to customers, they can
dampen demand and profitability. Declining demand and reduced
profitability results in fewer aircraft purchases. On the other hand,
increasing fuel costs can be an incentive for carriers to replace
older, less fuel-efficient aircraft with newer, more efficient models.
Turmoil and tensions in North Africa and the Middle East are also
raising concerns about the availability and price of oil.
■■ Privacy, certification, and the use of airspace must be dealt with as

the UAS market evolves.
■■ Infrastructure capacity at airports and for the air traffic control
system could impede the industry’s ability to meet customer
demand and result in even more congestion.
■■ Potential environmental regulations concerning noise and carbon
emissions, as well as new security measures, can increase costs and
inhibit the use of certain airports. Government regulations and
policies have an influence on competitiveness and the ability of
firms to operate successfully.
■■ Much like UAS, commercial space will require certification, policy,
and procurement reviews as it continues to develop outside
of NASA.
Opportunities in the Long-Term

The following is a summary of opportunities in the industry:
■■ As the world’s developed economies improve and the emerging
economies grow, the demand for both passenger and air freight
will expand over the next twenty years.
■■ Expanding demand, aging fleets, technology advancements, the
need for more efficient aircraft, and aircraft designed for specific
missions and markets will drive the need for new aircraft.
■■ If energy costs continue to be the largest single expense of
aircraft operation, more in-service aircraft may be retired sooner
than planned. This could push new aircraft and engine production
above current projections.
■■ Building aircraft takes time and, while new aircraft are being
designed, current fleets need to be maintained, creating
opportunities for MRO providers and their suppliers. Additionally,
if expansion in demand quickens, some older aircraft may be
brought back into service or maintained in service longer. This
could increase MRO and upgrade activity.
■■ The military is searching for ways to become more efficient
and reduce operating costs. This need can create opportunities
for innovation, which in turn can create opportunities for
entrepreneurial aerospace and defense companies and individuals.
■■ General aviation seems to be entering a long-awaited recovery.

As the U.S. and other economies improve, the demand for GA
aircraft will create significant opportunities.
■■ Unmanned aircraft systems will continue to grow in importance
and this segment is poised for significant commercial growth. The
military will scale back some of their UAS programs, but they
will continue to be the dominate user in the near term. As FAA
certification moves ahead, commercial uses will increase.
■■ Commercial space continues to show promise. The space economy
will continue to grow and recent successes indicate that the
commercial space sector is maturing.
General Assessment
The slow and uneven economic recovery has affected commercial
and general aviation, but as the economy recovers, so will the demand
for new aircraft and related services. UAS and commercial space are
clearly poised for growth, but the defense side of the industry is facing
considerable uncertainty. In general, it appears as though demand is
returning in many geographic markets and segments of the indus-
try. With the exception of defense, aerospace manufacturing should
continue to improve in 2013 and beyond.
Chapter Endnotes
1 The format for this chapter is somewhat different than in previous years. In the past, the
major forecasts were summarized. This year, the chapter is organized around sectors of
the industry.
2 General Aviation Manufacturing Association. (2006, May). General Aviation’s
contribution to the U.S. economy. Retrieved from http://www.gama.aero/files/
documents/GAcontribution.pdf
3 General Aviation Manufacturing Association. (2012). General Aviation statistical data
book and industry outlook. Retrieved from http://www.gama.aero/files/GAMA7233_
AR_FINAL_LOWRES.pdf
4 Ibid. pp. 23–24.
5 General Aviation Manufacturing Association. (2013, May 7). GAMA issues first
quarter 2013 airplane shipments and billings. Retrieved from http://www.gama.aero/
media-center/press-releases/content/q1-shipment
6 Embraer Commercial Aviation. (2012). Embraer market outlook 2012–2031. Retrieved
from http://www.embraer.com/en-US/ImprensaEventos/Press-releases/noticias/Pages/
EMBRAER-DIVULGA-PREVISAO-DE-ENTREGA-DE-6800-JATOS-NO-SEGMENTO-
DE-30-A-120-ASSENTOS-NOS-PROXIMOS-20-ANOS.aspx
7 The Boeing Company. (2012). Current market outlook 2012–2031. Retrieved from
http://www.boeing.com/commercial/ cmo/pdf/Boeing_Current_Market_Outlook_2012.pdf
8 Airbus. (2012). Global market forecast 2012–2031, navigating the
future, p. 10. Retrieved from http://www.airbus.com/company/market/
forecast/?eID=dam_frontend_push&docID=27599
9 Ibid., p. 53.
10 Ibid., p. 22.
11 PricewaterhouseCoopers. (2009, November). UK Economic Outlook, p. 20.
Retrieved from http://www.ukmediacentre.pwc.com/imagelibrary /downloadMedia.
ashx?MediaDetailsID=1562
12 Bombardier Inc. (2012). Commercial aircraft market forecast 2012–2031, p. 4.
Retrieved from http://read.uberflip.com/i/70579
13 Ibid., p. 37.
14 The Boeing Company. (2012). Current market outlook, 2012–2031, p. 3.
15 Airbus. (2012). Global market forecast 2012–2031, navigating the future, p. 141.
16 The Aerospace Industries Association has produced two papers on this topic. See
Aerospace Industries Association. (2012). UAS and the future of aviation (unpublished
white paper); or Aerospace Industries Association. (2013, May). Unmanned Aircraft
Systems: Perceptions and Potential. Retrieved from http://www.aia-aerospace.org/
assets/AIA_UAS_Report_small.pdf
17 U.S. Department of Defense. (2011, March). Unmanned aircraft system airspace
integration plan (Version 2.0). Retrieved from http://www.acq.osd.mil/sts/docs/
DoD_2011_UAS_Airspace_Integration_Plan_(signed).pdf
Trade Administration. (2011). Flight plan 2011: Analysis of the U.S. aerospace
19 U.S. Department of Defense. (2012, August 9). UAS integration program (Briefing).
Retrieved from http://safetyforum.alpa.org/LinkClick.aspx?fileticket=CO495osqy%2Bo
%3D&tabid=2275
20 Global Information, Inc. (2012, July 26). Commercial unmanned aerial systems (UAS):
market shares, strategies, and forecasts, worldwide, 2012–2018. Retrieved from
http://www.giiresearch.com/report/wg247707-commercial-unmanned-aerial-systems-
uas-market.html
21 Federal Aviation Administration. (2012, May 14). FAA Makes Progress with UAS
Integration Retrieved from http://www.faa.gov/news/updates/?newsId=68004
22 Association for Unmanned Vehicle Systems International. (2010). Unmanned Aircraft
System Integration into the United States National Airspace System: an assessment of
the impact on job creation in the U.S. aerospace industry. Retrieved from
http://uas.usgs.gov/pdf/0510jobsreport.pdf
23 Hoffman, C. (2007, May 22). Rocket boom, Wired Magazine, 15(6). Retrieved from
http://www.wired.com/wired/issue/15-06
24 A more detailed summary of the National Space Policy of the United States of America
can be viewed at: http://www.space.commerce.gov/general/nationalspacepolicy/
25 Federal Aviation Administration. (2012, May). 2012 Commercial space transportation
forecasts, Retrieved from http://www.faa.gov/about/office_org/headquarters_offices/
ast/media/2012_Forecasts.pdf
26 The Tauri Group. (2012, August). Suborbital reusable vehicles: a ten-year forecast of
market demand. Retrieved from http://www.taurigroup.com/files/Suborbital_Reusable_
Vehicles_A_10_Year_Forecast_of_Market_Demand.pdf
27 Ibid., p. 3.
28 The Space Foundation. (2012). The space report: the authoritative guide to
global space activity. Retrieved from http://www.spacefoundation.org/programs/
research-and-analysis/space-report
29 Ibid.
30 Futron Corporation. (2012). Space competitiveness index, executive summary.
Retrieved from http://www.futron.com/sci_exe_summary_download_form.xml
31 Australian Government. (2012). Space and Australia: national space industry policy.
Retrieved from http://www.space.gov.au/SPACEPOLICYUNIT/Pages/default.aspx
32 Messier, D. (2012). Ukraine’s 5-Year plan focuses on public-private partnerships,
commercial activities. Ukraine Business Online. Retrieved from
http://www.parabolicarc.com/2012/03/10/ukraines-5-year-space-plan-focuses-on-
public-private-partnerships-commercial-activities/
33 U.S. Government support for programs of this scale is not unusual. In the 19th Century,
the railroads received substantial assistance from the states and federal government,
and in the 20th Century, military contracts and the development of federally-funded
transcontinental airmail services helped lay the foundation for America’s current
aerospace industry.
34 Weaver, D. (2012, February 13). NASA reaches higher with fiscal year 2013 budget
request (Release 12-051). Retrieved from http://www.nasa.gov/home/hqnews/2012/
feb/HQ_12-051_2013_Budget.html
35 The Boeing Company. Current market outlook, 2012–2031, p. 26.
269
Acronyms and Other Terms
A&D: Aerospace and Defense C2: Command and Control
AIA: Aerospace Industries Association CAB: Current Account Balance
AIAA:American Institute of Aeronautics CAGR: Compound Annual Growth Rate

and Astronautics
CBO: Congressional Budget Office
AIAB:Aerospace Industries Association
of Brazil CFO: Chief Financial Officer
AMP: Advanced Manufacturing Partnership COMAC: Commercial Aircraft Corporation

of China
ASA: Aerospace States Association
COTS: Commercial-Off-The-Shelf; or for
Aviation Industry (or sometimes
AVIC: space programs, Commercial Orbiter
“Industries”) of China Transportation Services
BCA: Budget Control Act CPI: Consumer Price Index
BLOS: Beyond Line of Sight CU: Capacity Utilization
BLS: Bureau of Labor Statistics DARPA:Defense Advanced Research Project

Agency
BRIC: Brazil, Russia, India and China
DOD: Department of Defense
C&I: Commercial and Industrial
EBIT: Earnings Before Interest and Taxes Industrial Production or Intellectual

IP:
Property
EBITA: Earnings Before Interest, Taxes and
Amortization ITA Stock Symbol: The iShares Dow Jones U.S.
Aerospace & Defense Index Fund
EBITDA: Earnings Before Interest, Taxes,
Depreciation and Amortization ITA: International Trade Administration
ER: Exchange Rate JWST: James Webb Space Telescope
ERI: Exchange Rate Index LCA: Large Civil Aircraft or Large

Commercial Aircraft
ETS: Emissions Trading System
LTIR: Long-term Interest Rates
EU: European Union
M&A: Merger and Acquisition
FAA: Federal Aviation Administration
ME: Multi-Engine Aircraft
FDI: Foreign Direct Investment
MRO: Maintenance, Repair and Overhaul
FDIC: Federal Deposit Insurance Corporation
NAICS: North American Industry
FRB: Federal Reserve Bank Classification System
FTA: Federal Trade Administration NASA:National Aeronautics and Space

Administration
FTK: Freight Ton (or Tonne) Kilometer
NASDAQ: National Association of Security
FY: Fiscal Year Dealers Automated Quotation
G-7:Group of seven industrialized nations NBAA: National Business Aviation

which includes Canada, Japan, U.K., U.S., Association
France, Italy and Germany
NDAA: National Defense Authorization Act
G-8: G-7 plus Russia
NDIA: National Defense Industrial
GA: General Aviation Association
GAMA: General Aviation Manufacturers NEI: National Export Initiative

Association
NGSO: Non-Geosynchronous Orbit
GAO: Government Accountability Office
NOAA:National Oceanic and Atmospheric
GDP: Gross Domestic Product Administration
GERD: Gross Domestic Expenditures on NPV: Net Present Value

Research and Development
NSF: National Science Foundation
GSO: Geosynchronous Obit
NYSE: New York Stock Exchange
HAZMAT: Hazardous Material
OASD:Office of the Assistant Secretary of
IA: Information Assurance Defense
IATA: International Air Transport Association OECD: Organization for Economic

Cooperation and Development
ICAO: International Civil Aviation
Organization OEM: Original Equipment Manufacturer
IMF: International Monetary Fund OMB: Office of Management and Budget

271
OPW: Output per Worker SBIR: Small Business Innovation Research
OTC: Over the Counter SCI: Space Competitiveness Index, published

by the Futron Group
PBL: Performance-Based Logistics
SE: Single-Engine Aircraft
PNFI:Private Nonresidential Fixed
Investment SEC: Securities and Exchange Commission
PPI: Producer Price Index SMB: Small to Medium-Size Business
Q1-4: Quarters 1 through 4 SME: Small to Medium-Size Enterprise
QA: Quality Assurance SMM: Small to Medium-Size Manufacturer
R&D: Research and Development SRV: Suborbital Reusable Vehicle
RDT&E: Research, Development, Test, and STEM:Science, Technology, Engineering and

Evaluation Mathematics
REE: Rare Earth Elements STEM+M: STEM plus Manufacturing
ROE: Return on Equity STTR: Small Business Technology Transfer
RoHS: Restriction on Hazardous Substances TARC: Team America Rocketry Challenge
RPK: Revenue Passenger Kilometer or UAC: United Aircraft Corporation

Revenue per Kilometer. Both are used as
measures of profitability by the commercial UAS: Unmanned Aerial System or Unmanned
airline industry. Aircraft System
RWDC: Real World Design Challenge UAV: Unmanned Aerial Vehicle
SBA: Small Business Administration

273
Glossary
Advanced Economies: The International of persons employed during a designated

Monetary Fund divides the world into advanced pay period.
economies and emerging market and developing
economies. This classification has evolved over Aerospace Industry: Includes firms engaged
time and is generally based on GDP per in aircraft manufacturing; aircraft engine
capita, exports, population, and other factors. and engine parts manufacturing; other
At the present time, there are 35 advanced aircraft parts and auxiliary equipment
economies, 151 developing economies, and manufacturing; guided missile and space
several economies that are not classified, such vehicle manufacturing; guided missile and
as Cuba and North Korea. space vehicle propulsion units; other guided
missile and space vehicle parts and auxiliary
Aeronautics: (1) The art and science of equipment; satellite telecommunications;
designing and constructing aircraft. (2) space research and technology (NAICS
The art and science of operating aircraft. 33641). The industry also includes firms
(3) The study of the science of flight. (4) involved in search, detection, navigation,
The method of designing an airplane or guidance, aeronautical, and nautical system
other flying machine. According to NASA, and instrument manufacturing (NAICS
aeronautics typically involves the study of 334511). (U.S. Department of Commerce)
aerodynamics; propulsion; materials and
structures; and stability and control. (NASA) Estimated on the basis of
Aerospace Payroll:
average weekly earnings for a given calendar
Aerospace Employment: Average annual year for production workers, plus an
employment in the aerospace industry (see estimated annual salary for other employees.
below) calculated as one-twelfth of the sum
of monthly estimates of the total number
Aerospace Sales: The AIA estimate of Airframe: The structural components of

aerospace industry sales is developed by an airplane, such as: fuselage, empennage,
summing: DOD expenditures for aircraft, wings, landing gear, and engine mounts, but
missiles, and space-related procurement and excluding such items as: engines, accessories,
RDT&E; NASA expenditures for R&D, electronics, and other parts that may be
space flight control and data communications; replaced from time to time.
outlays for space activities by other U.S.
government departments and agencies; Airlines: see Air Carriers.
commercial sales of space-related products;
net domestic and export sales of civil aircraft, Applied Research: Systematic study to gain
engines, and parts; foreign military sales knowledge or understanding necessary to
and commercial exports of military aircraft, determine the means by which a recognized
missiles, propulsion, and related parts; sales and specific need may be met. (U.S. Office
of related products and services including of Management and Budget) (2) Research
electronics, software, and ground support projects which represent investigation directed
equipment; and sales of non-aerospace to discovery of new scientific knowledge, and
products which are produced in aerospace- which have specific commercial objectives
manufacturing establishments which use with respect to either products or processes.
technology, processes, and materials derived (U.S. Department of Commerce)
from the aerospace industry.
Appropriation: An act of Congress that allows
A WTO
Agreement on Trade in Civil Aircraft: federal agencies to incur obligations and
agreement that eliminates import duties make payments from the U.S. Treasury for
on all aircraft, other than military aircraft, specified purposes. An appropriation is the
as well as on all other products covered by most common means of providing budget
the agreement such as civil aircraft engines, authority, and usually follows the passage
components and sub-assemblies of civil of an authorized bill. (U.S. Department
aircraft, flight simulators and other parts and of Commerce) Within the Department of
components. Defense, types of appropriations include:
RDT&E; procurement; operations and
Air Carrier: (1) An aircraft with seating maintenance; military personnel; and military
capacity of more than 60 seats or a construction.
maximum payload capacity of more than
18,000 pounds carrying passengers or cargo Assets: Tangible or intangible things of value
for hire or compensation. This includes US that are owned by a business. Examples
and foreign flagged carriers. (Federal Aviation include money, machines, buildings, and
Administration) (2) Any citizen of the United inventory.
States who undertakes, whether directly
or indirectly or by a lease or any other The art and science of
Astronautics:
arrangement, to engage in air transportation. designing, building, and operating manned
(U.S. Department of Transportation) or unmanned space objects.
Air Carriers: The commercial system of air Average Hourly Earnings: The average amount
transportation, consisting of domestic and employees make per hour in the United
international scheduled and charter service. States in a given month.
The industry primarily

Aircraft Industry: Average Weekly Earnings: Calculated by
engaged in the manufacture of aircraft, multiplying average weekly hours by average
aircraft engines, and parts including hourly earnings.
propellers and auxiliary equipment. The
aircraft industry is part of the aerospace Average Weekly Hours: Average hours for
industry, but does not include spacecraft. which pay was received; different from
standard or scheduled hours.
All airborne vehicles supported
Aircraft:
either by buoyancy or by dynamic action. Avionics:Refers to communication systems,
Used in this volume in a restricted sense navigation systems, displays and other
to mean an airplane—any winged aircraft electronic devices used in aviation.
including helicopters, but excluding gliders
and guided missiles.
Glossary 275
Backlog: The sales value of orders accepted Commercial Banks: A type of financial
(supported by legal documents) that have institution that may offer services to
not yet passed through the sales account. individuals, but whose primary function is
receiving deposits and lending to businesses.
Balance of Payments: The total of all financial
transfers for whatever purpose, including Commercial Paper: A short-term unsecured
goods and services and all financial obligation, normally issued at a discount
transactions by private and public entities in and fully repayable on maturity. One of
and out of a country, which results in balance the methods favored by companies to raise
where all outflows must equal all inflows. working capital.
Balance of Trade: The difference between Compound Annual Growth Rate (CAGR): The
exports and imports. A positive balance is year-over-year growth rate of an investment
called a surplus. A negative balance is called over a specified period of time.
a deficit. (U.S. Department of Commerce)
The combined
Consolidated Income Statement:
Balance Sheet: A summary of a company or income statements of an entire entity or
industry’s financial condition at a specific industry.
point in time, including assets, liabilities and
equity or net worth. Constant Dollars:Calculated by dividing
current (“then-year”) dollars by appropriate
Basic Research: (1) Systematic study directed price deflator and multiplying the result by
toward greater knowledge or understanding 100.
of the fundamental aspects of phenomena
and of observable facts without specific Consumer Price Index (CPI):The Bureau of
applications toward processes or products Labor Statistics defines the CPI as a measure
in mind. (U.S. Office of Management of the average change over time in the prices
and Budget) (2) Research projects which paid by urban consumers for a market basket
represent original investigation for the of consumer goods and services.
advancement of scientific knowledge, and
which do not have specific commercial Consumer Prices: The prices of consumer
objectives, although they may be in fields of goods.
present or potential interest to the sponsor.
(U.S. Department of Commerce) Coproduction: As used in this report, this
term refers to military or civil aircraft
BRIC Countries: Refers to the nations of systems or subsystems produced by two
Brazil, Russia, India and China. or more countries through government-
to-government agreements or direct
Budget Authority (BA): The value of the annual commercial agreements subject to U.S.
new authority to incur legally binding Government export licenses.
obligations of the Government that will
result in the outlay of funds. Corporate Aviation: The non-commercial
operation or use of aircraft by a company
An agency
Bureau of Economic Analysis (BEA): for the carriage of passengers or goods as
of the Department of Commerce. an aid to the conduct of company business,
flown by a professional pilot employed to
Bureau of Labor Statistics (BLS): An agency of fly the aircraft (International Civil Aviation
the Department of Labor. Organization).
Bureau of the Census: An agency of the Credit Spread:The risk premium commercial
Department of Commerce. bank lenders charge corporate borrowers
above the risk-free rate of return, typically
Capacity Utilization (CU): The percentage of based on 10-year Treasury securities and
effective manufacturing capacity that is the term of the loan. Credit spread is also
currently being utilized for manufacturing. referred to as loan spread.
Refers to aircraft and aircraft

Civil Aircraft: Currency Hedge: A position established in one
engines not built for military or public currency in an attempt to offset exposure
applications.
to exchange-rate changes or fluctuations in Durable Goods Industry: Comprised ofmajor

another currency. manufacturing industry groups with NAICS
codes 321, 327, and 33. All major manufacturing
Current Year Dollars: Dollars that include industry groups in NAICS codes 31 and
the effects of inflation or escalation and/ 322–326 are considered nondurable goods
or reflect the price levels expected to manufacturing industry groups.
prevail during the year at issue. (Defense
Acquisition University) Earnings: The total income people receive for
work performed as an employee during the
Debt-to-Equity Ratio: A measure of a income year. This category includes wages,
company’s financial leverage, calculated by salary, armed forces pay, commissions, tips,
dividing total liabilities by stockholder equity. piece-rate payments, and cash bonuses
earned, before deductions are made for
Deflator: An index used to convert a price items such as taxes, bonds, pensions, and
level to one comparable with the price level union dues. (U.S. Department of Commerce)
at a different time, offsetting the effect of
inflation. The base period, which equals 100, Economic Espionage: Occurs when an actor,
is usually specified as either a given fiscal or knowing or intending that his or her actions
calendar year. will benefit any foreign government,
instrumentality or agent, knowingly: (1)
Demographic Gifts:Peaks in national economic steals, or without authorization appropriates,
output resulting from low-dependency ratio carries away, conceals, or obtains by
demographics. deception or fraud a trade secret; (2) copies,
duplicates, reproduces, destroys, uploads,
Dependency Ratios: A measure of the number of downloads, or transmits that trade secret
dependents (aged 0–14 and over the age of 65) without authorization; or (3) receives a trade
to the total population (aged 15–64) expressed secret knowing that the trade secret had been
in terms of hundreds of people. stolen, appropriated, obtained or converted
without authorization. (U.S. Office of the
Depository Institution: Financial institution that National Counterintelligence Executive)
makes loans and obtains its funds mainly
through accepting deposits from the public; Emerging Economies: Refers to nations that
includes commercial banks, savings and are experiencing rapid growth, expansion
loan associations, savings banks, and credit and industrialization—sometimes referred
unions. (Federal Reserve Bank) to as emerging markets. See definition of
Advanced Economies.
Depreciation: The conversion of the
depreciable cost of a fixed asset into an Enterprise Value to EBITA: An alternative
expense, spread over its remaining life. There valuation tool which determines the fair
are a number of methods for calculating market value of a company.
depreciation, all based on a periodic charge
to an expense account and a corresponding Enterprise Value to Sales: Portrays how much
credit to a reserve account. it costs to buy a company’s sales. A lower
EV-to-sales ratio generally indicates an
Development: Refers to the systematic undervalued company.
application of knowledge toward the
production of useful materials, devices, Establishment: The basis for reporting to
and systems or methods, including design, the Census of Manufacturers; an operating
development, and improvement of facility in a single location.
prototypes and new processes to meet
specific requirements. (U.S. Office of Euro Area: The area comprising those
Management and Budget) European Union member states in which the
euro has been adopted as the single currency
Direct and Indirect Purchases:Direct purchases in accordance with the Treaty and in which
refer to purchases by the DOD from a single monetary policy is conducted under
contractors, while indirect purchases are not the responsibility of the Governing Council
contracted directly through the DOD but of the European Central Bank. Also referred
indirectly through DOD contractors. to as the Euro Zone. (Organization for
Economic Cooperation and Development)
Glossary 277
Euro:The name of the European currency Factoring: The selling of accounts receivable
adopted by the European Council at its to an agency known as a factor to obtain
meeting in Madrid on 15 and 16 December payment before the accounts are due.
1995 and used instead of the European The factor assumes responsibility for the
Currency Unit. (Organization for Economic accounts, the collection of payments, and
Cooperation and Development) any losses.
Evaluation: The determination of technical Federal Aviation Administration (FAA): An agency

suitability of material, equipment, or a of the U.S. Department of Transportation.
system. (U.S, Department of Defense).
Federal Deposit Insurance Corporation (FDIC)
Exchange Rate: The price of one currency Insurance: Covers all deposit accounts,
expressed in terms of another, i.e., the including checking and savings accounts,
number of units of one currency that money market deposit accounts and
may be exchanged for one unit of another certificates of deposit. FDIC insurance
currency. (U.S. Department of Commerce) does not cover other financial products
and services that banks may offer, such
Export-Import Bank of the United States (Exim as stocks, bonds, mutual fund shares, life
Bank): The Exim Bank was created in 1934 insurance policies, annuities or securities.
and established as an independent U.S. The standard insurance amount is $250,000
Government agency in 1945. The Exim per depositor, per insured bank, for each
Bank is designed “… to aid in financing account ownership category.
and to facilitate exports…” The Exim Bank
receives no appropriations from the U.S. Federal Reserve System:Refers to the central
Congress. It is directed by statute to: (1) bank of the United States. The system
offer financing that is competitive with that consists of 12 Federal Reserve Banks that
offered exporters of other countries by are supervised by the Federal Reserve Board.
their official export credit institutions, (2)
determine that the transactions supported Fiscal Year:The 12-month period that a firm
provide for a reasonable assurance of or government agency uses for accounting
repayment, (3) supplement, but not compete and preparing financial statements. The
with, private sources of export financing, fiscal year may or may not coincide with the
and (4) take into account the effect of its calendar year. For the U.S. Government, the
activities on small business, the domestic fiscal year starts on 1 October and ends on
economy, and U.S. employment. 30 September of the following calendar year.
Exports: Domestic merchandise including Flyaway Value: Includes the cost of

commodities which are grown, produced, the airframe, engines, electronics,
or manufactured in the United States and communications, armament, and other
commodities of foreign origin which have installed equipment.
been changed in the United States from the
form in which they were imported or which Foreign Military Sales (FMS): (1) Export sales
have been enhanced in value by further to foreign governments arranged through
manufacture in the United States, and which the Department of Defense, whereby
are traded or sold to other nations. Exports DOD recovers full purchase price and
measure the total physical movement of administrative costs; often mistakenly used
merchandise out of the United States to to include foreign military aid and foreign
foreign countries whether such merchandise commercial sales. (2) That portion of U.S.
is exported from within the U.S. Customs security assistance authorized by the Foreign
territory or from a U.S. Customs bonded Assistance Act (FAA) of 1961, and the Army
warehouse or a U.S. Foreign Trade Zone. Export Control Act (AECA). The recipient
(U.S. Department of Commerce) provides reimbursement for defense articles
and services transferred from the United
Facility: Refers to a physical plant or States. This includes cash sales from stocks
installation including real property, buildings, (inventories, services, or training) by the
structures, improvements, and plant DOD. (Defense Acquisition University)
equipment. Also used to describe an entire
military or government installation. G-7:The seven largest, most powerful
industrialized countries. Also known as
the Group of Seven, the G7 includes the Imports: All goods physically brought into
United States, Japan, Great Britain, France, the United States, including: (1) goods of
Germany, Italy, and Canada. The group foreign origin, and (2) goods of domestic
meets routinely (usually quarterly) to discuss origin returned to the United States without
national and global economic and monetary substantial transformation affecting a
policies. In 1991, Russia was added, making change in tariff classification under an
it the G-8; and in 1999 eleven other nations applicable rule of origin. (U.S. Department
were added to create the G-20, to be more of Commerce)
representative of the global economy.
Income: Net Operating Income: Total sales
General Agreement on Tariffs and Trade (GATT): less total operating costs.
A post WWII agreement signed by more
than 100 governments to reduce trade Independent Research and Development
barriers and expand international trade. As (IR&D): a term devised by the Department
an organization, the GATT was replaced by of Defense and used by Federal agencies
the World Trade Organization on January 1, to differentiate between a contractor’s
1995, but the General Agreement still serves research and development technical effort
as the WTO’s overall trade treaty. performed under a contract, grant, or other
arrangement (R&D) and that which is self-
General Aviation (GA): Refers to all civil aviation initiated and self-funded (IR&D).
operations other than scheduled air services
and non-scheduled air transport operations Industrial Base: That part ofthe total private
for remuneration or hire. (International Civil and government-owned industrial production
Aviation Organization) and depot-level equipment and maintenance
capacity in the United States, its territories
Gross Domestic Product (GDP): The market and possessions, and Canada. It is or shall
value of goods and services produced by be made available in an emergency for the
labor and property in the United States, manufacture of items required by the U.S.
regardless of nationality; GDP replaced military services and selected allies. (Defense
gross national product (GNP) as the primary Acquisition University)
measure of U.S. production in 1991.
(U.S. Bureau of Economic Analysis) Industrial Espionage: Occurs when an actor,
intending or knowing that his or her offense
Gross Federal Debt: The total accumulated will injure the owner of a trade secret of a
debt of the U.S. Government, whether product produced for or placed in interstate
issued by the Treasury or other agencies and or foreign commerce, acts with the intent
held by the public or federal government to convert that trade secret to the economic
accounts. benefit of anyone other than the owner
by: (1) stealing, or without authorization
A rotary-wing aircraft which
Helicopter: appropriating, carrying away, concealing, or
depends principally for its support and obtaining by deception or fraud information
motion in the air upon the lift generated by related to that secret; (2) copying, duplicating,
one or more power-driven rotors, rotating reproducing, destroying, uploading,
on substantially vertical axes. A helicopter is downloading, or otherwise transmitting
a type of V/STOL aircraft. that information without authorization;
or (3) receiving that information knowing
Heliport: An area, either at ground level or that that information had been stolen,
elevated on a structure, that is used for the appropriated, obtained or converted without
landing and take-off of helicopters and authorization. (U.S. Office of the National
includes some or all of the various facilities Counterintelligence Executive)
useful to helicopter operations such as:
helicopter parking, hangar, waiting room, Industrial Production: Refers to the total
fueling, and maintenance equipment. production from all industrial activities over
a particular period of time.
Helistop: A minimum facility heliport, but
without such auxiliary facilities as: waiting Industrial Research and Development: Research
room, hangar parking, etc. and development work performed within
company facilities, funded by company or
Federal funds, and excluding company-
Glossary 279
financed research and development Loan Spread: The difference between a

contracted to outside organizations such as: risk-free investment, such as a U.S. Treasury
research institutions, universities, colleges, or security, and a riskier investment, such as a
other non-profit organizations. corporate bond or a commercial loan. Loan
spread is also referred to as credit spread.
Initial Jobless Claims: The number of
individuals each week who file for the first Long-Term Interest Rates: The interest rate
time for unemployment benefits. earned by a note or bond that matures in 10
or more years.
Intellectual Property (IP): Includes inventions,
trademarks, patents, industrial designs, Lump-Sum Wage Payment: A one-time
copyrights, and technical information payment given in lieu of general wage
including software, data designs, technical increases and/or cost of living adjustments
know-how, manufacturing information in labor settlements.
and know-how, techniques, technical data
packages, manufacturing data packages, and M1: A measure of the money supply that
trade secrets. (Defense Acquisition University) includes currency and demand deposits at
commercial banks.
Intercontinental Ballistic Missile (ICBM): A missile
with a range of more than 5,000 miles. M2: A broader measure of the money supply
that incorporates M1 but also includes assets
International Trade Administration (ITA): Part of such as commercial bank savings deposits,
the U.S. Department of Commerce. The deposits at credit unions and noninstitutional
International Trade Administration’s mission money market funds, among other
is to strengthen the competitiveness of U.S. components.
industry, promote trade and investment,
and ensure fair trade through the rigorous Manufacturing Industries:Those establishments
enforcement of U.S. trade laws and engaged in the mechanical or chemical
agreements. transformation of inorganic or organic
substances into new products, and usually
An agreement by two entities
Joint Venture: described as plants, factories, or mills,
to share the costs and benefits of a business which characteristically use power-driven
operation. machines and materials- handling equipment;
also establishments engaged in assembling
Lagging Indicators: Economic measures of past component parts of manufactured products
performance, often used to confirm upturns if the new product is neither a structure nor
or downturns in business activity. In some other fixed improvement.
circumstances, they can also be useful for
forecasting purposes. (Federal Reserve Bank) Commercial bank lenders with
Mega Lenders:
more than $50 billion in assets.
Large Commercial Aircraft (LCA): Traditionally
defined to be those aircraft which have more Merchandise Trade Balance: The difference
than 100 seats or an equivalent cargo capacity. between the value of U.S. goods exported to
other countries and foreign goods imported
Leading Indicators: Economic indicators into this country. The trade balance is generally
that measure past performance but are regarded as “favorable” when exports exceed
considered to be relatively good indicators imports—a trade surplus—and “unfavorable”
of future performance. Leading indicators when imports exceed exports—a trade deficit.
consist of individual components that See Balance of Trade.
might lead measures of economic activity
such as new housing starts, new orders for Companies with
Middle-Market Companies:
machinery, etc. (Federal Reserve Bank) revenues between $50 million and $1 billion.
Legacy Demand: The demand from Missile: A term that is sometimes used to
established customers or markets. describe space launch vehicles, but more
appropriately applied to weapons that have
Liabilities: Debts owed by a business to an integrated guidance system, as opposed to
creditors. Examples include account an unguided rocket.
balances, credit card debt, and notes payable.
An agency of
Missile Defense Agency (MDA): Commitments
Obligations (Federal Budget):
the U.S. Department of Defense. made by Federal agencies to pay out money
for products, services, or other purposes—
Money Multiplier: The number of times the as distinct from the actual payments.
basic money supply circulates in the economy. Obligations incurred may not be larger than
budget authority.
Mortgage Securitization: The process by which
securities are created through the aggregation Offset Agreements: One of various industrial
of a large amount of individual mortgages and commercial compensation practices
into an investment pool. These pooled required of defense contractors by foreign
mortgage loans serve as collateral to back governments as a condition for the
a security. Investors buy the securities and purchase of defense articles/services in
receive principal and interest payments from either government-to-government or direct
the pool that are a proportional share of the commercial sales. The responsibility for
mortgage principal and interest payments. negotiating offset arrangements resides with
the U.S. firm involved. (Defense Acquisition
Net Assets: Total assets minus total liabilities. University)
Net income
Net Income (After Income Taxes): Orders, Net New:The sales value of new
(before income taxes) less federal income orders (supported by legal documents)
taxes. minus cancellations during the period.
Net Income (Before Income Taxes): Net Organization for Economic Cooperation and
operating income plus or minus other Development (OECD): The mission of the
income and expenses. OECD is to promote policies that will
improve the economic and social well-being
Net Operating Income: Total sales less total of people around the world. Membership
operating costs. include 34 countries that span the globe,
including many of the world’s most
Non-Aerospace Products and Services: Products advanced countries, but also emerging
and services other than aircraft, missiles, countries like Mexico, Chile and Turkey.
space vehicles, and related propulsion
and parts, produced or performed by Other Aerospace Products and Services: All
establishments whose principal business is conversions, modifications, site activation,
the development and/or manufacture of other aerospace products (including UAVs),
aerospace products. services, plus research and development
under contract, defined as: basic and applied
Non-Residential Private Fixed Investment: research in the sciences and in engineering
Investments by private interests in and design and development of prototype
commercial property. products and processes.
North American free Trade Agreement (NAFTA): Other Income and Expenses: Includes interest
The formal agreement, or treaty, among income, royalty income, capital gains and
Canada, Mexico, and the United States to losses, interest expense, cash discounts, etc.
promote trade amongst the three countries.
It includes measures for the elimination of Checks issued, interest accrued on
Outlays:
tariffs and nontariff barriers to trade, as well the public debt, or other payments made, net
as numerous specific provisions concerning of refunds and reimbursements.
the conduct of trade and investment.
(U.S. Department of Commerce) Overtime Hours: That portion of the gross
average weekly hours which is in excess
North American Industry Classification System of regular hours and for which premium
(NAICS): A system developed by Canada, payments are made.
Mexico, and the United States that groups
establishments into industries to provide Passenger-Mile: One passenger moved
uniformity of statistical data and facilitate one mile.
economic analyses between industries across
the three North American countries. Payroll, All Manufacturing: Includes the gross
earnings paid in the calendar year to all
Glossary 281
employees on the payroll of operating Real Income: The income of nations or

manufacturing establishments. Includes all individuals after adjusting for inflation.
forms of compensation paid directly to
workers such as: salaries, wages, commissions, Real Private Consumption: The value of the
dismissal pay, all bonuses, vacation and sick consumption goods and services acquired
leave pay, and compensation in kind; prior and consumed by households, adjusted for
to such deductions as: employees’ Social inflation.
Security contributions, withholding taxes,
group insurance, union dues, and savings Recession:A decline in the Gross Domestic
bonds. Does not include employers’ Social Product for two or more consecutive
Security contributions or other nonpayroll quarters.
labor costs such as: employees’ pension plans,
group insurance premiums, and workmen’s Sales of
Related Products and Services:
compensation. electronics, software, and ground equipment
in support of aerospace products, plus sales
Performance-Based Logistics (PBL):The by aerospace manufacturing establishments
preferred sustainment strategy for weapon of systems and equipment which are
system product support that employs the generally derived from the industry’s
purchase of support as an integrated, aerospace technological expertise in design,
affordable performance package designed materials, and processes, but which are
to optimize system readiness. PBL meets intended for applications other than flight.
performance goals for a weapon system
through a support structure based on Research: Systematic study directed toward
long-term performance agreements with fuller scientific knowledge or understanding
clear lines of authority and responsibility. of the subject studied. Research is classified
(Defense Acquisition University) as either basic or applied according to the
objectives of the sponsoring agency.
Procurement: The process whereby
the executive agencies of the Federal Research and Development (R&D): Refers to all
Government acquire goods and services research activities, both basic and applied,
from enterprises other than the Federal and all development activities that are
Government. supported at universities, colleges, non-
profit institutions, for-profit entities, or the
Producer Price Index (PPI): The price level paid government.
by business for inputs into the production
process. The index gives a base-year measure Reserve Balances: The monetary balances on
of 100 and compares each period to the base deposit by the member banks of the national
year. For example, an index value of 110 banking system at the Federal Reserve
would mean an increase of 10 percent since Banks.
the base year.
Return on Assets: Net profit divided by total
Production Workers: Includes working assets.
foremen and all non-supervisory workers
engaged in the production of goods. It also Return on Equity: Net profit divided by total
includes janitorial services, recordkeeping equity.
and other services closely associated with
production. Rotorcraft: An aircraft which, in all its usual
flight attitudes, is supported in the air wholly
A measure of how much is
Productivity: or in part by a rotor or rotors (i.e., airfoils
produced per unit of input. There are rotating or revolving about an axis). See
various kinds of productivity depending Helicopter.
on the input, and various ways to calculate
it. Labor productivity, for instance, can be Seasonal Adjustment:The seasonal adjustment
calculated per worker, per hour worked, etc. procedure designed to reflect seasonal
Capital productivity is similar to calculating a patterns at the most detailed commodity
return from an investment. levels. The Census Bureau is seasonally
adjusting the merchandise trade data at
Real GDP: Gross Domestic Product adjusted the most detailed end-use level possible.
for inflation. These detailed data are then summed
to the one-digit level for release with An experiment designed to assess

Test:
the monthly merchandise trade totals. progress in the attainment of development
The adjustment is made at that end-use objectives.(U.S. Department of Defense)
commodity level for which significant stable
seasonality is identified. The use of the Thrust: The driving force exerted by an
end-use commodity classification system for engine, particularly an aircraft or missile
seasonal adjustment ensures methodological engine, in propelling the vehicle to which it
consistency with the quarterly adjusted is attached.
balance of trade data published by the
Bureau of Economic Analysis (BEA), and Ton-Mile: One ton moved one mile.
reflects the BEA coding descriptions which
combine data into broad categories based Total Compensation:Includes both wages or
upon principal uses of the commodities. salaries and other benefits.
(U.S. Department of Commerce)
Total Obligation Authority (TOA): (1) The sum of
A
SIC (Standard Industrial Classification): budget authority granted or requested from
system developed by the U.S. government the Congress in a given year, plus unused
to define the industrial composition of budget authority from prior years. (2) The
the economy, facilitating comparability of value of funds that can be committed to a
statistics. Beginning in 1997, SIC codes program for a given Fiscal Year based on the
were progressively superseded by the North congressionally approved Budget Authority,
American Industry Classification System plus or minus other adjustments.
(NAICS).
Trade Deficit: The value of imports of goods
Small Business Loan: A loan originated for $1 that exceeds the value of exports of goods.
million or less at some point in time over the
last several years. Trade Surplus: The value of exports of goods
that exceeds the value of imports of goods.
Small to Medium-Size Manufacturers (SMM):
Refers to smaller manufacturers that are TTM EBITDA/ TTM Revenue: The sum of the
generally categorized as having less than 500 last four quarters (trailing twelve months) of
employees, and medium-size manufacturers EBITDA divided by the last four quarters
between 500 and 999 employees. of revenue.
Space Vehicle: An artificial body operating TTM Net Revenues:A measure of one year’s
in outer space (beyond the Earth’s growth calculated by totaling the company’s
atmosphere). net revenues over the trailing 12 months.
Stockholder’s Equity:Also referred to as Turbine, Turbo: A mechanical device or engine

Shareholder Equity, this term refers to the that spins in reaction to a fluid flow that
value of all assets minus all obligations passes through or over it. Frequently used in
of the corporation, except those to turboprop or turbojet powered aircraft.
stockholders. Annual data are average equity
for the year (using four end-of-quarter U.S. Treasury Bond: A security issued by the
figures). For details, see “Quarterly Financial U.S. Treasury.
Report for Manufacturing, Mining and Trade
Corporations,” compiled by the Bureau of Unmanned Aerial Vehicle (UAV): A powered,
the Census. aerial vehicle that does not carry a human
operator, uses aerodynamic forces to provide
STOL: Short take-off and landing aircraft. vehicle lift, can fly autonomously or be
piloted remotely, can be expendable or
Customs duties on merchandise
Tariff: recoverable, and can carry a lethal or non-
imports. Levied either on an ad valorem lethal payload.
basis (percentage of value) or on a specific
basis (e.g. $7 per 100 kgs.). Tariffs give price Refers
Unmanned Aircraft System (UAS):
advantage to similar locally-produced goods to a system whose components include
and raise revenues for the government. the necessary equipment, network, and
(World Trade Organization) personnel to control an unmanned aircraft.
Glossary 283
U-Shaped Recovery: An economic slump that The WTO

World Trade Organization (WTO):
recovers over a long period of time, so named was established in 1995 as a result of the
for how the data appear when graphed. “Uruguay Round” negotiations which
included a major revision of the General
Utility Aircraft: An aircraft designed for general Agreement on Tariffs and Trade (GATT).
purpose flying. The WTO’s overriding objective is to
help trade flow smoothly, freely, fairly, and
V/STOL: Vertical short take-off and landing predictably.
aircraft.
V-Shaped Recovery: An economic slump

that recovers over a short period of time,
so named for how the data appear when
graphed.
285
Appendix
■■ Summary Aerospace Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
■■ Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
■■ Missiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
■■ Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
■■ Air Carriers, Traffic Statistics, and Fuel Costs. . . . . . . . . . . . . . . 322
■■ General Aviation Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330
■■ Landing Facilities by State and Type. . . . . . . . . . . . . . . . . . . . . . . 332
■■ Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
■■ Foreign Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
■■ Employment, Earnings, and Other Workforce Statistics . . . . . . 352
■■ Income Statement, Balance Sheet, and Other
Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
■■ Key Operating Costs for Selected Aerospace
Manufacturing Centers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
■■ Major DOD and NASA Contractors. . . . . . . . . . . . . . . . . . . . . . 371
Summary Aerospace Statistics
AIA's AEROSPACE INDUSTRY SALES BY PRODUCT GROUP*
Calendar Years 2002-2013
Aircraft Related
Total
Year Missiles Space Products &
Sales
Total Civil Military Services
Current Dollars (Billions)
2002 $154.35 $78.62 $41.34 $37.28 $15.71 $34.62 $25.39

2003 152.59 75.96 32.44 43.52 16.93 35.86 23.84
2004 157.88 78.32 32.52 45.80 19.66 35.70 24.20
2005 169.41 86.58 37.16 49.42 20.80 36.66 25.36
2006 185.26 100.19 45.85 54.34 21.03 37.56 26.48

2007 204.50 112.96 52.55 60.41 22.59 39.90 29.06
2008 210.17 112.19 48.18 64.01 24.59 43.22 30.18
2009 209.86 110.69 51.30 59.39 24.70 45.03 29.44
2010 208.49 109.96 48.16 61.80 23.46 45.39 29.68

2011 210.79 112.81 53.15 59.66 23.39 44.59 30.01
2012 217.87 118.82 60.59 58.24 23.13 44.90 31.01
2013(E) 223.55 124.29 67.48 56.81 21.84 45.60 31.82
Constant Dollars a (Billions)
2002 $160.74 $81.88 $43.05 $38.82 $16.36 $36.06 $26.44

2003 156.44 77.88 33.26 44.62 17.36 36.76 24.44
2004 159.79 79.27 32.91 46.36 19.90 36.13 24.50
2005 169.41 86.58 37.16 49.42 20.80 36.66 25.36
2006 179.87 97.27 44.51 52.76 20.42 36.47 25.71

2007 199.83 110.38 51.35 59.03 22.07 38.99 28.39
2008 205.13 109.50 47.03 62.47 24.00 42.18 29.45
2009 204.03 107.61 49.87 57.74 24.01 43.78 28.62
2010 203.39 107.27 46.98 60.29 22.89 44.28 28.95

2011 205.11 109.76 51.71 58.05 22.76 43.39 29.20
2012 210.41 114.76 58.52 56.24 22.34 43.36 29.95
2013(E) 214.65 119.34 64.80 54.55 20.97 43.79 30.55
Source: Aerospace Industries Association (AIA), based on company reports; The Budget of the United States Government,
National Aeronautics and Space Administration (NASA), U.S. Department of Commerce, and Department of Defense.
* Government purchases reflected as appropriated funding.
a. Based on AIA's aerospace composite price deflator, (2005=100).
E. Estimate.
Appendix 287
AIA's AEROSPACE INDUSTRY SALES BY CUSTOMER*
Aerospace Products and Services

Related
Total
Year NASA Products &
Sales Department Other
Total and Other Services
of Defense Customers
Agencies
Current Dollars (Billions)
2002 $154.35 $128.96 $61.70 $16.39 $50.87 $25.39

2003 152.59 128.75 71.28 16.52 40.95 23.84
2004 157.88 133.68 75.38 16.98 41.32 24.20
2005a 169.41 144.05 80.71 17.25 46.09 25.36
2006 185.26 158.78 84.04 17.22 57.52 26.48

2007 204.50 175.45 94.17 17.80 63.48 29.06
2008 210.17 179.99 101.47 19.51 59.01 30.18
2009 209.86 180.41 99.43 20.81 60.17 29.44
2010 208.49 178.82 101.23 21.10 56.49 29.68

2011 210.79 180.78 99.64 21.17 59.97 30.01
2012 217.87 186.86 96.24 20.25 70.37 31.01
2013(E) 223.55 191.73 93.16 20.81 77.76 31.82
Constant Dollars b (Billions)
2002 $160.74 $134.29 $64.25 $17.06 $52.98 $26.44

2003 156.44 132.00 73.08 16.94 41.98 24.44
2004 159.79 135.30 76.29 17.18 41.82 24.50
2005a 169.41 144.05 80.71 17.25 46.09 25.36
2006 179.87 154.17 81.60 16.72 55.85 25.71

2007 199.83 171.44 92.02 17.39 62.03 28.39
2008 205.13 175.67 99.03 19.04 57.59 29.45
2009 204.03 175.40 96.67 20.24 58.50 28.62
2010 203.38 174.44 98.75 20.58 55.11 28.95

2011 205.10 175.90 96.95 20.60 58.35 29.20
2012 210.42 180.47 92.95 19.56 67.96 29.95
2013(E) 214.65 184.10 89.45 19.98 74.67 30.55
Source: Aerospace Industries Association (AIA), based on company reports; The Budget of the United States Government,
National Aeronautics and Space Administration (NASA), Department of Commerce, and Department of Defense.
* Government purchases reflected as appropriated funding.
a. Beginning in 2005, NASA sales were reported separately from other agencies.
b. Based on AIA's aerospace composite price deflator, (2005=100).
E. Estimate.
AEROSPACE SALES AND THE NATIONAL ECONOMY

Calendar Years 1998–2012
(Billions of Dollars)
Industry Sales Aerospace Sales as Percent of:

Gross
Domestic Manufac- Durable Aero- Manufac- Durable
Year Product turing Goods space GDP turing Goods
Current Dollars
1998 $8,794 $3,899 $2,229 $148 1.68% 3.80% 6.64%

1999 9,354 4,033 2,328 154 1.64 3.81 6.60
2000 9,952 4,202 2,370 145 1.45 3.44 6.11
2001 10,286 3,971 2,174 152 1.47 3.82 6.98
2002 10,642 3,917 2,126 154 1.45 3.94 7.26
2003 11,142 4,016 2,142 153 1.37 3.80 7.12
2004 11,853 4,293 2,254 158 1.33 3.68 7.00
2005 12,623 4,742 2,424 169 1.34 3.57 6.99
2006 13,377 5,016 2,562 185 1.38 3.69 7.23
2007 14,029 5,321 2,687 205 1.46 3.84 7.61
2008 14,292 5,447 2,613 210 1.47 3.86 8.04
2009 13,974 4,424 2,065 210 1.50 4.74 10.16
2010 14,499 4,908 2,291 208 1.44 4.25 9.10
2011 15,076 5,504 2,506 211 1.40 3.83 8.41
2012 16,245 5,724 2,666 218 1.34 3.81 8.17
Real Annual Growth
Manufac- Durable Aero-

GDP turing Goods space
Constant Dollars a
1998 $10,275 $4,555 $2,605 $157 4.4% 0.5% 2.6% 13.1%

1999 10,771 4,645 2,681 163 4.8 2.0 2.9 3.7
2000 11,216 4,736 2,672 152 4.1 2.0 (0.3) (6.6)
2001 11,338 4,377 2,396 159 1.1 (7.6) (10.3) 4.2
2002 11,543 4,248 2,306 161 1.8 (2.9) (3.8) 1.4
2003 11,836 4,266 2,275 156 2.5 0.4 (1.3) (2.7)
2004 12,247 4,436 2,329 160 3.5 4.0 2.3 2.1
2005 12,623 4,742 2,424 169 3.1 6.9 4.1 6.0
2006 12,959 4,859 2,482 180 2.7 2.5 2.4 6.2
2007 13,206 5,009 2,529 200 1.9 3.1 1.9 11.1
2008 13,162 5,017 2,407 205 (0.3) 0.2 (4.8) 2.6
2009 12,758 4,039 1,885 204 (3.1) (19.5) (21.7) (0.6)
2010 13,063 4,422 2,064 203 2.4 9.5 9.5 (0.3)
2011 13,300 4,856 2,211 205 1.8 9.8 7.1 0.8
2012 14,082 4,962 2,311 210 5.9 2.2 4.5 2.6
Source: Aerospace Industries Association (AIA), based on data from the the Bureau of the Census, Bureau of
Economic Analysis, and Council of Economic Advisers, Economic Indicators, 2013.
Note: Parentheses indicate negative real annual growth.
a. Aerospace constant dollar sales based on AIA's aerospace composite price deflator (2005=100).
Others based on GDP deflator (2005=100).
Appendix 289
SALES OF AEROSPACE ESTABLISHMENTS

AS REPORTED BY THE BUREAU OF THE CENSUS
(Millions of Dollars)
Aircraft, Other Aerospace

Totals Missiles,
Engines and Parts (includes R&D)
Space &
Total Non- Non- Rocket Non- Non-
Year Sales Military Military Military Military Propulsion Military Military Aerospace
Current Dollars
1996 $103,115 $53,153 $49,962 $24,804 $32,722 $18,506 $12,171 $4,624 $10,287
1997 114,946 50,648 64,298 23,944 42,614 21,354 12,320 3,922 10,792
1998 119,258 45,110 74,148 23,795 52,708 16,109 7,818 5,035 13,796
1999 124,181 49,690 74,491 26,043 56,406 15,661 9,062 4,472 12,535
2000 109,311 43,256 66,055 23,196 46,477 15,603 6,035 4,785 13,215
2001 117,088 47,232 69,856 22,133 52,504 15,512 8,187 5,732 13,020
2002 115,202 55,422 59,781 25,249 43,435 15,636 11,030 5,251 14,601
2003 116,445 65,569 50,876 26,225 37,256 15,579 14,659 4,397 18,328
2004 124,329 69,027 55,301 26,008 39,667 14,239 20,480 4,403 19,531
2005 124,176 61,660 62,517 24,873 43,509 (S) 19,995 5,063 20,767
2006 155,893 72,934 82,959 27,261 (D) (D) 24,607 6,557 (D)
2007 126,824 42,386 84,438 17,102 (D) (D) (D) (D) 25,256
2008 135,157 55,469 79,688 (D) (D) (D) 14,722 7,027 (D)
2009 147,951 57,512 90,439 (D) (D) (D) (D) (D) (D)
2010 134,147 57,297 76,850 (D) (D) (D) (D) (D) (D)
Constant Dollars a
1996 $108,209 $55,779 $52,430 $26,029 $34,338 $19,420 $12,772 $4,852 $10,795
1997 121,348 53,469 67,879 25,277 44,987 22,543 13,006 4,140 11,393
1998 126,561 47,872 78,688 25,252 55,935 17,095 8,297 5,343 14,641
1999 131,576 52,649 78,927 27,594 59,765 16,594 9,602 4,738 13,281
2000 114,922 45,476 69,446 24,387 48,863 16,404 6,345 5,031 13,893
2001 122,460 49,399 73,061 23,148 54,913 16,224 8,563 5,995 13,617
2002 119,972 57,717 62,256 26,294 45,233 16,283 11,487 5,468 15,206
2003 119,385 67,224 52,160 26,887 38,197 15,972 15,029 4,508 18,791
2004 125,836 69,864 55,971 26,323 40,148 14,411 20,729 4,456 19,768
2005 124,176 61,660 62,517 24,873 43,509 (S) 19,995 5,063 20,767
2006 151,361 70,814 80,547 26,469 (D) (D) 23,892 6,366 (D)
2007 123,927 41,418 82,509 16,711 (D) (D) (D) (D) 24,679
2008 131,913 54,138 77,775 (D) (D) (D) 14,369 6,859 (D)
2009 143,780 55,891 87,889 (D) (D) (D) (D) (D) (D)
2010 130,861 55,893 74,968 (D) (D) (D) (D) (D) (D)
Source: Aerospace Industries Association (AIA), based on data from the Bureau of the Census, Aerospace Industry (Orders, Sales, and
Backlog), 2011.
Notes: In addition to AIA's own aerospace sales figure, AIA reports two, unique aerospace sales figures derived from two different
Bureau of the Census sources. Data reported on this page is derived from the Current Industrial Report, 2011.
a. Based on AIA's aerospace composite price deflator (2005=100).

D. Withheld by the Bureau of the Census to avoid disclosing data for individual companies.
S. Does not meet publication standards, as determined by the Bureau of the Census.
ORDERS AND BACKLOG OF AEROSPACE ESTABLISHMENTS

AS REPORTED BY THE BUREAU OF THE CENSUS
Aircraft, Other Aerospace

Totals Missiles,
Engines and Parts (includes R&D)
Space, &
Non- Non- Rocket Non- Non-
Year Total Military Military Military Military Propulsion Military Military Aerospace
Orders
1996 $126,267 $62,127 $64,140 $25,343 $45,281 $27,067 $12,136 $5,070 $11,370
1997 118,993 47,802 71,192 21,424 49,676 21,326 12,348 4,125 10,096
1998 109,993 38,678 71,314 16,870 47,613 19,699 7,628 4,468 13,715
1999 115,257 49,696 65,561 25,009 48,018 18,824 10,261 4,152 8,992
2000 140,086 54,723 85,363 31,396 65,459 18,368 7,046 3,900 13,917
2001 122,206 63,619 58,587 21,762 40,731 12,727 25,659 5,876 15,451
2002 114,830 66,437 48,393 28,498 31,482 17,288 11,156 4,985 21,420
2003 117,721 72,650 45,070 33,941 30,878 10,067 15,269 4,935 22,631
2004 131,674 76,747 54,927 26,785 44,984 17,677 19,088 3,611 19,529
2005 186,443 53,008 133,434 19,017 113,565 (S) 20,272 5,295 24,444
2006 202,842 67,709 135,133 31,285 110,967 (D) 16,724 8,620 (D)
2007 231,586 44,595 186,991 18,891 152,994 (D) 11,984 7,204 29,398
2008 189,273 74,396 114,877 (D) (D) (D) (D) (D) 29,961
2009 106,600 68,371 38,229 (D) (D) (D) (D) (D) 34,233
2010 145,589 66,472 79,117 (D) (D) (D) (D) (D) 27,803
Backlog (as of end-of-year)
1996 $229,871 $89,500 $140,371 $47,635 $106,341 $35,440 $16,176 $9,339 $14,940
1997 218,951 78,870 140,082 43,615 111,931 34,585 12,125 4,754 11,942
1998 200,288 69,962 130,326 37,530 106,166 31,174 9,665 3,488 12,264
1999 188,409 68,379 120,029 36,565 96,596 33,880 9,904 3,051 8,413
2000 214,966 73,741 141,225 41,250 115,241 36,283 10,028 4,081 8,083
2001 223,189 88,863 134,326 39,623 107,124 32,139 27,922 3,631 12,748
2002 222,452 99,948 122,505 42,934 96,515 33,503 30,533 3,944 18,224
2003 226,932 108,704 118,229 50,646 90,122 27,989 31,173 4,481 22,522
2004 234,272 116,509 117,763 51,428 95,356 31,337 29,707 3,690 22,755
2005 290,054 100,836 189,217 38,436 165,297 25,784 30,077 3,939 26,520
2006 334,489 92,924 241,565 42,459 (D) (D) 22,109 6,380 (D)
2007 437,092 93,971 343,121 44,205 (D) (D) (D) (D) 32,245
2008 482,068 105,279 376,789 (D) (D) (D) (D) (D) 34,028
2009 432,638 100,941 331,697 (D) (D) (D) (D) 4,661 37,673
2010 430,106 95,934 334,173 (D) (D) (D) (D) 7,060 37,094
Source: Bureau of the Census, Aerospace Industry (Orders, Sales, and Backlog), 2011.
Notes: Totals may not equal sum of terms due to rounding.
To ensure comprehensive industry coverage, AIA provides backlog data from two different Bureau of the Census sources.
Data reported on this page is derived from the Current Industrial Report, 2011.
D. Withheld by Bureau of the Census to avoid disclosing data for individual companies.
S. Does not meet publication standards, as determined by the Bureau of the Census.
Appendix 291
SHIPMENTS, ORDERS, AND BACKLOG:

Aircraft & Parts and Search & Navigation Equipment
As of End-of-Year 1993-2012
Year Shipments Orders Backlog

1993 123,850 100,815 197,198
1994 112,511 98,621 183,308
1995 110,928 115,279 187,659
1996 110,840 134,142 210,961
1997 132,787 143,071 221,245
1998 150,077 138,407 209,575

1999 152,728 140,329 197,176
2000 144,740 165,994 218,430
2001 153,571 148,129 212,988
2002 140,889 134,045 206,144
2003 135,955 139,327 209,516

2004 145,305 154,081 218,292
2005 152,081 217,910 284,121
2006 165,652 253,351 371,820
2007 202,723 319,186 488,283
2008 211,943 260,809 537,149

2009 201,577 95,184 430,756
2010 200,616 223,713 453,853
2011 201,174 248,359 501,038
2012 224,493 267,037 543,582
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Census,
Notes: Includes both Civil and Defense Data.
Not seasonally adjusted; includes aircraft engine and parts manufacturing.
FEDERAL OUTLAYS FOR DEFENSE, NASA, AND AEROSPACE

PRODUCTS AND SERVICES
Fiscal Years 1988–2012
Federal Outlays for

Aerospace Products and Services Aerospace
as Percent
Dept of Defensea of Sum of
Total Total Nat.
National Total Total Total Def. and
Year Defense NASA Aerospace NASAc Aerospace Aircraft Missilesd Total NASA
1988 $290,360 $9,092 $48,848 $8,926 $39,922 $28,246 $11,676 16.3%

1989 303,555 11,036 52,933 10,861 42,072 27,569 14,503 16.8
1990 299,321 12,429 53,195 12,202 40,993 26,142 14,851 17.1
1991b 273,285 13,878 53,630 13,541 40,089 25,689 14,400 18.7
1992b 298,346 13,961 50,569 13,484 37,085 23,581 13,504 16.2
1993b 291,084 14,305 45,496 13,733 31,763 20,359 11,404 14.9

1994 281,640 13,694 41,082 13,308 27,774 18,840 8,934 13.9
1995 272,063 13,378 36,696 13,058 23,638 16,125 7,513 12.9
1996 265,748 13,881 32,947 12,417 20,530 14,331 6,199 11.8
1997 270,502 14,360 32,808 12,920 19,888 14,663 5,225 11.5
1998 268,194 14,194 33,184 12,804 20,380 15,473 4,907 11.8

1999 274,769 13,636 32,968 12,404 20,564 16,484 4,080 11.4
2000 294,363 13,428 34,645 12,395 22,250 17,991 4,259 11.3
2001 304,732 14,092 37,212 13,761 23,451 17,979 5,472 11.7
2002 348,456 14,405 39,224 13,448 25,776 20,546 5,230 10.8
2003 404,744 14,610 39,430 12,857 26,573 21,280 5,293 9.4

2004 455,833 15,152 44,324 14,611 29,713 22,898 6,815 9.4
2005 495,308 15,602 44,655 14,749 29,906 23,284 6,622 8.7
2006 521,827 15,125 45,046 14,370 30,676 23,176 7,500 8.4
2007 551,271 15,861 46,021 15,216 30,805 23,349 7,456 8.1
2008 616,073 17,833 50,851 17,176 33,675 25,964 7,711 8.0

2009 661,023 19,168 57,687 18,344 39,343 30,575 8,768 8.5
2010 693,498 18,906 60,910 18,269 42,641 33,745 8,896 8.5
2011 705,557 17,618 61,167 16,827 44,340 35,513 8,827 8.5
2012 677,856 17,190 62,064 16,255 45,809 37,060 8,749 8.9
Source: Office of Management and Budget, The Budget of the United States Government, FY13.
Notes: Totals may not equal sum of terms due to rounding. "National Defense” includes the military budget of the DoD and other
defense-related activities.
a. Outlays for aircraft and missile procurement, excluding RDT&E.
b. 1991–1993 reflects transfers from the Defense Cooperation Account funded by foreign government and private cash
contributions reducing total U.S.-funded military outlays.
c. Excludes Office of Inspector General, Education, Working Capital Fund and National Space Grant Program.
d. Beginning in 1987, DoD combined Navy Missile Procurement with torpedoes and other related products into Navy Weapons
Procurement, of which missiles comprise approximately 80 percent.
Appendix 293
DEPARTMENT OF DEFENSE
a
MILITARY OUTLAYS BY FUNCTIONAL TITLE
2004 2005 2006 2007
Total $436,439 $474,071 $499,297 $528,548
Procurement—TOTAL $76,216 $82,294 $89,757 $99,647

Aircraft 22,898 23,284 23,176 23,349
Missilesb 6,815 6,622 7,500 7,456
Ships 10,021 9,950 10,345 10,485
Weaponsb 2,332 2,680 4,065 4,915
Ammunition 3,502 4,061 4,281 4,392
Other 30,648 35,697 40,390 49,050
Military Personnel 113,576 127,463 127,543 127,544
Operations & Maintenance (O&M) 174,045 188,118 203,789 216,631
Research, Development, Test, and

Evaluation (RDT&E) 60,759 65,694 68,629 73,136
Military Construction 6,312 5,331 6,245 7,899
Family Housing 3,905 3,720 3,717 3,473
Other 1,626 1,451 (383) 218
(Continued on next page)

MILITARY OUTLAYS BY FUNCTIONAL TITLEa
Fiscal Years 2004–2012, Continued
2008 2009 2010 2011 2012
Total $594,632 $636,742 $666,703 $678,064 $652,411
Procurement—TOTAL $117,398 $129,218 $133,603 $128,003 $126,272

Aircraft 25,964 30,575 33,745 35,513 37,060
Missilesb 7,711 8,768 8,896 8,827 8,749
Ships 11,185 11,312 11,893 12,052 12,353
Weaponsb 5,898 6,984 6,886 6,062 6,680
Ammunition 4,451 4,397 4,433 4,330 4,541
Other 62,189 67,182 67,750 61,219 56,889
Military Personnel 138,940 147,348 155,690 161,608 152,266
Operations & Maintenance (O&M) 244,836 259,312 275,988 291,038 282,297
Research, Development, Test, and

Evaluation (RDT&E) 75,120 79,030 76,990 74,871 70,396
Military Construction 11,563 17,614 21,169 19,917 14,553
Family Housing 3,590 2,721 3,173 3,432 2,331
Other 3,185 1,499 90 (805) 4,296
Source: Office of Management and Budget, The Budget of the United States Government, FY13 .
Notes: Data in parentheses are credit items.
Totals may not equal sum of terms due to rounding. Previous years’ data may have been revised to reflect updated and/or newly
available information.
a. Includes all items in the DoD military budget; excludes the DoD civil budget for the Army Corps of Engineers and other
non-defense related activities.
b. Beginning in 1987, DoD combined Navy Missiles Procurement with torpedoes and other related products into Navy Weapons
Procurement. Missiles comprise approximately 80 percent of the value of this category.
Appendix 295
FEDERAL PRICE DEFLATORS FOR GDP, DEFENSE, PPI, AND CPI

Calendar and Fiscal Years 1983–2012
Federal Government
GDP Defense Purchases
Goods & Equipment PPI, Capital CPI-U,
Year FY GDP CY GDP Services Investment Equipment All Items
(FY 2005=100) (CY 2005=100) (CY 2005=100) (CY 2005=100) (CY 2005=100) (CY 2005=100)
1983 57.7 57.7 53.8 101.7 71.1 51.0

1984 59.9 59.8 57.6 103.0 72.8 53.2
1985 61.8 61.6 58.7 100.4 74.3 55.1
1986 63.2 63.0 58.6 95.4 75.9 56.1
1987 64.9 64.8 59.2 91.3 77.2 58.2
1988 67.0 67.0 60.3 90.5 79.0 60.6
1989 69.6 69.6 61.9 91.4 82.2 63.5
1990 72.2 72.3 63.9 93.1 85.0 66.9
1991 74.9 74.8 66.2 95.0 87.6 69.7
1992 76.9 76.6 68.5 95.8 89.3 71.8
1993 78.5 78.3 69.7 98.1 90.9 74.0
1994 80.2 79.9 71.4 101.0 92.7 75.9
1995 81.9 81.6 73.2 103.2 94.5 78.0
1996 83.5 83.2 75.4 103.5 95.6 80.3
1997 85.0 84.6 76.5 100.8 95.6 82.2
1998 86.1 85.6 77.3 99.6 95.2 83.5
1999 87.2 86.8 79.2 100.9 95.2 85.3
2000 89.0 88.7 81.8 100.4 96.0 88.2
2001 91.1 90.7 83.5 98.5 96.6 90.7
2002 92.6 92.2 86.6 97.1 96.2 92.1
2003 94.5 94.1 90.7 97.3 96.5 94.2
2004 96.9 96.8 94.9 98.6 97.8 96.7
2005 100.0 100.0 100.0 100.0 100.0 100.0
2006 103.4 103.2 104.4 101.4 101.6 103.2
2007 106.5 106.2 108.2 102.3 103.4 106.2
2008 108.9 108.6 112.2 104.5 106.4 110.2
2009 110.5 109.5 111.3 104.2 108.4 109.8
2010 111.5 111.0 114.0 105.2 108.8 111.7
2011 113.7 113.4 117.4 106.9 110.4 115.2
2012 115.8 115.4 119.5 107.2 112.6 117.6
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and Office of Management and Budget, The Budget
of the United States Government, FY13.
CPI. Consumer Price Index for All Urban Consumers.
CY. Calendar Year.
FY. Fiscal Year.
GDP. Gross Domestic Product.
PPI. Producer Price Index for Capital Equipment.
PRICE DEFLATORS FOR AEROSPACE INDUSTRY

Aerospace Deflators (2005=100)
AIA
Aerospace
Year Composite Aircraft Missiles
1983 81.3 82.5 73.7

1984 89.3 89.8 86.5
1985 91.6 91.7 91.1
1986 92.4 92.8 90.0
1987 91.3 91.5 90.1
1988 86.8 86.9 86.1
1989 84.9 84.5 87.5
1990 87.0 86.8 88.2
1991 89.8 89.6 91.5
1992 91.7 91.5 93.1
1993 93.6 92.9 98.3
1994 94.9 94.2 99.1
1995 95.1 95.0 96.0
1996 95.3 95.4 94.6
1997 94.7 94.8 94.4
1998 94.2 94.3 93.8
1999 94.4 94.5 93.9
2000 95.1 95.3 93.8
2001 95.6 95.9 93.8
2002 96.0 96.0 96.2
2003 97.5 97.6 96.9
2004 98.8 99.0 97.8
2005 100.0 100.0 100.0
2006 103.0 102.9 103.8
2007 102.3 101.9 105.0
2008 102.5 101.7 107.0
2009 102.9 102.1 107.6
2010 102.5 101.7 107.4
2011 102.8 101.8 108.5
2012 103.5 102.4 110.2
Source: Aerospace Industries Association (AIA), based on data from the Bureau of
Economic Analysis, National Income and Product Account Tables, 2013.
Appendix 297
GROSS DOMESTIC PRODUCT,

FEDERAL BUDGET, AND DEFENSE BUDGET
(Billions of Dollars)
Defense Outlays

Federal Budget Outlays as a Percent of:
Fiscal Total National Total
Year Year GDP Outlays Defense GDP Outlays
1983 $3,440.7 $808.4 $209.9 6.10% 25.97%

1984 3,844.4 851.8 227.4 5.92 26.70
1985 4,146.3 946.3 252.7 6.10 26.71
1986 4,403.9 990.4 273.4 6.21 27.60
1987 4,651.4 1,004.0 282.0 6.06 28.09
1988 5,008.5 1,064.4 290.4 5.80 27.28
1989 5,399.5 1,143.7 303.6 5.62 26.54
1990 5,734.5 1,253.0 299.3 5.22 23.89
a
1991 5,930.5 1,324.2 273.3 4.61 20.64
a
1992 6,242.0 1,381.5 298.3 4.78 21.60
a
1993 6,587.3 1,409.4 291.1 4.42 20.65
1994 6,976.6 1,461.8 281.6 4.04 19.27
1995 7,341.1 1,515.7 272.1 3.71 17.95
1996 7,718.3 1,560.5 265.7 3.44 17.03
1997 8,211.7 1,601.1 270.5 3.29 16.89
1998 8,663.0 1,652.5 268.2 3.10 16.23
1999 9,208.4 1,701.8 274.8 2.98 16.15
2000 9,821.0 1,789.0 294.4 3.00 16.45
2001 10,225.3 1,862.8 304.7 2.98 16.36
2002 10,543.9 2,010.9 348.5 3.30 17.33
2003 10,980.2 2,159.9 404.7 3.69 18.74
2004 11,676.0 2,292.8 455.8 3.90 19.88
2005 12,428.6 2,472.0 495.3 3.99 20.04
2006 13,206.5 2,655.1 521.8 3.95 19.65
2007 13,861.4 2,728.7 551.3 3.98 20.20
2008 14,334.4 2,982.5 616.1 4.30 20.66
2009 13,937.5 3,517.7 661.0 4.74 18.79
2010 14,359.7 3,456.2 693.6 4.83 20.07
2011 14,958.6 3,603.1 705.6 4.72 19.58
2012(E) 15,601.5 3,795.5 716.3 4.59 18.87
Notes: Totals may not equal sum of terms due to rounding. Previous years’ data may have been
revised to reflect updated and/or newly available information.
a. 1991-1993 reflects transfers from the Defense Cooperation Account funded by foreign
government and private cash contributions reducing total U.S.-funded military outlays.
E. Estimate.
Aircraft
U.S. AIRCRAFT SHIPMENTS: CIVIL

(Number of Aircraft)
Domestic Exports
Trans- Heli- General Trans- Heli- General

Year Total ports copters Aviation ports copters Aviation
1992 1,832 180 112 588 387 212 353

1993 1,630 130 83 615 278 175 349
1994 1,545 87 154 651 222 154 277
1995 1,625 119 82 762 137 210 315
1996 1,662 97 64 770 172 214 345
1997 2,269 122 87 1,100 252 259 449
1998 3,122 184 125 1,665 375 238 535
1999 3,485 279 180 1,942 341 181 562
2000 3,801 218 189 2,247 274 304 569
2001 3,573 273 106 2,126 254 309 505
2002 2,906 118 24 1,835 263 294 372
2003 2,935 121 118 1,801 160 399 336
2004 3,445 137 238 2,022 148 567 333
2005 4,094 130 242 2,300 160 705 557
2006 4,443 152 212 2,256 246 686 891
2007 4,729 153 108 2,137 288 901 1,142
2008 4,538 135 204 1,918 240 880 1,161
2009 2,636 154 D 853 327 D 732
2010 2,135 161 D 645 301 D 689
2011 2,365 117 D 872 360 D 581
Source: Aerospace Industries Association (AIA), based on company reports and data from the Bureau of the Census,
Department of Commerce, International Trade Administration, General Aviation Manufacturers Association,
and Helicopter Association International, 2012.
Appendix 299
U.S. AIRCRAFT SHIPMENTS: MILITARY

(Number of Aircraft)
Year Total U.S. Military Agencies

Exportsa
1987 1,210 725 485

1988 1,305 687 618
1989 1,261 614 647
1990 1,053 666 387
1991 911 556 355
1992 753 421 332
1993 954 437 517
1994 766 418 348
1995 816 354 462
1996 558 242 316
1997 511 151 360
1998 418 149 269
1999 357 133 224
2000 333 138 195
2001 347 196 151
2002 359 228 131
2003 383 234 149
2004 420 251 169
2005 587 324 263
2006 996 298 698
2007 1,062 467 595
2008 723 503 220
2009 868 617 251
2010 1,340 1,023 317
2011 941 731 210
Source: Aerospace Industries Association (AIA), based on data from the Department of
Defense: Air Force Aircraft Procurement, Vol I; Aircraft Procurement, Army,
Justification Book; Aircraft Procurement, Navy, Justification Book Volume 1, FY13,
and Economic Consulting Services, 2013.
a. Includes foreign military sales and military aircraft exported via commercial contracts,
directly from manufacturers to foreign governments.
CIVIL AIRCRAFT SHIPMENTS

Transport General
Year TOTAL Helicopters
Aircraft Aviation
NUMBER OF AIRCRAFT SHIPPED
2002 2,904 379 318 2,207

2003 2,935 281 517 2,137
2004 3,445 285 805 2,355
2005 4,094 290 947 2,857
2006 4,443 398 898 3,147
2007 4,729 441 1,009 3,279
2008 4,538 375 1,084 3,079
2009 2,636 481 570 1,585
2010 2,135 462 339 1,334
2011 2,377 477 435 1,465
2012 2,593 601 478 1,514
2013(E) 2,852 671 519 1,662
VALUE (millions of dollars)
2002 $35,078 $27,202 $157 $7,719

2003 28,180 21,380 366 6,434
2004 27,256 19,925 515 6,816
2005 30,848 21,365 816 8,667
2006 39,675 28,465 843 10,367
2007 46,657 33,386 1,330 11,941
2008 43,097 28,263 1,486 13,348
2009 44,105 34,051 972 9,082
2010 40,602 31,834 893 7,875
2011 45,582 36,171 1,145 8,266
2012 58,298 49,127 1,154 8,017
2013(E) 62,482 52,111 1,262 9,109
Source: Aerospace Industries Association (AIA), based on company reports, data from the General Aviation
Manufacturers Association (GAMA), Helicopter Association International (HAI) and Teal Group.
E. Estimate.
Appendix 301
CIVIL TRANSPORT AIRCRAFT SHIPMENTSa

2008 2009 2010 2011 2012
SHIPMENT TOTALS:
Number of Aircraft 375 481 462 477 601
Value (Millions of Dollars) $28,263 $34,051 $31,834 $36,171 $49,127
Boeing (U.S. & Foreign):
B-737 290 372 376 372 415

B-747 14 8 - 9 31
B-767 10 13 12 20 26
B-777 61 88 74 73 83
B-787 - - - 3 46
Source: The Boeing Company, 2013.

a. U.S.-manufactured fixed-wing aircraft over 33,000 pounds.
U.S. CIVIL TRANSPORT AIRCRAFT BACKLOG
2008 2009 2010 2011 2012

TOTAL BACKLOG:
Number of Aircraft …………………… 3,714 3,375 3,443 3,771 4,373
Value (in millions) ……………………$278,575 $250,476 $255,591 $293,303 $317,287
Boeing:
B-737 ......................................... 2,270 2,076 2,186 2,365 3,074
B-747 ...................................... 114 108 107 97 67
B-767 ..................................... 70 59 50 72 68
B-777 ..................................... 350 281 253 380 365
B-787 ........................................ 910 851 847 857 799
Foreign Order Backlog
Percent of Total Backlog:
Number of Aircraft ……………. 77.8% 79.5% 77.8% 67.0% 65.3%
Value ………………………………… 81.1% 82.3% 81.2% 74.4% 72.5%
Number of Aircraft ……………………. 2,891 2,682 2,679 2,528 2,856

Value (in millions) ………………………
$225,793 $206,167 $207,639 $218,112 $229,924
Boeing:
B-737 ......................................... 1,703 1,605 1,643 1,394 1,836
B-747 ...................................... 97 94 95 89 63
B-767 ..................................... 42 34 30 26 10
B-777 ..................................... 271 230 221 323 316
B-787 ........................................ 778 719 690 696 631
Domestic Order Backlog
Percent of Total Backlog:
Number of Aircraft ……………. 22.2% 20.5% 22.2% 33.0% 34.7%
Value ………………………………… 18.9% 17.7% 18.8% 25.6% 27.5%
Number of Aircraft …………………… 823 693 764 1,243 1,517

Value (in millions) ……………………. $52,782 $44,310 $47,952 $75,191 $87,363
Boeing:
B-737 ......................................... 567 471 543 971 1,238
B-747 ...................................... 17 14 12 8 4
B-767 ..................................... 28 25 20 46 58
B-777 ..................................... 79 51 32 57 49
B-787 ........................................ 132 132 157 161 168
Source: Aerospace Industries Association (AIA), based on Boeing reports.

Appendix 303
GENERAL AVIATION AIRCRAFT SHIPMENTS

BY SELECTED AIRCRAFT MANUFACTURERS
2008 2009 2010 2011 2012
NUMBER OF AIRCRAFT SHIPPED:

TOTAL 3,079 1,585 1,334 1,465 1,514
Single-Engine, Piston 1,700 770 679 639 645

Multi-Engine, Piston 91 32 67 67 63
Turboprop 333 269 224 395 459
Turbojet 955 514 364 364 357
VALUE OF SHIPMENTS:
TOTAL (Millions of Dollars) $13,348 $9,082 $7,875 $8,266 $8,017
Piston $836 $389 $368 $368 $374

Turboprop 1,172 872 724 831 867
Turbojet 11,340 7,821 6,782 7,068 6,776
Shipments by Selected Manufacturers:
Air Tractor - - - 130 168

American Champion 54 26 37 29 18
Boeing Business Jet 6 6 12 8 12
Cessna Aircraft Company 1,300 741 512 689 571
Cirrus Aircraft 549 268 264 255 253
CubCrafters - - - 47 58
Gulfstream Aerospace Corporation 156 94 99 99 94
Hawker Beechcraft Corporation 435 273 214 198 153
Liberty Aerospace 33 13 14 3 -
Maule Air Incorporated 28 7 4 4 9
Mooney Aerospace Group, Ltd. 65 19 2 - -
Piper Aircraft, Inc. 268 90 160 136 158
Quest Aircraft Company 7 24 14 13 15
Thrush Aircraft - - - 35 51
Source: General Aviation Manufacturers Association, General Aviation Statistical Datebook and Industry Outlook, 2012.
Notes: Totals may not equal sum of terms due to rounding. Previous years’ data may have been revised to reflect
updated and/or newly available information.
MILITARY AIRCRAFT PROCUREMENT:

BY AGENCY AND SELECTED MODELSa
(Millions of Dollars)b
2011 2012 2013(E)

Agency and Model No. Cost No. Cost No. Cost
AIR FORCE
C-5 Galaxy - $949.5 - $1,035.1 - $1,127.6

C–130J Hercules 17 1,261.3 11 1,280.2 7 759.4
F-22 Raptor - 592.5 - 336.2 - 283.9
F–35 Joint Strike Fighter 25 4,302.2 18 3,518.6 19 3,565.7
HH-60M Pave Hawk 16 521.3 4 144.0 - 60.6
MQ–1 Predator - 20.1 - 161.2 - 30.9
MQ–9 Reaper 48 853.6 48 944.2 24 885.4
RQ–4 Global Hawk 4 777.2 3 484.6 - 95.9
RQ–11 Raven - 9.4 - - - -
V–22 Osprey 6 474.5 5 359.9 4 309.2
ARMY
AH–64 Apache Longbow Block 3 16 $491.0 19 $665.6 50 $1,055.9

CH–47 Chinook 49 1,419.8 47 1,360.3 44 1,390.7
LUH Light Utility Helicopter 50 303.5 39 250.4 34 272.0
MQ-1C Gray Eagle 39 554.1 43 697.8 19 749.6
RQ–7 Shadow - 549.0 - 165.1 - 104.3
RQ–11 Raven 206 37.5 900 86.1 234 25.8
UH–60 Black Hawk 99 1,788.9 72 1,697.6 59 1,222.2
NAVY / USMC
E–2D Advanced Hawkeye 5 $1,105.0 5 $1,044.8 5 $984.7

EA–18G Growler 12 999.1 12 1,022.7 12 1,027.4
F/A–18E/F Super Hornet 31 2,171.8 28 2,303.4 26 2,065.4
F–35 Joint Strike Fighter 10 2,691.1 13 2,816.3 10 2,583.7
H–1 Huey/Super Cobra 31 881.2 26 734.2 28 820.4
JPATS T–6B Texan II - 26.1 36 256.9 33 278.9
KC–130J Hercules - - 1 87.0 - 26.0
MH–60R Multi-Mission Helicopter 24 1,021.1 24 985.0 19 842.8
MH–60S Fleet Combat Support Helicopter 18 531.7 18 474.7 18 454.1
P–8A Poseidon 7 1,903.1 11 2,253.7 13 2,746.4
RQ–7 Shadow - 26.0 - - - 49.3
RQ–11 Raven 4 28.3 - 2.1 - 2.3
V–22 Osprey 30 2,190.9 30 2,265.9 17 1,457.3
Source: Aerospace Industries Association (AIA), based on data from the Department of Defense, Program Acquisition Costs by
Weapon System, FY12 and FY13.
a. Total Obligational Authority for procurement, including modifications and remanufactures, and excluding spares and RDT&E.
b. Includes Base and Overseas Contingency Operations budget requests.
E. Estimate.
Appendix 305
ACQUISITION COST OF MEDIUM-SIZED AND LARGE UNMANNED

AIRCRAFT SYSTEMS UNDER THE DEPARTMENT OF DEFENSE’S 2012 PLAN
2011 2012 2013 2014 2015
AIR FORCE
MQ-1 Predator $30 $10 $10 $10 *

MQ-9 Reaper 1,700 1,550 1,740 1,440 $1,350
RQ-4 Global Hawk 1,200 1,060 890 790 810
ARMY
MQ-1 Gray Eagle $870 $1,060 $1,040 $740 $220

RQ-7 Shadow 610 250 270 200 300
NAVY / USMC
MQ-8 Fire Scout $60 $70 $60 $80 $80

RQ-4 Broad Area Maritime Surveillance 530 560 760 880 900
RQ-7 Shadow 90 10 10 10 *
All services $5,090 $4,570 $4,780 $4,150 $3,660

Source: Gertler, J., Congressional Research Service, U.S. Unmanned Aerial Systems, January 2012.
* The Department of Defense has no plans to acquire or modify the specified system in these years.
DEPARTMENT OF HOMELAND SECURITY:

BUDGET AUTHORITY FOR AIRCRAFT ACQUISITION
AND MODIFICATION, SELECTED PROGRAMS
(Thousands of Dollars)
FY 2011 FY 2012 FY 2013

Enacted Enacted Requested
Airframe replacement (CGNR 6017) - $18,300 -
HC-144A Maritime Patrol Aircraft (MPA) $39,920 129,500 $43,000
HH-60 Black Hawk Conversions 31,936 56,100 56,100
HH-65 Conversion / Sustainment Projects - 24,000 31,500
HC-130H Long Range Surveillance Aircraft 28,942 62,000 -
P-3 SLEP 47,700 42,000 28,100
New AS-350 Helicopters 38,400 36,800 -
MQ-9 Predator/Guardian UAS 18,000 4,000 -
KA-350CER Multi-Role Enforcement Aircraft - 22,500 20,500
Source: Department of Homeland Security Annual Performance Report, Fiscal Years 2011-2013.
UAS. Unmanned Aircraft System.
Appendix 307
DEPARTMENT OF DEFENSE OUTLAYS

FOR AIRCRAFT PROCUREMENT
BY AGENCY
Year Total Air Force Army Navy
1990 $26,142 $14,303 $2,808 $9,031

1991 25,689 13,794 2,840 9,055
1992 23,581 13,154 2,520 7,907
1993 20,359 11,438 1,675 7,246
1994 18,840 10,303 1,711 6,826
1995 16,125 8,891 1,549 5,685
1996 14,331 7,862 1,435 5,034
1997 14,663 7,799 1,542 5,322
1998 15,473 8,236 1,392 5,845
1999 16,484 8,928 1,532 6,024
2000 17,991 8,979 1,268 7,744
2001 17,979 8,217 1,358 8,404
2002 20,546 10,424 1,633 8,489
2003 21,280 11,303 1,781 8,196
2004 22,898 12,003 2,042 8,853
2005 23,284 11,999 2,491 8,794
2006 23,176 11,783 2,618 8,775
2007 23,349 10,858 3,532 8,959
2008 25,964 11,448 4,250 10,266
2009 30,575 13,503 5,076 11,996
2010 33,745 13,736 5,672 14,337
2011 35,513 13,089 6,138 16,286
2012 42,398 17,701 6,403 18,294
2013(E) 41,243 15,824 6,818 18,601
2014(E) 33,735 12,808 5,709 15,218
Source: Office of Management and Budget, Budget of the United States Government, FY13.
E. Estimate.
MILITARY AIRCRAFT ACCEPTED BY U.S. MILITARY AGENCIES

Bomber/Patrol/ Fighter/ Transport/

Year Total Command/Control Attack Tanker Trainer Helicoptersa UAS
NUMBER OF AIRCRAFT
1997 151 4 34 16 26 71 -
1998 149 8 26 30 33 52 -
1999 133 6 46 45 12 24 -
2000 138 2 51 30 33 22 -
2001 196 3 58 36 52 38 9
2002 228 4 75 30 55 46 18
2003 234 3 57 33 64 61 16
2004 251 5 67 44 75 38 22
2005 324 4 66 57 72 104 21
2006 298 - 69 45 76 81 27
2007 467 4 66 51 88 230 28
2008 503 1 35 38 96 301 32
2009 617 3 60 53 131 312 58
2010 1,023 2 65 44 34 237 641
2011 731 2 49 49 57 226 348
FLYAWAY VALUE (Millions of Dollars)
1997 6,277 1,921 1,204 2,248 270 635 -

1998 9,296 4,699 846 2,890 319 542 -
1999 7,211 415 2,733 3,588 219 256 -
2000 7,424 140 3,018 3,651 356 259 -
2001 7,537 218 3,480 2,962 376 440 61
2002 9,020 295 3,707 3,950 407 456 205
2003 9,736 204 3,960 4,447 371 626 128
2004 12,755 346 6,013 5,067 523 575 231
2005 14,666 281 6,901 5,863 518 1,062 41
2006 13,966 - 7,005 5,004 623 1,108 226
2007 13,079 385 4,798 4,329 341 2,803 423
2008 10,809 31 2,996 3,993 168 3,290 331
2009 18,485 292 6,148 6,723 396 4,384 542
2010 15,909 174 6,526 4,747 218 3,740 503
2011 13,001 369 4,448 3,629 436 3,899 220
Source: Department of Defense: Air Force Aircraft Procurement, Vol 1, FY13; Aircraft Procurement, Army, Justification Book, FY13;
Aircraft Procurement, Navy, Justification Book Volume 1, FY13.
Note: Data represent new U.S.-manufactured aircraft, excluding gliders and targets. Values include spares, spare parts, and
support equipment that are procured with the aircraft.
UAS: Unmanned Aircraft System.
a. Beginning in 2005, values for helicopters include remanufactured aircraft.
Appendix 309
MILITARY AIRCRAFT ACCEPTANCES BY UNITED STATES AIR FORCEa

(Costs in Millions of Dollars)
Number of Aircraft Flyaway Costb Weapon System Costc
2010 2011 2010 2011 2010 2011
Total 57 49 $6,302 $3,705 $8,173 $4,594
Combat Aircraft:
Total 20 14 $3,051 $2,082 $3,761 $2,516
F-22 Raptor 20 14 3,051 2,082 3,761 2,516
Airlift/Transport Aircraft:
Total 14 17 $2,761 $1,411 $3,760 $1,768
C-17A Globemaster 14 2 2,761 444 3,760 523
C-130J Hercules - 9 - 550 - 701
CV-22 Osprey - 6 - 416 - 544
UAS:
Total 23 18 $490 $213 $652 $310
RQ-4 Global Hawk 4 - 277 - 346 -
MQ-9 Reaper 19 18 212 213 306 310
Source: Aerospace Industries Association (AIA), based on data from the Department of Defense, Air Force Aircraft Procurement
Vol I, FY13.
a. Air Force acceptances for own use; excludes FMS/MAP shipments.
b. Flyaway Cost includes airframe, engines, electronics, communications, armament, other installed equipment, and non-
recurring costs associated with the manufacture of aircraft.
c. Weapon System Cost includes flyaway costs, initial spares, peculiar ground equipment, training equipment, and
technical data.
MILITARY AIRCRAFT ACCEPTANCES BY UNITED STATES ARMYa

2010 2011 2010 2011 2010 2011
Total 787 499 $1,632 $2,211 $3,285 $4,365
Helicopters:
Total 169 169 $1,619 $2,205 $3,211 $3,993
d
CH-47 Chinook 23 37 345 673 727 1,279
UH-60 Black Hawk 58 80 711 1,113 1,061 1,504
d
AH-64 Apache Longbow Block 3 33 36 273 333 1,092 1,112
LUH Light Utility Helicopter 55 16 290 86 330 98
UAS:
Total 618 330 $13 $7 $74 $372
MQ-1 Gray Eagle - 18 - - - 342
RQ-11 Raven 618 312 13 7 74 30
Source: Aerospace Industries Association (AIA), based on data from the Department of Defense, Aircraft Procurement, Army
Justification Book, FY13.
a. Army acceptances for own use; excludes FMS/MAP shipments.
b. Flyaway Cost includes airframes, engines, electronics, communications, armament and other installed equipment.
c. Weapon System Cost includes flyaway cost, initial spares, ground equipment, training equipment and other support items.
d. Includes remanufacured aircraft.
Appendix 311
a
MILITARY AIRCRAFT ACCEPTANCES BY UNITED STATES NAVY
2010 2011 2010 2011 2010 2011
Total 179 183 $7,974 $7,083 $8,624 $8,408
Patrol:
Total 2 2 $174 $369 $198 $433
E-2D Advanced Hawkeye 2 2 174 369 198 433
Combat:
Total 45 35 $3,475 $2,366 $3,438 $2,919
F/A-18 Super Hornet 23 17 1,908 1,137 1,649 1,361
E/A-18G Growler 22 18 1,567 1,228 1,789 1,558
Transports/Tankers:
Total 30 32 $1,986 $2,218 $2,222 $2,535
C-40A 1 - 74 - 74 -
KC-130J Hercules 6 4 378 278 419 349
V-22 Osprey 23 28 1,535 1,940 1,730 2,186
Trainers:
Total 34 57 $218 $436 $243 $482
T-6 JPATS Texan II 34 57 218 436 243 482
Helicopters:
Total 68 57 $2,121 $1,694 $2,524 $2,039
MH-60R Multi-Mission Helicopter 38 31 1,342 1,097 1,603 1,327
MH-60S Fleet Combat Support Helicopter 17 9 458 216 520 234
UH-1Y/AH-1Z Huey/Super Cobra 13 17 321 382 401 479
Source: Aerospace Industries Association (AIA), based on data from the Department of Defense, Aircraft Procurement, Navy
Justification Book Volume 1, FY13.
a. Navy acceptances for own use; excludes FMS shipments.
b. Flyaway Cost includes airframe, engines, electronics, communications, armament, other installed equipment, non-recurring
costs, and ancillary equipment.
c. Weapons System Cost (Investment Cost) includes flyaway cost, initial spares, ground equipment, training equipment, and
other support items.
Missiles

FOR MISSILE PROCUREMENT
BY AGENCY
Year Total Air Force Army Navy
1990 $14,851 $7,951 $2,453 $4,446

1991 14,400 6,906 2,540 4,954
1992 13,504 6,409 2,401 4,694
1993 11,404 5,424 2,187 3,794
1994 8,934 4,312 1,384 3,238
1995 7,513 3,845 974 2,694
1996 6,199 3,235 919 2,045
1997 5,225 2,743 936 1,546
1998 4,907 2,543 964 1,400
1999 4,080 2,299 783 998
2000 4,520 2,243 926 1,351
2001 5,821 2,982 1,248 1,591
2002 5,702 2,719 1,256 1,727
2003 5,826 2,802 1,273 1,751
2004 7,632 4,040 1,295 2,297
2005 7,478 3,733 1,373 2,372
2006 8,202 4,074 1,594 2,534
2007 8,208 4,182 1,316 2,710
2008 8,545 4,082 1,468 2,995
2009 9,721 4,338 2,057 3,326
2010 9,894 4,412 2,034 3,448
2011 9,847 4,410 1,994 3,443
2012 13,070 7,427 1,835 3,808
2013(E) 11,109 5,747 1,694 3,668
2014(E) 10,506 5,653 1,415 3,438
Source: Office of Management and Budget, The Budget of the United States Government, FY13 .
E. Estimate.
Appendix 313
a
MISSILE PROGRAM PROCUREMENT
BY AGENCY AND SELECTED MODELS
2011 2012 2013(E)

b b
Base and OCO Base and OCO Base and OCOb
No. Cost No. Cost No. Cost
AIR FORCE
AGM-65D Maverick - $15.3 - $0.3 - $0.3

AGM-88A Harm - 4.1 - 25.6 - 23.2
Air Launch Cruise Missile (ALCM) - 10.7 - 14.9 - 13.6
AMRAAM 246 346.4 138 202.2 113 229.6
JASSM 171 168.2 142 236.2 157 240.4
MM III Modifications - 132.3 - 125.7 - 54.8
Predator Hellfire Missile 938 90.6 678 75.8 717 82.0
Sidewinder (AIM-9X) 178 64.2 125 88.8 164 88.0
Small Diameter Bomb / Mods 2,785 119.2 100 19.8 144 47.0
Missile Replacement Eq-Ballistic - 59.8 - 67.7 - 56.9
Space Programs (Missile Proc) 5 3,065.1 10 4,114.2 8 3,378.8
Special Programs (Missile Proc) - 246.2 - 325.1 - 138.9
Classified Programs - 805.1 - 769.0 - 1,097.5
ARMY
Guided MLRS Rocket (GMLRS) 2,592 $264.5 3,204 $333.2 1,794 $239.2
Hellfire Systems / Mods 1,473 222.2 907 109.0 161 30.5
HIMARS / Mods 44 242.5 - 43.3 - 18.1
Javelin (Aaws-M) 715 163.0 710 160.8 400 81.1
MLRS RRRR / Mods 2,149 24.0 2,370 26.4 2,430 21.2
MSE Missile - 0.0 - 75.0 - 12.9
Patriot Systems / Mods 78 685.3 88 729.2 84 846.2
Surface-Launched AMRAAM - 2.4 - 0.0 - 0.0
TOW 2 / Mods - 190.8 802 92.1 1,403 84.6
NAVY
AMRAAM 101 $144.7 67 $105.1 67 $102.7

ESSM 33 45.3 35 48.5 37 58.2
Harm Mods 44 51.9 72 71.6 100 86.7
Hellfire 559 127.3 426 36.7 1,210 91.5
JSOW 225 128.9 246 131.7 280 127.6
Ram 90 99.6 61 66.2 62 66.8
SOPGM - 0.0 150 20.0 50 6.5
Sidewinder 64 49.1 68 42.2 150 80.2
Standard Missile / Mods 67 286.8 89 356.9 94 399.5
Tomahawk 417 596.7 196 297.6 196 309.0
Trident II Mods 24 1,100.4 24 1,306.1 - 1,224.7
Source: Department of Defense, Procurement Programs (P-1), FY13.

a. Total Obligational Authority, excluding initial spares and RDT&E.
E. Estimate.
MISSILE PROGRAMS:
a
RESEARCH, DEVELOPMENT, TEST, AND EVALUATION
2011 2012 2013(E)
Base and Base and Base and

OCOb OCOb OCOb
AIR FORCE
Advanced Medium Range Air-to-Air Missile (AMRAAM) $60.8 $77.8 $87.0

Air-Launched Cruise Missile (ALCM) 3.5 0.8 0.4
ICBM Fuze Modernization - - 73.5
Intercontinental Ballistic Missile - Dem/Val 67.2 69.4 71.2
Intercontinental Ballistic Missile - EMD 66.3 148.3 135.4
Joint Air-to-Surface Standoff Missile (JASSM) 19.3 5.8 8.0
Joint Dual Role Air Dominance Missile 9.5 29.8 -
MQ-1 Predator A UAS 42.8 11.6 9.1
Small Diameter Bomb (SDB) - EMD 100.0 132.9 143.0
Tactical AIM Missiles 5.8 8.0 8.2
ARMY
JAVELIN - $9.9 $5.0

Joint Air-to-Ground Missile (JAGM) $71.8 126.9 10.0
Missile and Rocket Advanced Technology 76.3 90.5 71.1
Missile Technology 48.1 67.1 49.4
Missile/Air Defense Product Improvement Program 23.4 53.0 20.7
PAC-3/MSE Missile 121.5 88.9 69.0
Patriot Product Improvement - - 110.0
Patriot/MEADS Combined Aggregate Program (CAP) 450.6 389.6 400.9
SLAMRAAM 18.4 1.5 -
NAVY
Advanced Medium Range Air-to-Air Missile (AMRAAM) $2.6 $2.9 $2.9

HARM Improvement 73.2 11.1 11.5
Joint Air-to-Ground Missile (JAGM) 80.9 108.4 -
Small Diameter Bomb (SDB) 15.7 29.6 31.1
SSN-688 and Trident Modernization 100.7 90.2 82.6
SSN-688 and Trident Modernization - MIP 1.4 - -
Standard Missile Improvements 93.4 46.7 63.9
Tactical AIM Missiles 0.9 8.8 21.1
MISSILE DEFENSE AGENCY
Ballistic Missile Defense Joint Warfighter Support $55.4 $41.2 $55.6

Ballistic Missile Defense Midcourse Defense Segment 1,245.5 1,159.5 903.2
Ballistic Missile Defense Terminal Defense Segment 420.8 290.1 316.9
Next Generation Aegis Missile - 13.4 224.1
Source: Department of Defense Budget, RDT&E Programs (R-1), FY13.

UAS. Unmanned Aircraft System.
a. Total Obligational Authority.
E. Estimate.
Appendix 315
MISSILE DEFENSE AGENCY:

FUNDING BY APPROPRIATION AND PROGRAM ELEMENT
Category and Title 2010 2011 2012 2013(E) 2014(E)

Aegis Ashore EPAA Phase II - - - $157.90 -
Aegis Ashore EPAA Phase III - - - - -
Clear AFS UEWR Upgrade - - - - $14.50
Fort Drum IDT - - - 25.90 -
Planning & Design/Minor - - $8.37 4.55 9.81
Von Braun Complex Phase IV - - 58.80 - -
MILCON Total - - $67.17 $188.35 $24.31

THAAD $419.00 $858.90 $709.15 $460.73 $565.94
Aegis BMD 225.63 94.10 565.39 389.63 767.03
BMDS AN/TPY-2 Radars - - 380.20 227.42 -
Aegis Ashore Phase III - - - - 86.40
Procurement Total $644.63 $94.10 $1,654.74 $1,077.78 $1,419.37

THAAD - - $50.41 $55.68 $77.93
Aegis BMD - - - 12.16 7.46
BMDS Radars - - 151.94 192.13 212.16
O&M Total - - $202.34 $259.98 $297.55

BMD Technology $189.23 $132.20 $74.92 $79.98 $81.39
Special Programs - - 61.37 36.69 39.74
BMD Terminal Defense 715.73 436.50 290.08 316.93 313.21
BMD Midcourse Defense 1,027.37 1,346.20 1,159.46 903.17 914.60
BMD Sensors 621.02 454.90 222.08 347.01 327.34
BMD Test & Targets - - 85.57 - -
BMD Enabling Programs 358.75 402.80 415.05 362.71 339.20
Special Programs - MDA 269.89 290.67 296.15 272.39 321.45
BMD Aegis 1435.72 1,467.30 988.93 992.41 960.87
STSS 161.61 112.70 96.23 51.31 45.36
BMDS Space Program 12.49 10.90 7.94 6.91 6.58
BMD C2BMC 334.73 342.60 363.64 366.55 376.12
BMD Joint Warfighter 61.10 68.70 41.17 55.55 53.14
Directed Energy Research - 98.70 49.94 46.94 47.87
SM-3 BLK IIB - - 13.44 224.08 295.25
MDIOC 86.48 86.20 69.25 63.04 54.30
Regarding Trench 6.13 7.50 15.78 11.37 10.37
Sea Based X-Band Radar 167.15 153.10 176.83 9.73 9.73
Israeli Cooperative 201.32 121.70 235.70 99.84 95.78
BMD Test 394.69 559.13 487.70 454.40 420.36
BMD Targets 428.65 554.29 454.36 435.75 475.18
Land-Based SM-3 - 281.40 306.19 276.34 127.24
Aegis SM-3 Blk IIA 255.99 318.80 473.84 420.63 273.93
Precision Tracking Space System - 67.00 80.72 297.38 267.51
Advanced Remote Sensor Technology - - - 58.74 35.16
Management Headquarters 52.40 29.80 28.91 34.86 25.47
RDT&E Total $6,780.46 $7,343.10 $6,495.23 $6,224.69 $5,917.10

President's Budget Controls 2013 - - $8,419.48 $7,750.79 $7,658.33
Source: Missile Defense Agency. Fiscal Year 2012 and 2013 Budget Outline.
E. Estimate.
Space
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

BUDGET AUTHORITY
Research Space Flight Research and

and Control and Construction Program
Year Total Development Communications of Facilities Managementa
1991 $14,005 $6,024 $5,271 $498 $2,212

1992 14,301 6,848 5,352 525 1,576
1993 14,310 7,074 5,059 526 1,652
1994 14,570 7,534 4,835 493 1,708
Science, Human
Aeronautics, & Space Mission
Year Total Technology Flight Othera Support
1995b $13,854 $5,936 $5,515 ($130) $2,533

1996 13,886 5,929 5,457 17 2,483
1997 13,711 5,590 5,540 19 2,562
1998 13,649 5,690 5,560 19 2,380
1999 13,655 5,654 5,480 21 2,500
2000 13,602 5,582 5,488 21 2,511
2001 14,361 6,235 5,496 28 2,602
2002c 14,893 8,095 6,773 25 -
2003 15,391 9,215 6,149 27 -
Exploration,
Science, & Space Mission
Year Total Aeronautics Operations Othera Support
2004b $15,342 $7,873 $7,478 ($9) -

2005 16,187 7,891 8,275 21 -
2006 16,570 9,721 6,905 (56) -
2007 16,275 10,086 6,166 23 -
2008 17,219 10,606 6,574 39 -
2009 18,777 9,458 5,765 3,554 -
2010 18,719 8,772 6,142 3,805 -
2011 18,888 9,838 5,321 3,729 -
2012 17,751 9,930 4,187 3,635 -
2013(E) 17,693 10,095 4,013 3,585 -
a. Includes trust funds, Office of the Inspector General, National Space Grant Program, and GSA building
delegation.
b. Year features major budget account restructuring.
c. Mission Support, as a separate category, discontinued; funds merged into other categories.
E. Estimate.
Appendix 317
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION OUTLAYS

Research Space Flight Research

and Control and Construction and Program
Year Total Development Communicationsa of Facilities Managementb
c
1996 $1,022 $510 $241 $265 $6
1997c 317 101 92 122 2
1998c 138 40 34 64 -
1999c 47 18 2 27 -
2000c 31 18 1 12 -
Science, Human
Aeronautics, & Space
Year Total Technology Flight Otherb Mission Support
c
1996 $12,858 $5,017 $5,452 $16 $2,373
1997c 14,043 5,891 5,656 19 2,477
1998c 14,068 6,015 5,551 19 2,483
1999c 13,617 5,785 5,417 20 2,395
2000c 13,411 5,477 5,497 21 2,416
2001d 14,199 5,752 5,829 32 2,586
2002f 14,430 7,532 6,337 27 534
2003f 14,552 8,358 6,034 25 135
2003f, g 5,826 3,944 1,842 - 40
2003f, g 884 667 198 - 19
Exploration, Office of
Science, & Space Inspector
Year Total Aeronautics Operations General Otherh
2004g $15,152 $4,115 $5,218 $32 $5,787

2005g 15,602 6,957 7,743 28 874
2006 15,125 7,853 7,117 33 122
2007 15,861 9,303 6,375 32 151
2008 17,833 11,283 6,474 33 43
2009 19,168 4,871 6,721 31 7,545
2010 18,906 8,829 5,800 34 4,243
2011 17,618 8,882 5,046 39 3,651
2012 17,190 9,200 4,471 37 3,482
2013(E) 17,797 9,825 4,259 39 3,674
a. Separate budget category beginning in 1984; funds formerly included under Research and Development.
b. Includes trust funds, Office of Inspector General, National Space Grant Program, and GSA building delegation.
c. 1995 featured major budget account restructuring; 1996–2000 outlays split between old and new account structure.
d. Continuing minimal outlays reported under old account structure included under Other beginning in 2001.
E. Estimate.
f. Mission Support, as a separate category, is being discontinued; funds merged into other categories.
g. 2004 featured another budget account restructuring; 2004-2005 outlays split between old and new account structure.
h. In FY 2004, NASA again restructured accounts. Outlays authorized under old accounts, but expended in later years
are shown here, along with a few miscellaneous programs and accounts.
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

BUDGET AUTHORITY BY MAJOR BUDGET ACCOUNT
FOR SELECTED PROGRAMS
2010 2011 2012 2013

Actual Actual Actual Request
TOTAL $18,725 $18,448 $17,770 $17,711
Space Applications: $5,270 $5,910 $6,217 $6,162

Science 4,498 4,920 5,074 4,911
Aeronautics 497 534 569 552
Space Technology 275 456 574 699
Exploration Capabilities: $3,626 $3,821 $3,713 $3,933

Exploration Systems Development 3,288 2,982 3,007 2,769
Commercial Spaceflight 39 607 406 830
Exploration Research and Development 299 232 300 334
Space Operations: $6,142 $5,146 $4,187 $4,013

Space Shuttle 3,101 1,593 556 71
International Space Station 2,313 2,714 2,830 3,008
Space and Flight Support (SFS) 728 840 801 935
Cross-Agency Support: $3,018 $2,956 $2,994 $2,848
Construction, Compliance and Restoration: $453 $433 $487 $619
Education: $180 $145 $136 $100
Inspector General: $36 $36 $38 $37
Source: NASA, FY12 Budget Overview and FY13 President's Budget Request Summary.
Appendix 319
SELECT SPACE PROGRAMS PROCUREMENT AND RDT&E
Fiscal Years 2011–2013a
2011 2012 2013(E)
Procure- Procure- Procure-

Agency and Program RDT&E ment RDT&E ment RDT&E ment
AIR FORCE
Advanced Extremely High Frequency Sat. $385.0 $256.9 $397.4 $551.5 $229.2 $557.2
Defense Meteorological Satellite Program - 86.4 - 100.0 - 89.0
Evolved Expendable Launch Vehicle (EELV) 53.8 1,144.5 14.5 1,701.7 8.0 1,679.9
Global Positioning System (GPS) 817.2 71.8 835.6 629.3 704.9 558.8
MILSATCOM 298.7 188.2 236.6 36.5 107.2 47.6
NPOESS 173.0 - 43.0 - - -
Nuclear Detonation Detection System (NUDENT) 71.3 5.9 82.0 4.9 65.0 5.6
Satellite Control Network 25.7 60.1 18.1 60.6 33.8 44.2
Space Based Infrared System (SBIRS) 523.8 963.6 621.6 374.5 448.6 501.4
Spacelift Range System 9.3 103.2 9.9 125.0 8.8 109.5
Wideband Global Satellite (WGS) 74.9 559.3 12.7 792.9 12.0 36.8
ARMY
NAVSTAR GPS - $95.5 - $26.4 - $27.4
NAVY
Mobile User Objective System (MUOS) $391.4 $503.1 $243.9 $238.2 $145.9 $21.5
Satellite Communications 410.0 $28.7 263.4 $25.5 188.5 49.3
Source: Department of Defense Budget, Program Acquisition Costs by Weapon System, Procurement Programs (P-1), and RDT&E Programs
(R-1), FY13.
Key: NPOESS = National Polar-orbiting Operational Environmental Satellite System.
a. The amounts listed for Procurement and RDT&E represent the combined value of the Base budget amounts and the amounts allocated
in the Overseas Contingency Operations budget request.
E. Estimate.
ORDERS AND BACKLOG OF COMMERCIALa GEOSYNCHRONOUS

SATELLITES BY MANUFACTURERb
2008 2009 2010 2011
ORDERS
Estimated Valuec (millions) $3,631 $5,725 $4,800 $2,863

Number of Satellites—TOTAL 19 39 28 21
Boeing Satellite Systems 1 4 6 -

CAST/CGWIC 1 3 2 3
EADS Astrium 2 7 3 5
Israel Aircraft Industries - - - -
Khrunichev - - - -
Lockheed Martin 2 1 1 1
MDA - 1 - -
Mitsubishi 1 - - 2
OHB Systems - 1 - -
Orbital Sciences 3 5 3 2
Reshetnev - 5 4 1
Space Systems Loral 6 8 6 6
Thales Alenia Space 3 4 3 1
BACKLOGd
Estimated Valuec (millions) $13,102 $13,673 $12,873 $15,236

Number of Satellites—TOTAL 66 82 82 86
Boeing Satellite Systems 4 6 9 9
CAST/CGWIC 1 4 5 8
EADS Astrium 11 17 15 15
Israel Aircraft Industries 1 1 1 1
Khrunichev 3 2 2 1
Lockheed Martin 3 3 3 3
MDA - 1 1 1
Mitsubishi 1 1 1 3
OHB Systems - 1 1 1
Orbital Sciences 11 11 10 8
Reshetnev 3 6 9 9
Space Systems Loral 20 21 18 22
Thales Alenia Space 8 8 7 5
Source: Futron Corporation, 2012.

a. Satellites primarily used for commercial service. For state-owned manufacturers, only includes export satellite orders.
b. Excludes canceled orders, orders on hold, lacking firm funding or business commitment, or having extended
construction delay. Satellite bus developer assigned spacecraft in cases of manufacturer partnerships.
c. Estimated using the best publicly available information; where not available, Futron estimates are used.
d. Includes satellites on order during year.
Appendix 321
ORDERS AND BACKLOG OF COMMERCIAL LAUNCH CONTRACTS

BY PROVIDER-COUNTRY
2008 2009 2010 2011

a, b
ORDERS
Total: 57 41 49 30
China 1 2 2 3
India - - - -
Japan 2 - - -
Russia 4 11 11 8
United States 31 15 20 3
Europe 13 13 14 14
Other multinationalc 6 - 2 2
BACKLOGa, b, d
Total: 134 144 148 178

China 16 15 19 22
India 4 4 5 5
Japan 4 6 6 6
Russia 50 53 55 63
United States 32 35 36 39
Europe 20 23 24 38
Other multinationalb 8 8 3 5
Source: Futron Corporation, 2012.

a. Announced orders and backlog is not equal to the number of launches due to multi-manifesting options.
b. Includes announced government payloads.
c. Sea Launch and Land Launch.
d. Based on historical launch rates.
Air Carriers, Traffic Statistics, and Fuel Costs

a
OPERATING REVENUES AND EXPENSES OF U.S. AIR CARRIERS
DOMESTIC AND INTERNATIONAL OPERATIONS
Total Domestic Operations International Operations
Operating Operating Operating

Operating Operating Profit Operating Operating Profit Operating Operating Profit
Year Revenues Expenses (or Loss) Revenues Expenses (or Loss) Revenues Expenses (or Loss)
1982 $36,066 $36,804 ($739) $28,728 $29,478 ($750) $6,435 $6,452 ($17)
1983 38,177 37,879 299 31,014 31,186 (171) 7,163 6,693 470
1984 43,369 41,297 2,072 35,394 33,812 1,582 7,975 7,485 490
1985 45,931 44,595 1,337 37,629 36,611 1,018 8,302 7,984 319
1986 49,622 48,442 1,223 41,001 39,984 1,060 8,621 8,458 163
1987 56,583 54,151 2,431 45,658 43,925 1,733 10,925 10,226 698
1988 63,589 60,142 3,446 50,187 47,739 2,448 13,402 12,403 998
1989 69,225 67,413 1,812 54,314 52,460 1,855 14,911 14,954 (43)
1990 75,984 77,898 (1,913) 57,994 58,983 (989) 17,990 18,914 (924)
1991 75,158 76,943 (1,785) 56,230 56,758 (528) 18,928 20,185 (1,257)
1992 78,140 80,585 (2,444) 57,654 58,801 (1,147) 20,486 21,784 (1,298)
1993 84,559 83,121 1,438 63,233 61,157 2,076 21,326 21,964 (637)
1994 88,313 85,600 2,713 65,949 63,758 2,191 22,364 21,842 522
1995 94,318 88,455 5,863 70,885 66,120 4,765 23,433 22,335 1,098
1996 101,937 95,728 6,209 76,891 71,573 5,317 25,047 24,155 892
1997 109,568 100,981 8,587 82,250 75,731 6,518 27,318 25,250 2,068
1998 113,465 104,137 9,328 86,494 78,389 8,105 26,971 25,749 1,223
1999 119,038 110,635 8,403 90,931 84,328 6,603 28,107 26,307 1,800
2000 130,299 123,314 6,985 98,896 93,579 5,317 31,403 29,736 1,668
2001 115,227 125,550 (10,323) 86,511 94,892 (8,380) 28,716 30,658 (1,943)
2002 106,702 115,260 (8,557) 79,220 86,697 (7,476) 27,482 28,563 (1,081)
2003 117,728 119,824 (2,096) 88,830 91,484 (2,654) 28,898 28,340 558
2004 134,296 135,778 (1,482) 100,811 104,353 (3,542) 33,486 31,425 2,061
2005 151,255 150,828 427 111,730 113,764 (2,034) 39,524 37,064 2,461
2006 164,913 157,400 7,513 120,330 116,188 4,142 44,583 41,212 3,371
2007 174,696 165,353 9,344 124,869 120,471 4,398 49,827 44,881 4,946
2008 185,081 188,422 (3,341) 128,722 132,319 (3,597) 56,359 56,103 256
2009 154,156 151,843 2,313 108,787 107,578 1,208 45,369 44,265 1,105
2010 173,476 163,025 10,452 117,872 111,897 5,975 55,604 51,128 4,476
2011 191,002 183,909 7,093 130,899 124,397 6,502 60,103 59,512 591
Source: Department of Transportation, Bureau of Transportation Statistics, Air Carrier Financial Statistics (Yellow Book), 2011.
a. Scheduled and non-scheduled service for all certificated route air carriers. Excludes supplemental air carriers, commuters, and air taxis.
Appendix 323
a
SOURCES OF OPERATING REVENUES OF U.S. AIR CARRIERS
Passenger Excess
Year Total Service Mail Freight Baggage Otherb
DOMESTIC OPERATIONS
1997 $82,250 $62,549 $1,087 $7,497 $99 $11,017

1998 86,494 64,847 1,423 7,711 105 12,408
1999 90,931 67,777 1,475 8,053 118 13,509
2000 98,896 74,744 1,688 8,804 123 13,537
2001 86,511 64,324 824 8,170 111 13,082
2002 79,220 57,871 431 8,148 132 12,638
2003 88,830 62,442 545 8,983 201 16,660
2004 100,811 67,284 443 10,691 219 22,173
2005 111,730 72,142 318 12,530 263 26,476
2006 120,330 77,092 405 13,514 341 28,979
2007 124,869 80,113 269 14,344 358 29,786
2008 128,722 80,900 308 14,281 902 32,330
2009 108,787 66,914 259 10,543 2,322 28,749
2010 117,872 71,750 234 11,430 2,949 31,509
2011 130,899 78,190 225 14,459 2,908 35,117
INTERNATIONAL OPERATIONS
1997 $27,318 $18,320 $275 $5,156 $56 $3,511

1998 26,971 17,667 285 5,278 50 3,692
1999 28,107 18,011 264 5,921 46 3,865
2000 31,403 20,419 283 6,566 47 4,089
2001 28,716 18,227 240 6,444 42 3,763
2002 27,482 17,105 228 7,127 48 2,975
2003 28,898 17,253 358 8,206 58 3,023
2004 33,486 20,788 257 8,851 67 3,522
2005 39,524 23,891 405 10,651 79 4,499
2006 44,583 26,502 528 11,810 100 5,641
2007 49,827 29,810 439 12,493 107 6,978
2008 56,359 33,959 492 13,761 247 7,900
2009 45,369 27,483 376 9,734 405 7,372
2010 55,604 31,047 403 12,458 452 11,244
2011 60,103 34,567 412 12,565 483 12,076
Note: Totals may not equal sum of terms due to rounding.
a. Scheduled service for all certificated route air carriers. Excludes supplemental air carriers, commuters, and air taxis.
b. Includes subsidy, reservation cancellation fees, miscellaneous operating revenues, non-scheduled revenue, and other
transport-related revenues.
OPERATING EXPENSES OF U.S. AIR CARRIERSa

Aircraft & Depreciation

Flying Passenger Traffic Promotions &
Year Total Operations Maintenance Service Servicing and Sales Amortization Otherb
DOMESTIC OPERATIONS
1997 $75,731 $22,156 $9,475 $5,854 $12,058 $10,780 $3,940 $11,469

1998 78,389 21,044 10,311 6,252 12,699 10,743 4,144 13,195
1999 84,328 22,820 11,161 6,763 13,796 10,760 4,657 14,372
2000 93,579 28,565 12,062 7,355 14,827 10,089 5,122 15,558
2001 94,892 27,908 12,113 7,219 15,390 8,949 6,230 17,081
2002 86,697 25,924 11,069 7,049 14,853 6,703 4,989 16,109
2003 91,484 28,339 10,369 6,499 15,245 6,299 5,028 19,704
2004 104,353 34,016 11,071 6,604 15,580 6,372 5,096 25,614
2005 113,764 39,805 11,466 6,317 15,671 6,369 5,038 29,099
2006 116,188 42,727 11,609 5,798 15,469 6,113 5,056 29,417
2007 120,471 44,507 12,395 5,909 16,193 6,145 5,190 30,133
2008 132,319 53,094 12,260 5,702 15,938 5,637 5,299 34,389
2009 107,578 35,848 11,478 5,778 15,206 5,358 5,273 28,637
2010 111,897 39,147 11,936 5,943 15,484 5,622 5,180 28,585
2011 124,397 47,058 12,771 6,101 16,073 5,852 5,222 31,320
1997 $25,250 $7,462 $2,899 $2,736 $3,823 $3,476 $1,281 $3,571

1998 25,749 7,158 2,955 2,920 3,978 3,374 1,438 3,926
1999 26,307 7,472 2,902 3,067 4,207 3,201 1,614 3,845
2000 29,736 9,504 3,093 3,211 4,565 3,282 1,751 4,329
2001 30,658 9,652 3,196 3,254 4,599 2,828 2,168 4,960
2002 28,563 9,202 3,125 3,090 4,573 2,233 1,923 4,417
2003 28,340 9,805 3,294 2,741 4,456 1,959 1,748 4,337
2004 31,425 11,579 3,438 2,911 4,961 2,225 1,799 4,512
2005 37,064 15,172 3,994 3,006 5,613 2,281 1,734 5,264
2006 41,212 17,066 4,287 2,960 5,852 2,305 1,875 6,867
2007 44,881 18,444 4,463 3,049 6,193 2,414 1,988 8,331
2008 56,103 25,935 4,540 3,295 6,706 2,872 2,308 10,447
2009 44,265 17,075 4,448 3,064 6,209 2,205 2,264 9,001
2010 51,128 20,453 5,035 3,359 7,159 2,676 2,449 9,996
2011 59,512 25,843 5,476 3,565 7,762 2,883 2,523 11,459
a. Scheduled and non-scheduled service for all certificated route air carriers. Excludes supplemental air carriers, commuters, and air taxis.
b. General and administrative, and other transport-related expenses.
Appendix 325
TOTAL ASSETS AND INVESTMENT IN EQUIPMENT BY U.S. AIR CARRIERS

Less: Equals:
Value of Value of Reserves for Net Value of Net Value as
Total Flight Ground Property, Depreciation Owned Operating a Percent of
Year Assets Equipment Equipment & Othera & Overhaul Property & Equipment Total Assets
1982 $31,525 $23,786 $5,424 $11,405 $17,804 56.5%

1983 35,213 26,588 6,191 12,910 19,868 56.4
1984 36,769 28,509 6,061 14,043 20,527 55.8
1985 40,978 30,402 6,772 15,467 21,707 53.0
1986 47,105 31,750 8,468 14,764 25,454 54.0
1987 51,436 33,177 9,223 15,580 26,820 52.1
1988 56,047 35,781 10,248 17,450 28,579 51.0
1989 62,454 38,812 11,903 19,018 31,697 50.8
1990 67,769 40,215 13,523 20,593 33,144 48.9
1991 70,332 42,897 14,285 22,009 35,173 50.0
1992 75,426 48,563 15,219 24,445 39,337 52.2
1993 82,399 51,513 15,438 24,949 42,003 51.0
1994 84,442 51,951 15,844 26,476 41,319 48.9
1995 89,782 56,018 16,804 29,056 43,766 48.7
1996 95,184 59,206 16,661 30,029 45,838 48.2
1997 105,226 66,523 17,643 32,789 51,377 48.8
1998 118,308 75,385 19,980 35,992 59,373 50.2
1999 133,711 86,269 21,826 39,060 69,035 51.6
2000 146,300 98,404 22,095 41,880 78,620 53.7
2001 158,516 103,508 23,092 42,666 83,934 52.9
2002 158,186 106,297 24,224 44,366 86,155 54.5
2003 166,899 109,429 23,451 44,577 88,303 52.9
2004 165,116 115,006 24,320 48,468 90,858 55.0
2005 167,830 115,582 25,987 51,620 89,950 53.6
2006 178,070 115,926 23,391 48,188 91,129 51.2
2007 207,447 112,833 21,332 38,913 95,252 45.9
2008 183,841 115,211 21,637 39,639 97,208 52.9
2009 186,296 117,291 24,304 43,732 97,863 52.5
2010 195,986 119,685 23,926 45,285 98,253 50.1
2011 193,799 122,696 24,742 48,322 99,115 51.1
a. Includes land and construction in progress.
TRAFFIC STATISTICS:
WORLD AIRLINE SCHEDULED SERVICEa
Ton-Miles Performed
Freight Passenger
Passengers Tons Miles Seat-Miles Passenger
Year Carried Carried Performed Available Load Factor Totalb Freight Mail
(Millions) (Billions) (Percent) (Billions)
1982 766 12.8 710 1,115 64% 94.84 21.60 2.65

1983 798 13.5 739 1,151 64 100.28 24.05 2.74
1984 848 14.8 794 1,226 65 109.05 27.17 2.95
1985 899 15.1 850 1,293 66 114.86 27.29 3.01
1986 960 16.2 902 1,389 65 122.47 29.58 3.11
1987 1,028 17.7 988 1,471 67 134.57 33.10 3.22
1988 1,082 19.0 1,060 1,568 68 145.29 36.48 3.31
1989 1,109 19.9 1,102 1,621 68 152.73 39.14 3.46
1990 1,165 20.3 1,177 1,740 68 161.12 40.27 3.65
1991 1,135 19.3 1,147 1,727 66 158.04 40.11 3.48
1992 1,146 19.5 1,199 1,821 66 165.86 42.90 3.51
1993 1,142 19.9 1,211 1,873 65 171.67 46.88 3.58
1994 1,233 22.6 1,305 1,969 66 187.29 52.89 3.71
1995 1,304 24.5 1,397 2,087 67 201.34 56.94 3.86
1996 1,391 25.6 1,511 2,215 68 217.24 61.10 3.97
1997 1,457 29.1 1,599 2,316 69 235.75 70.47 4.10
1998 1,471 29.2 1,633 2,385 68 238.77 69.74 3.95
1999 1,562 31.0 1,739 2,517 69 253.72 74.43 3.92
2000 1,672 33.5 1,887 2,663 71 276.69 80.88 4.14
2001 1,640 31.7 1,833 2,654 69 265.86 75.89 3.64
2002 1,665 36.2 1,880 2,639 71 280.43 86.78 2.89
2003 1,719 38.6 1,914 2,677 71 288.00 91.03 2.86
2004 1,918 42.3 2,184 2,979 73 324.28 100.68 2.90
2005 2,054 43.4 2,358 3,151 75 344.71 103.20 2.94
2006 2,169 46.1 2,506 3,309 76 366.24 110.01 2.87
2007 2,360 48.9 2,711 3,534 77 390.53 115.30 2.85
2008 2,395 47.3 2,765 3,647 76 396.98 114.19 3.17
2009 2,385 47.0 2,736 3,573 77 379.94 104.06 3.00
2010 2,593 55.9 2,954 3,796 78 424.56 124.63 3.15
2011 2,738 56.7 3,145 4,049 78 442.99 124.53 3.14
Source: International Civil Aviation Organization (ICAO), Annual Report of the Council, 2011.
a. Includes scheduled service traffic performed by international and domestic airlines of the 191 ICAO member states.
b. Passengers, baggage, freight, and mail.
Appendix 327
PASSENGER STATISTICS:
U.S. AIR CARRIER SCHEDULED SERVICE,
Revenue Average Revenue

Passenger Passenger Passenger Available Revenue
Enplanements Trip-Length Miles Seat Miles Passenger
Year (Thousands) (Miles) (Millions) (Millions) Load Factora
DOMESTIC OPERATIONS
1996 530,708 802 425,596 626,389 67.9%

1997 542,001 817 442,640 640,319 69.1
1998 559,653 812 454,430 649,362 70.0
1999 582,880 824 480,134 687,502 69.8
2000 610,601 833 508,403 714,454 71.2
2001 570,125 843 480,348 695,200 69.1

2002 560,107 850 476,004 676,949 70.3
2003 589,135 848 499,632 687,850 72.6
2004 640,698 862 551,937 741,677 74.4
2005 670,418 865 579,690 752,482 77.0
2006 671,796 871 585,391 740,909 79.0

2007 693,374 871 604,215 757,604 79.8
2008 664,714 873 580,468 729,073 79.6
2010 641,660 876 562,211 685,202 82.1
2011 649,253 883 573,095 692,748 82.7
1996 50,526 3,029 153,067 208,682 73.3%

1997 52,724 3,049 160,779 216,913 74.1
1998 53,232 3,074 163,656 224,728 72.8
1999 53,079 3,239 171,913 230,917 74.4
2000 55,549 3,319 184,354 242,496 76.0
2001 52,003 3,295 171,352 235,311 72.8

2002 52,769 3,129 165,098 215,606 76.6
2003 53,863 2,908 156,638 204,755 76.5
2004 62,222 2,921 181,743 229,788 79.1
2005 68,210 2,922 199,324 250,854 79.5
2006 72,445 2,918 211,405 264,625 79.9

2007 75,996 2,959 224,866 279,574 80.4
2008 76,735 3,010 230,939 291,032 79.4
2010 78,819 2,992 235,816 287,382 82.1
2011 80,750 2,988 241,244 299,904 80.4
Source: Department of Transportation, Bureau of Transportation Statistics, Air Carrier Traffic Statistics (Green Book), 2011.
a. Revenue passenger miles as a percent of available seat miles.
AIR CARGO STATISTICS:

U.S. COMMERCIAL AIR CARRIERS
(Millions of Revenue-Ton-Miles)
Freight / Express / Mail
Year Total Domestic Internationala
1983 7,715 4,539 3,177

1984 8,857 5,228 3,629
1985 8,653 4,994 3,659
1986 10,311 5,989 4,322
1987 12,130 7,010 5,119
1988 14,136 8,075 6,061
1989 15,954 8,821 7,133
1990 16,229 8,987 7,242
1991 16,327 8,913 7,414
1992 16,793 9,474 7,319
1993 18,420 10,374 8,046
1994 20,790 11,323 9,467
1995 23,228 12,416 10,812
1996 24,217 12,782 11,435
1997 26,954 13,455 13,499
1998 28,347 13,830 14,517
1999 28,102 13,975 14,127
2000 30,057 14,699 15,358
2001 28,485 13,938 14,547
2002 27,763 12,967 14,796
2003 33,514 14,972 18,542
2004 36,463 16,341 20,122
2005 39,219 16,090 23,129
2006 39,340 15,381 23,959
2007 39,909 15,219 24,690
2008 38,830 14,408 24,422
2009 30,999 11,899 19,100
2010 35,888 12,823 23,065
2011 37,277 12,047 25,230
2012(E) 36,383 12,053 24,330
Source: Federal Aviation Administration, FAA Aerospace Forecast, Fiscal Years 2013-2033.
a. Beginning in 2003, includes contract service by U.S. carriers for foreign carriers.
E. Estimate.
Appendix 329
JET FUEL COSTS AND CONSUMPTION BY U.S. AIR CARRIERSa

Cost of Fuel as a Percent

Total Jet Fuel Cost Gallons Consumed Cost Per Gallon of Cash Operating
Year (Millions of Dollars) (Millions) (Cents) Expenses
1983 $9,006.7 10,225.3 88.1¢ 24.5%

1984 9,324.1 11,182.5 83.4 23.4
1985 9,352.7 10,324.9 90.6 21.7
1986 7,054.9 10,722.0 65.8 15.9
1987 7,607.5 11,542.2 65.9 15.5
1988 7,551.6 12,059.4 62.6 14.0
1989 8,572.7 14,255.4 60.1 14.4
1990 11,744.9 15,522.0 75.7 16.9
1991 9,689.9 14,340.1 67.6 14.2
1992 8,840.5 14,970.2 59.1 12.3
1993 8,583.4 14,666.2 58.5 11.8
1994 8,276.2 15,626.3 53.0 11.2
1995 8,503.6 16,105.1 52.8 11.3
1996 10,432.1 16,592.2 62.9 12.8
1997 10,402.1 16,900.8 61.5 12.4
1998 8,376.1 17,274.9 48.5 9.7
1999 9,078.2 17,409.8 52.1 9.9
2000 15,198.4 19,026.2 80.0 14.2
2001 13,220.4 19,371.3 68.2 12.8
2002 11,036.6 15,841.1 69.7 11.7
2003 13,070.5 15,487.0 84.4 13.4
2004 18,990.0 16,928.3 112.2 17.0
2005 27,293.2 17,099.5 159.6 22.5
2006 31,989.3 16,486.8 194.0 25.0
2007 34,022.7 16,760.5 203.0 25.8
2008 46,876.2 16,157.0 290.1 31.5
2009 32,290.0 17,023.4 189.7 22.4
2010 38,782.0 17,284.7 224.4 23.8
2011 50,488.1 17,594.7 287.0 27.5
2012 50,414.6 17,090.2 295.0 27.1
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Transportation Statistics, Research and Innovative
Technology Administration, Airline Fuel Cost and Consumption Report, 2012.
a. Domestic and International scheduled and non-scheduled service for all U.S. major and national air carriers.
General Aviation Statistics
U.S. GENERAL AVIATION:

TYPE OF AIRCRAFT AND HOURS FLOWNa
2008 2009 2010 2011(E) 2012(E)
NUMBER OF ACTIVE AIRCRAFT BY TYPE (Thousands)
All Aircraft: 228.7 223.9 223.4 220.8 220.7

Fixed-Wing: 183.0 177.4 176.3 173.8 173.1
Piston: 163.0 157.1 155.4 152.6 151.5
Single-Engine 145.5 140.6 139.5 136.9 135.9
Twin-Engine 17.5 16.5 15.9 15.7 15.6
Turboprop: 8.9 9.1 9.4 9.5 9.7
Twin-Engine 3.5 4.0 4.2 NA NA
Other 5.5 5.1 5.2 NA NA
Turbojet: 11.0 11.3 11.5 11.7 11.9
Rotorcraft: 9.9 10.0 10.1 10.4 10.7
Piston 3.5 3.5 3.6 3.7 3.8
Turbine 6.4 6.5 6.5 6.7 6.9
Gliders 1.9 1.8 1.9 NA NA
Experimental 23.4 24.4 24.8 24.3 24.4
Light-sport 6.8 6.5 6.5 6.6 6.8
HOURS FLOWN BY TYPE OF AIRCRAFT (Thousands)
All Aircraft: 26,009 23,763 24,802 24,570 24,599

Fixed-Wing: Piston 15,074 13,634 13,979 13,626 13,396
Turboprop 2,457 2,215 2,325 2,324 2,357
Turbojet 3,600 3,161 3,375 3,577 3,756
Rotorcraft: Piston 751 755 794 785 808
Turbine 2,470 2,248 2,611 2,545 2,535
Gliders 96 85 92 NA NA
Experimental 1,155 1,286 1,226 1,213 1,232
Light-sport 293 286 311 317 331
AVERAGE HOURS FLOWN ANNUALLY BY TYPE
All Aircraft: 113.7 106.1 111.0 111.3 111.5

Fixed-Wing: Piston 92.5 86.8 89.9 89.3 88.4
Turboprop 275.8 244.6 248.1 244.1 243.7
Turbojet 326.0 280.5 293.9 307.0 315.9
Rotorcraft: Piston 214.8 215.8 221.4 213.0 214.6
Turbine 387.3 346.7 400.8 378.4 367.4
Gliders 50.0 46.8 48.4 NA NA
Experimental 49.5 52.7 49.5 50.0 50.5
Light-sport 43.0 43.6 47.6 47.7 48.5
Source: Federal Aviation Administration, FAA Aerospace Forecast, Fiscal Years 2013-2033; General Aviation and Air Taxi
Survey , 2010.
a. Excludes commuters.
E. Estimate
NA. Not available.
Appendix 331
U.S. GENERAL AVIATION

ACTIVE AIRCRAFT AND HOURS FLOWN BY PRIMARY USE
(Thousands)
Primary Use 2006 2007 2008 2009 2010
ACTIVE AIRCRAFT AS OF END-OF-YEAR
TOTAL 212.9 222.1 220.2 215.3 215.3

Personal 149.0 152.5 154.4 152.3 150.9
Business 24.4 25.0 22.4 22.4 21.7
Corporate 11.1 10.9 11.7 10.5 10.4
Instructional 14.3 14.7 15.0 14.1 15.4
Aerial Application 3.4 4.2 3.1 3.2 3.3
Aerial Observation 4.4 5.2 5.3 5.3 5.9
Aerial Other 0.8 1.4 1.0 0.8 0.7
External Load 0.2 0.2 0.4 0.2 0.2
Other Work 0.7 0.9 0.9 1.2 0.8
Sightseeing 0.9 1.3 0.7 0.8 1.5
Air Medical 0.4 0.2 0.4 0.5 0.2
Other 3.2 5.8 4.8 4.0 4.3
HOURS FLOWN
TOTAL 23,963 23,819 22,805 20,862 21,688

Personal 9,141 8,676 8,279 8,540 8,006
Business 3,234 3,094 2,505 2,532 2,387
Corporate 3,114 3,214 3,092 2,444 2,696
Instructional 4,322 3,804 4,427 3,440 3,885
Aerial Application 946 1,415 922 960 1,070
Aerial Observation 1,197 1,364 1,427 1,211 1,667
Aerial Other 241 371 266 162 328
External Load 136 152 153 88 144
Other Work 198 145 317 222 259
Sightseeing 171 160 152 119 173
Air Medical 115 118 108 174 187
Other 1,149 1,305 1,154 970 886
Source: Federal Aviation Administration, General Aviation and Air Taxi Activity Survey, 2010.
a. Air taxis under 12,500 pounds.
Landing Facilities by State and Type
U.S. LANDING FACILITIES BY STATE AND BY TYPE

As of July 31, 2012
State Total Public Private Military State Total Public Private Military
Alabama 275 92 172 11 Nevada 126 49 72 5
Alaska 733 404 308 21 New Hampshire 140 25 115 -
Arizona 305 76 219 10 New Jersey 315 45 263 7
Arkansas 296 99 194 3 New Mexico 176 63 108 5
California 958 253 676 29 New York 597 140 456 1
Colorado 454 76 373 5 North Carolina 441 113 317 11
Connecticut 138 23 115 - North Dakota 280 89 189 2
Delaware 39 11 27 1 Ohio 711 170 540 1
Dist. Of Col. 20 3 13 4 Oklahoma 391 139 246 6
Florida 851 128 697 26 Oregon 417 97 320 -
Georgia 453 108 334 11 Pennsylvania 796 128 662 6
Hawaii 50 13 30 7 Rhode Island 24 8 16 -
Idaho 286 123 162 1 South Carolina 192 67 119 6
Illinois 732 109 623 - South Dakota 178 73 104 1
Indiana 582 115 462 5 Tennessee 323 78 243 2
Iowa 283 121 160 2 Texas 2,005 392 1,589 24
Kansas 381 137 241 3 Utah 143 46 94 3
Kentucky 248 60 186 2 Vermont 84 16 68 -
Louisiana 470 74 392 4 Virginia 429 66 345 18
Maine 183 71 112 - Washington 548 136 403 9
Maryland 222 37 178 7 West Virginia 123 36 86 1
Massachusetts 238 39 197 2 Wisconsin 554 132 419 3
Michigan 469 228 239 2 Wyoming 121 41 80 -
Minnesota 469 153 315 1 Total - 50 States 19,522 5,123 14,116 283
Mississippi 247 80 160 7 Puerto Rico 52 12 39 1
Missouri 512 128 380 4 Virgin Islands 8 2 6 -
Montana 271 128 141 2 South Pacificb 21 10 9 2
Nebraska 243 85 156 2 Total 19,603 5,147 14,170 286
FACILITIES BY CLASS
CLASS Total Publica Private Military
Airports 13,436 4,863 8,366 207

Heliports 5,666 68 5,519 79
Seaplane Bases 501 216 285 -
Stolports - - - -
Total 19,603 5,147 14,170 286

Source: Aerospace Industries Association (AIA), based on data from the Federal Aviation Administration, Airport Facilities Data, July 2012.
a. “Public” refers to use, whether publicly or privately owned.
b. American Samoa, Guam, and Trust Territories.
Appendix 333
Research and Development
FEDERAL OUTLAYS FOR CONDUCT OF RESEARCH AND DEVELOPMENT

Year Total DOD NASA Energya Otherb
Current Dollars
1999 $74,136 $37,571 $9,433 $6,077 $21,055

2000 73,947 38,279 6,369 6,282 23,017
2001 80,089 41,157 6,473 6,613 25,846
2002 87,911 44,903 6,772 6,830 29,406
2003 101,440 53,778 7,665 7,355 32,642
2004 113,379 61,510 8,588 7,923 35,358
2005 119,846 66,467 7,714 8,260 37,405
2006 122,795 69,323 7,529 7,842 38,101
2007 129,689 73,716 9,122 7,725 39,126
2008 134,947 75,783 10,882 8,034 40,248
2009 139,829 79,708 9,937 8,403 41,781
2010 140,926 77,591 8,472 8,902 45,961
2011 143,625 75,576 8,323 11,820 47,906
2012 145,012 76,623 8,986 12,558 46,845
2013(E) 139,170 73,248 9,163 11,992 44,767
Constant Dollars c
1999 $84,979 $43,066 $10,813 $6,966 $24,135

2000 83,115 43,025 7,159 7,061 25,871
2001 87,952 45,198 7,108 7,262 28,383
2002 94,967 48,507 7,316 7,378 31,766
2003 107,389 56,932 8,115 7,786 34,556
2004 117,067 63,511 8,867 8,181 36,508
2005 119,846 66,467 7,714 8,260 37,405
2006 118,757 67,044 7,281 7,584 36,848
2007 121,819 69,243 8,568 7,256 36,752
2008 123,884 69,570 9,990 7,375 36,949
2009 126,542 72,134 8,993 7,605 37,811
2010 126,368 69,576 7,597 7,982 41,213
2011 126,297 66,458 7,319 10,394 42,126
2012 125,205 66,157 7,759 10,843 40,446
2013(E) 118,201 62,212 7,782 10,185 38,022
a. Includes DOD and Non-DOD-related atomic energy R&D with Non-DOD energy R&D.
b. Includes but is not limited to NSF, National Institutes of Health, DOT, and Agriculture.
c. Based on Fiscal Year GDP Deflator (2005=100).
E. Estimate.
FUNDS FOR INDUSTRIAL RESEARCH AND DEVELOPMENT

IN ALL INDUSTRIES AND THE AEROSPACE INDUSTRY
BY FUNDING SOURCE
All Industriesa Aerospace Industryb
Aerospace Aerospace
Federal Company Aerospace Federal Company
Year Total Funds Fundsc Total Funds Funds
Current Dollars
2000 $201,962 $19,118 $182,844 $10,319 $6,424 $3,895

2001 202,017 16,899 185,118 7,868 3,785 4,083
2002 193,868 16,401 177,467 9,654 4,306 5,349
2003 200,724 17,798 182,926 15,731 7,528 8,203
2004 208,301 20,266 188,035 13,086 3,862 9,224
2005 226,159 21,909 204,250 15,004 4,076 10,928
2006 247,669 24,304 223,365 16,367 4,372 11,995
2007 269,267 26,585 242,682 18,436 5,040 13,397
2008 290,680 36,360 254,320 36,941 25,805 11,136
2009 282,393 39,573 242,920 34,554 21,524 13,030
Constant Dollars d
2000 $227,000 $21,488 $205,512 $11,598 $7,220 $4,378

2001 221,850 18,558 203,292 8,640 4,157 4,484
2002 209,429 17,717 191,711 10,429 4,652 5,778
2003 212,496 18,841 193,654 16,654 7,970 8,684
2004 215,076 20,925 194,151 13,512 3,988 9,524
2005 226,159 21,909 204,250 15,004 4,076 10,928
2006 239,525 23,505 216,020 15,829 4,228 11,601
2007 252,928 24,972 227,956 17,317 4,734 12,584
2008 266,850 33,379 233,471 33,913 23,690 10,223
2009 255,559 35,813 219,837 31,271 19,479 11,792
Source: National Science Foundation, Business Research and Development and Innovation Survey
(BRDIS), 2009.
a. Includes all manufacturing industries, including those non-manufacturing industries known to conduct
or finance research and development.
b. Companies classified in NAICS code 3364, having as their principal activity the manufacture of
aerospace products and parts. Prior to 1999, data was categorized using the SIC system and
reported by combining codes 372 and 376.
c. Company funds include all funds for industrial R&D work performed within company facilities, except
funds provided by the Federal Government. Outside, company-financed, R&D contracted organizations
such as research institutions, universities and colleges, or other non-profit organizations are excluded.
d. Based on GDP deflator (2005=100).
Appendix 335
FUNDS FOR INDUSTRIAL RESEARCH AND DEVELOPMENT

IN THE AEROSPACE INDUSTRY BY TYPE OF RESEARCH
AND FUNDING SOURCE
Basic Research Applied Research Development
Federal Company Federal Company Federal Company

Year Total Total Funds Funds Total Funds Funds Total Funds Funds
1990 $25,356 $658 $519 $139 $3,340 $1,931 $1,409 $21,358 $16,766 $4,592
a
1991 16,983 364 302 62 2,091 1,105 986 14,528 10,043 4,485
1992 17,158 270 235 35 1,739 976 763 15,148 9,076 6,072
1993 15,056 (D) (D) (D) 1,453 825 628 (D) (D) (D)
1994 14,260 (D) (D) (D) (D) (D) (D) 12,787 7,978 4,809
1995 16,951 252 250 2 1,987 564 1,423 14,712 10,648 4,064
1996 16,224 (D) (D) 108 (D) (D) (D) 13,259 9,264 3,995
b
1997 17,865 (D) (D) 10 (D) (D) 1,508 13,275 9,115 4,159
b
1998 16,359 (D) (D) 172 (D) (D) 272 12,800 8,136 4,664
1999 14,425 (D) (D) 173 (D) (D) 655 11,541 7,060 4,480
2000 10,319 (D) (D) (D) (D) (D) (D) 6,766 3,931 2,835
2001 7,868 (D) (D) 301 1,639 735 904 (D) (D) 2,877
2002 9,654 (D) (D) 347 (D) (D) 1,092 7,268 3,358 3,910
2003 15,731 725 417 308 3,234 2,456 778 11,772 4,655 7,117
2004 13,086 465 (D) (D) 2,582 (D) (D) 10,039 1,895 8,143
2005 15,005 510 (D) (D) 2,783 (D) (D) 11,712 2,143 9,569
2006 16,367 604 155 449 3,361 1,944 1,417 12,402 2,273 10,129
2007 18,436 590 169 422 3,989 2,502 1,487 13,857 2,369 11,488
2008 36,941 810 (D) (D) 5,217 (D) (D) 30,915 (D) (D)
2009 34,554 339 (D) (D) 2,498 (D) (D) 31,717 (D) (D)
Source: Aerospace Industries Association (AIA), based on data from the National Science Foundation (NSF), Business Research and Development
and Innovation Survey (BRDIS), 2009.
a. Computed by AIA as difference between total and company funds. Figure withheld by NSF because of imputation of more than 50 percent.
b. Funding by type of research not revised nor published despite revised totals.
D. Suppressed by NSF to avoid disclosure of confidential information.
TOTAL RESEARCH AND DEVELOPMENT FUNDING:

TOP 30 STATES
Percent Change
State 2007 2008 2009 2010 2009-2010
United States: $269,267 $290,680 $282,393 $278,977 (1.2)

California 64,187 67,532 64,939 64,914 (0.0)
New Jersey 17,892 19,054 18,404 15,925 (13.5)
Texas 13,889 16,166 15,307 14,384 (6.0)
Massachusetts 19,488 15,028 14,422 14,020 (2.8)
Washington 12,687 13,876 16,471 13,545 (17.8)
Illinois 11,362 8,900 9,188 12,221 33.0
Michigan 15,736 13,742 11,999 12,144 1.2
New York 10,916 11,455 10,919 10,954 0.3
Pennsylvania 10,387 9,735 9,989 9,246 (7.4)
Missouri 2,736 D D 8,106 -
Ohio 7,265 7,405 6,811 6,857 0.7
Connecticut 9,444 10,518 10,638 6,498 (38.9)
Minnesota 6,636 5,728 6,880 6,246 (9.2)
North Carolina 6,829 6,246 5,531 5,749 3.9
Florida 4,569 4,178 4,329 5,127 18.4
Indiana 4,939 4,991 5,220 4,985 (4.5)
Virginia 4,840 6,142 6,159 4,655 (24.4)
Oregon 3,629 4,074 4,080 4,396 7.7
Maryland 3,665 4,333 4,492 4,384 (2.4)
Arizona 3,846 5,232 4,682 4,054 (13.4)
Wisconsin 3,411 3,798 3,616 3,927 8.6
Colorado 5,223 4,019 3,960 3,899 (1.5)
Georgia 2,788 3,344 3,905 3,644 (6.7)
Delaware 1,472 D 2,046 2,144 4.8
Utah 1,764 1,945 2,083 2,066 (0.8)
Iowa D 1,509 1,943 1,950 0.4
New Hampshire 1,814 2,169 D 1,818 -
Kansas 1,304 1,600 1,616 1,492 (7.7)
Alabama 1,771 3,099 1,562 1,449 (7.2)
South Carolina 1,426 1,221 1,254 1,316 4.9
Source: National Science Foundation, Business Research and Development and Innovation Survey (BRDIS) and InfoBrief
NSF 13-324, 2013.
( ) Indicates negative growth.
D Withheld by National Science Foundation to avoid disclosing operations of individual companies.
Appendix 337

FOR RESEARCH, DEVELOPMENT, TEST, AND EVALUATION
Air
Year Total Force Army Navy Other
1989 $37,002 $14,912 $4,966 $9,291 $7,833

1990 37,458 14,443 5,513 9,160 8,342
1991 34,566 13,050 5,559 7,586 8,371
1992 34,632 11,998 5,978 7,826 8,830
1993 36,968 12,338 6,218 8,944 9,467
1994 34,786 12,513 5,746 7,990 8,537
1995 34,710 12,052 5,081 9,230 8,347
1996 36,561 13,056 4,925 9,404 9,175
1997 37,027 14,040 4,859 8,220 9,908
1998 37,420 14,499 4,881 7,836 10,204
1999 37,363 14,172 5,027 8,052 10,112
2000 37,606 13,839 4,777 8,857 10,133
2001 40,599 14,310 5,837 9,465 10,987
2002 44,389 14,228 6,569 10,360 13,232
2003 53,098 17,271 7,041 12,192 16,594
2004 60,756 19,529 8,302 14,136 18,789
2005 65,694 20,640 9,702 16,039 19,313
2006 68,628 20,870 10,846 17,423 19,489
2007 73,136 22,919 11,364 18,752 20,101
2008 75,119 24,666 11,285 18,563 20,605
2009 79,030 26,105 11,764 19,411 21,749
2010 76,991 26,215 10,714 19,201 20,860
2011 74,871 25,993 10,079 18,196 20,603
2012 75,905 26,524 10,718 19,127 19,537
2013(E) 71,697 26,119 9,571 17,383 18,624
Source: Department of Defense Budget, Financial Summary Tables, FY13.

Note: Total may not equal sum due to rounding.
E. Estimate.
DEPARTMENT OF DEFENSE APPROPRIATIONS FOR

RESEARCH, DEVELOPMENT, TEST, AND EVALUATION
Fiscal Years 2009–2013a
2009 2010 2011 2012 2013(E)
Total $80,651 $80,655 $76,135 $72,837 $69,653
BY APPROPRIATION
Army $12,154 $11,711 $9,760 $8,760 $8,949

Navy 19,809 19,948 17,866 17,793 16,943
Air Force 26,767 27,917 27,421 26,740 25,481
Defense Agencies 21,736 20,890 20,895 19,355 18,095
Operational Test & Evaluation 185 188 192 188 185
RECAP OF BUDGET ACTIVITIES
Basic Research $1,758 $1,815 $1,877 $2,112 $2,117

Applied Research 5,072 4,984 4,329 4,739 4,478
Advanced Technology Development 6,425 6,507 5,340 5,411 5,266
Adv. Component Dvlp. & Prototypes 14,939 14,469 14,142 13,462 12,433
System Development & Demonstration 18,125 16,779 14,346 14,140 14,697
RDT&E Management Support 5,991 6,098 5,661 4,584 4,268
Operational Systems Development 28,340 30,003 30,441 28,388 26,394
RECAP OF FYDP PROGRAMS
Strategic Forces $607 $1,194 $985 $1,012 $574

General Purpose Forces 4,031 4,555 4,119 3,911 4,116
Intelligence and Communications 5,154 5,665 5,290 4,834 4,077
Mobility Forces 564 508 425 285 244
R&D (FYDP Program 6) 51,437 49,529 45,364 44,304 43,302
Central Supply and Maintenance 495 554 430 390 359
Training Medical and Other 28 58 60 39 79
Admn. and Associated Activities 182 173 128 126 155
Support of Other Nations 26 70 94 4 4
Special Operations Forces 463 553 424 469 402
Classified Programs 17,665 17,794 18,817 17,462 16,341
Source: Department of Defense Budget, RDT&E Programs (R-1), FY13.

a. Includes Base and Overseas Contingency Operations (OCO) budget request.
E. Estimate.
Appendix 339
FEDERAL CONTRACTS FOR RESEARCH AND DEVELOPMENTa

2008 2009 2010 2011 2012
Top 5 Prime Award Recipient Locations:

1. California $14,473.3 $14,056.5 $12,905.5 $13,046.4 $12,461.1
2. Virginia 4,828.7 5,352.6 6,097.4 5,648.2 5,862.0
3. Maryland 3,465.7 4,333.1 4,657.2 5,005.4 4,783.1
4. Massachusetts 4,797.2 6,284.4 4,649.0 3,936.3 3,944.5
5. Texas 5,441.8 5,275.5 5,171.1 4,409.5 3,628.4
Grand Total (all states) $58,256.0 $61,568.5 $59,251.2 $56,645.3 $52,749.1
Top 5 Prime Award Major Agencies:

1. Department of Defense $42,288.6 $44,534.7 $41,899.8 $40,193.8 $36,869.5
2. National Aeronautics and Space Administration 6,209.6 6,902.4 7,325.7 7,563.9 7,632.4
3. Department of Energy 3,383.1 3,035.7 2,836.9 2,767.6 3,003.7
4. Department of Health and Human Services 2,364.0 3,077.8 2,782.1 2,660.0 2,284.7
5. Department of Transportation 747.1 689.4 803.9 984.8 1,059.5
Top 5 Prime Award Sub Agencies:

1. Department of the Air Force $13,047.8 $14,302.5 $14,161.0 $14,246.1 $13,082.5
2. Department of the Navy 12,827.3 13,829.4 12,216.2 11,751.1 10,747.9
3. National Aeronautics and Space Administration 6,209.6 6,902.4 7,325.7 7,563.9 7,632.4
4. Department of the Army 10,511.7 10,129.7 9,197.7 8,455.7 7,292.1
5. Missile Defense Agency 4,442.7 4,401.4 4,081.5 3,412.4 3,825.7
Top 5 Prime Award Products or Services Sold:

1. R&D-Defense Sys: A/C (Op. Sys Dev.) $6,025.5 $5,677.4 $5,021.0 $3,952.4 $3,920.2
2. R&D-Defense Sys: Missile/Space Sys (Adv.) 4,236.5 3,385.6 3,155.0 2,691.4 2,729.3
3. R&D-Other R & D-Applied Res/Expl Dev. 1,524.1 1,778.5 2,172.4 2,555.8 2,344.4
4. R&D-Space Science & Appl-a Res/Expl. 2,048.7 2,149.9 2,010.1 2,078.4 2,314.8
5. R&D-Other R & D-Basic Research 2,938.2 2,275.6 2,295.3 2,297.2 2,264.8
Source: Aerospace Industries Association (AIA), based on data from USAspending.gov, Prime Award Spending Data, 2013.
a. Ranking based on net value of federal contracts awarded during the last fiscal year.
MILITARY AIRCRAFT PROGRAMS:

RESEARCH, DEVELOPMENT, TEST, AND EVALUATIONa
(Millions of Dollars)b
Agency and Model 2011 2012 2013(E)
AIR FORCE
A-10 Squadrons $5.5 $11.1 $13.5

B-1B Squadrons 33.1 33.0 16.3
B-2 Squadrons 244.7 280.3 36.0
B-52 Squadrons 129.9 93.8 53.2
C-5 Airlift Squadrons (IF) 55.1 12.9 35.1
C-17 Aircraft (IF) 156.9 93.8 99.2
C-130J Program 83.0 68.1 54.7
CSAR HH-60 Recapitalization 11.9 11.1 123.2
AWACS 201.8 117.9 65.2
JSTARS 162.8 74.0 24.2
F-15E Squadrons 201.0 194.8 192.7
F-16 Squadrons 125.4 131.1 190.3
F-22A Squadrons 493.5 571.3 371.7
F-35 Squadrons 931.6 1,397.9 1,218.4
KC-135s 19.9 6.2 0.0
CV-22 17.6 13.2 28.0
NAVY
AV-8B Aircraft - Eng Dev $22.1 $30.7 $32.8

CH-53K RDTE 558.2 624.5 606.2
EA-18 20.2 17.1 13.0
F/A-18 Squadrons 143.6 147.1 188.3
H-1 Upgrades 58.6 67.6 31.1
P-3 Modernization Program 3.5 3.4 3.5
V-22A 42.7 84.5 54.4
VH-71A Executive Helo Development 147.3 60.8 61.2
Source: Department of Defense, Research, Development, Test & Evaluation Programs (R-1), FY13.
Note: See Aircraft Production Chapter for aircraft program procurement authorization data.
a. Total Obligational Authority.
b. Includes Base and Overseas Contingency Operations.
E. Estimate.
Appendix 341
Foreign Trade
U.S. TOTAL AND AEROSPACE FOREIGN TRADE

Total U.S. Merchandise Trade Aerospace
Trade Trade
Year Balance Exports Imports Balance Exports Imports
1983 ($52,409) $205,639 $258,048 $12,619 $16,065 $3,446

1984 (106,702) 223,976 330,678 10,082 15,008 4,926
1985 (117,711) 218,815 336,526 12,593 18,725 6,132
1986 (138,279) 227,159 365,438 11,826 19,728 7,902
1987 (152,119) 254,122 406,241 14,575 22,480 7,905
1988 (118,526) 322,426 440,952 17,860 26,947 9,087
1989 (109,399) 363,812 473,211 22,083 32,111 10,028
1990 (101,719) 393,592 495,311 27,282 39,083 11,801
1991 (66,723) 421,730 488,453 30,785 43,788 13,003
1992 (84,501) 448,164 532,665 31,356 45,018 13,662
1993 (115,568) 465,091 580,659 27,235 39,418 12,183
1994 (150,630) 512,626 663,256 25,010 37,373 12,363
1995 (158,801) 584,742 743,543 21,561 33,071 11,509
1996 (170,214) 625,075 795,289 26,602 40,270 13,668
1997 (180,522) 689,182 869,704 32,239 50,374 18,134
1998 (229,758) 682,138 911,896 40,960 64,071 23,110
1999 (328,821) 695,797 1,024,618 37,381 62,444 25,063
2000 (436,104) 781,918 1,218,022 26,734 54,679 27,944
2001 (411,899) 729,100 1,140,999 26,035 58,508 32,473
2002 (468,263) 693,103 1,161,366 29,533 56,775 27,242
2003 (532,350) 724,771 1,257,121 27,111 52,504 25,393
2004 (654,830) 814,875 1,469,704 31,002 56,817 25,815
2005 (772,373) 901,082 1,673,455 39,783 67,432 27,649
2006 (827,971) 1,025,967 1,853,938 54,809 85,262 30,453
2007 (808,763) 1,148,199 1,956,962 60,614 97,224 36,610
2008 (816,199) 1,287,442 2,103,641 57,389 95,082 37,694
2009 (503,582) 1,056,043 1,559,625 56,034 81,166 25,132
2010 (634,897) 1,278,263 1,913,160 51,152 77,503 26,351
2011 (727,765) 1,480,290 2,208,055 55,753 85,326 29,573
2012 (729,611) 1,545,709 2,275,320 65,745 99,385 33,640
Source: Aerospace Industries Association (AIA), based on data from the the Bureau of the Census, Foreign Trade
Division, Economic Consulting Services, and the International Trade Administration, 2013.
Note: The Commerce Department began reporting international trade using the Harmonized Tariff Schedules of
the United States in 1989. Prior years based on the Tariff Schedules of the United States Annotated.
TOTAL U.S. EXPORTS AND EXPORTS OF AEROSPACE PRODUCTS

Exports of Aerospace Products
Percent of Civil
Total Exports of U.S. Total U.S.
Year Merchandisea Total Exports Total Transports Military
1983 $205,639 $16,065 7.8% $10,595 $4,683 $5,470

1984 223,976 15,008 6.7 9,659 3,195 5,350
1985 218,815 18,725 8.6 12,942 5,518 5,783
1986 227,159 19,728 8.7 14,851 6,276 4,875
1987 254,122 22,480 8.8 15,768 6,377 6,714
1988 322,426 26,947 8.4 20,298 8,766 6,651
1989 363,765 32,111 8.8 25,619 12,313 6,492
1990 392,976 39,083 9.9 31,517 16,691 7,566
1991 421,730 43,788 10.4 35,548 20,881 8,239
1992 448,164 45,018 10.0 36,906 22,256 8,111
1993 465,091 39,418 8.5 31,823 18,146 7,596
1994 512,626 37,373 7.3 30,050 15,931 7,322
1995 584,742 33,071 5.7 25,079 10,606 7,991
1996 625,075 40,270 6.4 29,477 13,624 10,792
1997 689,182 50,374 7.3 40,075 21,028 10,299
1998 682,138 64,071 9.4 51,999 29,168 12,072
1999 695,797 62,444 9.0 50,624 25,672 11,820
2000 781,918 54,679 7.0 45,566 19,615 9,113
2001 729,100 58,508 8.0 49,371 22,151 9,137
2002 693,103 56,775 8.2 47,348 21,626 9,427
2003 724,771 52,504 7.2 44,366 19,249 8,138
2004 814,875 56,817 7.0 47,772 18,577 9,045
2005 901,082 67,432 7.5 57,587 21,888 9,845
2006 1,025,967 85,262 8.3 71,857 32,897 13,405
2007 1,148,199 97,224 8.5 83,977 40,297 13,247
2008 1,287,442 95,082 7.4 82,264 33,326 12,819
2009 1,056,043 81,166 7.7 70,500 D 10,666
2010 1,278,263 77,503 6.1 67,128 D 10,375
2011 1,480,290 85,326 5.8 75,275 D 10,051
2012 1,545,709 99,385 6.4 86,814 D 12,571
Source: Aerospace Industries Association (AIA), based on data from the the Bureau of the Census, Foreign Trade
Division, Economic Consulting Services, and the International Trade Administration, 2013.
Note: International trade reported using Harmonized Tariff Schedules after 1988.
a. Includes Department of Defense shipments and undocumented exports to Canada, free alongside-ship basis.
D. Data surpressed by the Bureau of the Census.
Appendix 343
U.S. EXPORTS OF AEROSPACE PRODUCTS:

TOP 20 COUNTRIES OF DESTINATION
Country of Destination 2008 2009 2010 2011 2012
Japan $6,703 $5,511 $5,295 $5,072 $8,468

China 3,917 5,344 5,764 6,392 8,364
France 7,326 8,655 7,233 7,141 8,025
United Arab Emirates 2,775 3,507 1,811 3,655 7,186
United Kingdom 7,152 6,085 5,968 7,009 6,809
Brazil 5,568 4,681 4,481 5,469 6,169
Germany 5,677 5,515 5,683 5,894 5,764
Canada 7,245 5,700 5,400 5,677 5,713
Singapore 3,902 2,974 3,877 3,926 4,034
South Korea 2,712 2,026 2,647 2,740 3,633
Mexico 1,530 1,657 1,621 1,848 2,773
Hong Kong 1,177 2,199 1,408 2,486 2,496
Australia 1,749 1,797 1,636 2,002 2,206
Turkey 1,409 1,240 2,484 2,886 1,909
Qatar 742 1,366 1,702 1,203 1,777
Saudi Arabia 788 1,130 879 523 1,604
Russian Federation 557 422 341 742 1,494
Indonesia 543 910 1,727 1,183 1,477
Netherlands 1,974 1,847 1,517 1,885 1,450
Chile 515 1,242 1,318 772 1,378
Source: Aerospace Industries Association (AIA), based on data from the International Trade Administration, 2013.
U.S. IMPORTS OF AEROSPACE PRODUCTS:

TOP 20 COUNTRIES OF ORIGIN
Country of Origin 2008 2009 2010 2011 2012
France $9,114 $7,990 $8,792 $8,719 $9,801

Canada 7,837 6,805 6,371 7,244 8,001
Japan 2,666 2,904 3,055 3,841 4,783
United Kingdom 3,808 3,407 3,442 3,705 4,017
Germany 2,773 3,144 2,088 2,916 3,199
Italy 953 952 1,209 1,308 1,658
Mexico 557 469 689 1,157 1,439
Brazil 2,296 747 746 936 1,070
Israel 1,344 761 748 694 952
Poland 171 178 386 569 679
China 387 397 498 622 663
South Korea 371 387 467 598 570
Belgium 328 263 268 453 403
Netherlands 207 230 299 306 360
Australia 176 164 164 327 342
Turkey 214 251 270 283 336
Switzerland 350 279 292 266 301
Singapore 335 268 278 254 263
Sweden 261 178 229 224 259
Taiwan 175 166 173 215 256
Appendix 345
U.S. EXPORTS OF AEROSPACE PRODUCTS
2008 2009 2010 2011 2012
TOTAL EXPORTS $95,082 $81,166 $77,503 $85,326 $99,385
TOTAL CIVIL EXPORTS $82,264 $70,500 $67,128 $75,275 $86,814
Complete Aircraft .......................................42,422 (D) (D) (D) (D)

Transports ……………………………….33,326
General Aviation ………………………….4,818
Helicopters …………………………….. 948
Used Aircraft …………………………… 3,284
Other Aircraft …………………………. 46
Aircraft Engines ...................................... 8,505

Turbine ………………………………….. 8,334
Piston …………………………………… 171
Aircraft & Engine Parts,

Including Spares ................................. 30,777
Missiles, Rockets & Parts .................. 25
Spacecraft, Satellites & Parts .................. 535
TOTAL MILITARY EXPORTS $12,819 $10,666 $10,375 $10,051 $12,571
Complete Aircraft .................................. 4,521 2,325 1,742 1,738 3,442

Transports …………………………………. 1,548 276 140 614 1,410
Helicopters …………………………….. 300 520 832 539 690
Fighters & Bombers ……………….. 1,930 1,208 432 324 737
Used Aircraft ………………………….. 590 93 43 44 444
Other Aircraft ………………………………153 228 294 217 161
Aircraft Engines ......................................... 423 517 357 478 422

Turbine …………………………………. 344 381 271 387 357
Piston ………………………………… 80 137 86 92 65
Aircraft and Engine Parts,

Including Spares ................................. 6,311 6,126 6,404 6,242 6,836
Missiles, Rockets & Parts .................. 1,425 1,509 1,741 1,502 1,745
Spacecraft, Satellites & Parts .................... 139 189 133 91 126
Source: Aerospace Industries Association (AIA), based on data from the Department of Commerce and Economic
Consulting Services (ECS).
D. Civil aerospace export data suppressed by the Bureau of Census Bureau beginning in the first quarter 2009.
U.S. IMPORTS OF AEROSPACE PRODUCTS

2008 2009 2010 2011 2012
TOTAL IMPORTS $37,694 $25,132 $26,351 $29,573 $33,640
$12,480
Aircraft ............................................. $9,299 $9,041 $10,025 $10,266
Military ……………………………….51.5 0.4 61.7 124.4 102.8
Civil ..................................................
12,428 9,299 8,979 9,900 10,163
Transports ………………… 6,460 4,955 3,258 4,972 4,588
General Aviation ……………… 4,066 2,337 2,191 2,667 2,730
Helicopters ………………….. 1,143 833 838 896 1,161
Othera…………………………………….. 758 1,173 2,692 1,365 1,685
Aircraft Engines ............................. 4,328 3,752 3,799 4,101 5,146

Turbine ……………………………….
4,195 3,616 3,700 4,035 5,081
Piston …………………………….. 133 136 99 66 64
Aircraft and Engine Parts ..... 19,989 11,383 12,498 14,293 17,070
Spacecraft, Missiles,
Rockets, and Parts ................. 896 698 1,013 1,154 1,158
Source: Aerospace Industries Association (AIA), based on data from the Department of Commerce and Economic
Consulting Services (ECS).
Notes: Import data includes non-military aircraft parts and aerospace products previously exported from the United States.
Totals may not equal sum of terms due to rounding.
a. Includes used aircraft, gliders, balloons and airships.
Appendix 347
U.S. EXPORTS OF MILITARY AIRCRAFTa

2008 2009 2010 2011 2012(E)
TOTAL NUMBER OF AIRCRAFT 262 269 338 227 213
Fighters and Fighter Bombers 46 29 16 12 12

Transports 9 3 5 9 7
Helicopters 28 39 79 54 48
New Aircraft, NEC 137 180 217 135 125
Used or Rebuilt Aircraft 42 18 21 17 21
Source: Aerospace Industries Association (AIA), based on data from Economic Consulting Services, 2013.
NEC. Not elsewhere classified.
a. Includes aircraft exported under Military Assistance Programs and Foreign Military Sales.
E. Estimate.
U.S. EXPORTS OF CIVIL AIRCRAFT

Type of Aircraft 2008 2009 2010 2011 2012
NUMBER OF AIRCRAFT 3,583 D D D D
Helicopters ― TOTAL 880 D D D D

Under 2,200 lbs 766 - - - -
Over 2,200 lbs 114 - - - -
General Aviation ― TOTAL 1,188 D D D D
Single-Engine 612 - - - -
Multi-Engine, under 4,400 lbs 105 - - - -
Multi-Engine, 4,400-10,000 lbs 190 - - - -
Multi-Engine, 10,000-33,000 lbs 281 - - - -
Transports (over 33,000 lbs) ― TOTAL 321 D D D D
Passenger Aircraft 313 - - - -
Cargo Aircraft 8 - - - -
Other, incl. Pass./Cargo Combination - - - - -
Other Aircraft ― TOTAL 1,194 D D D D
Used or Rebuilt Aircraft 1,194 - - - -
Other Aircrafta 1,735 - - - -
VALUE (Millions of Dollars) $42,376 D D D D
Helicopters ― TOTAL 948 D D D D

Under 2,200 lbs 242 - - - -
Over 2,200 lbs 706 - - - -
General Aviation ― TOTAL 4,818 D D D D
Single-Engine 397 - - - -
Multi-Engine, under 4,400 lbs 45 - - - -
Multi-Engine, 4,400-10,000 lbs 903 - - - -
Multi-Engine, 10,000-33,000 lbs 3,473 - - - -
Transports (over 33,000 lbs) ― TOTAL 33,326 D D D D
Passenger Aircraft 31,322 - - - -
Cargo Aircraft 2,004 - - - -
Other, incl. Pass./Cargo Combination - - - - -
Other Aircraft ― TOTAL 3,284 D D D D
Used or Rebuilt Aircraft 3,284 - - - -
Other Aircrafta 46 - - - -
Source: Aerospace Industries Association (AIA), based on data from Economic Consulting Services, and the International
Trade Administration, 2013.
a. Excluded from totals.
Appendix 349
U.S. EXPORTS OF COMMERCIAL TRANSPORT AIRCRAFTa

Region of Destination 2008 2009 2010 2011 2012
NUMBER OF AIRCRAFT 321 D D D D
Africa 7 - - - -
Asia 115 - - - -
Canada & Greenland 15 - - - -
Europe 106 - - - -
Latin America & Caribbean 28 - - - -
Middle East 41 - - - -
Oceania 9 - - - -
VALUE (Millions of Dollars) $33,326.0 D D D D
Africa 664.6 - - - -
Asia 14,488.6 - - - -
Canada & Greenland 1,462.6 - - - -
Europe 7,613.8 - - - -
Latin America & Caribbean 2,744.3 - - - -
Middle East 5,715.8 - - - -
Oceania 636.4 - - - -
Notes: Totals may not equal sum of terms due to rounding. Previous years’ data may have been revised to reflect
updated and/or newly available information.
a. Airframe weight exceeding 33,000 pounds.
U.S. IMPORTS OF COMPLETE AIRCRAFT

Use and Type 2008 2009 2010 2011 2012
NUMBER OF AIRCRAFT 2,163 1,430 1,584 1,938 1,646
Civil Aircraft ― TOTAL 2,155 1,427 1,580 1,932 1,635

New Complete Aircraft:
Helicopters 364 241 269 258 336
General Aviation:
Single-Engine 376 200 212 171 145
Multi-Engine, under 4,400 lbs 37 11 4 3 10
Multi-Engine, 4,400-10,000 lbs 20 71 50 32 9
Multi-Engine, Turbojet / Turbofan,
10,000-33,000 lbs 188 85 91 122 137
Transports, Multi-Engine,
over 33,000 lbs 211 133 85 123 96
Other New Aircrafta 796 534 626 1,007 652
Used or Rebuilt 163 152 243 216 250
Military Aircraft ― TOTAL 8 3 4 6 11

New Complete Aircraft 7 1 3 4 10
Used or Rebuilt 1 2 1 2 1
VALUE (Millions of Dollars) $12,479.6 $9,298.9 $9,040.9 $10,024.7 $10,267.3
Civil Aircraft ― TOTAL $12,428.2 $9,298.5 $8,979.2 $9,900.3 $10,163.5

New Complete Aircraft:
Helicopters 1,143.0 832.7 838.2 896.2 1,160.8
General Aviation:
Single-Engine 456.0 310.6 272.7 273.0 274.6
Multi-Engine, under 4,400 lbs 17.2 6.0 2.9 1.8 5.2
Multi-Engine, 4,400-10,000 lbs 104.1 263.7 160.7 138.6 47.3
Multi-Engine, Turbojet / Turbofan,
10,000-33,000 lbs 3,489.2 1,757.1 1,754.5 2,253.6 2,403.3
Transports, Multi-Engine,
over 33,000 lbs 6,460.5 4,955.1 3,258.3 4,971.9 4,587.5
Other New Aircrafta 29.6 25.7 18.5 34.8 23.2
Used or Rebuilt 728.6 1,147.6 2,673.4 1,330.4 1,661.5
Military Aircraft ― TOTAL $51.5 $0.4 $61.7 $124.4 $103.8

New Complete Aircraft 51.3 0.2 61.6 124.4 103.7
Used or Rebuilt 0.2 0.2 0.1 0.0 0.2
Source: Aerospace Industries Association (AIA), based on data from Economic Consulting Services, and the
International Trade Administration, 2013.
Notes: Details include products not designated civil or military by the Harmonized Tariff Schedules. Historically,
aircraft herein have been predominantly civil. Totals may not equal sum of details due to rounding.
a. Includes gliders, balloons and airships, and kites.
Appendix 351
EXPORTS OF AEROSPACE PRODUCTS AND PARTS:

TOP 25 STATES
(Thousands of Dollars)
Percent
Change
State 2009 2010 2011 2012 2011-2012
U.S. Total $84,477,575 81,409,362 89,383,645 105,839,452 18.4%

Washington 26,479,191 23,322,362 27,163,172 37,110,551 36.6
California 6,682,727 6,100,328 6,797,582 7,994,836 17.6
Connecticut 6,241,407 6,812,920 6,653,561 6,981,781 4.9
Florida 3,976,625 4,471,118 4,989,044 5,736,121 15.0
Ohio 4,117,563 4,698,397 5,427,059 5,663,256 4.4
Georgia 3,442,375 4,499,101 5,928,861 5,638,614 (4.9)
Texas 4,893,430 4,484,144 5,144,827 5,636,133 9.5
Kentucky 4,720,585 3,560,263 3,522,097 3,834,815 8.9
Arizona 2,148,278 1,987,475 2,372,655 2,603,326 9.7
New York 2,700,771 2,427,762 2,590,356 2,511,750 (3.0)
Kansas 2,867,981 2,124,120 2,127,464 2,101,357 (1.2)
Arkansas 1,678,855 585,391 489,918 1,867,421 281.2
Indiana 750,963 960,523 1,272,477 1,698,613 33.5
Tennessee 1,018,611 1,114,480 1,222,231 1,231,583 0.8
North Carolina 1,311,913 1,463,107 996,609 1,130,804 13.5
Virginia 848,600 964,413 925,787 1,075,884 16.2
New Jersey 1,461,491 1,316,253 1,311,227 1,037,154 (20.9)
Illinois 1,125,943 1,036,889 1,003,976 1,031,655 2.8
Pennsylvania 832,461 988,398 855,217 989,708 15.7
Michigan 525,225 944,392 1,075,959 953,304 (11.4)
Massachusetts 835,084 717,052 751,681 944,392 25.6
Missouri 426,650 828,414 652,689 703,892 7.8
Alabama 535,409 424,906 526,569 691,775 31.4
Maryland 664,245 522,858 743,677 652,654 (12.2)
Oregon 491,431 462,869 483,413 625,540 29.4
Source: Aerospace Industries Association (AIA), based on data from the Bureau of the Census, 2013.
Note: Totals may not match totals provided in other AIA reports due to different Bureau of the Census survey methods.
Employment, Earnings, and

Other Workforce Statistics
ANNUAL AVERAGE EMPLOYMENT IN ALL MANUFACTURING,

DURABLE GOODS, AND AEROSPACE INDUSTRIES
(Thousands)
Aerospace Industrya
As Percent of:
All Durable
Manufacturing Goods All Durable
Year Industries Industries Total Manufacturing Goods
1988 17,906 10,969 1,294 7.2% 11.8%

1989 17,985 11,004 1,314 7.3 11.9
1990b 17,695 10,737 1,121 6.3 10.4
1991 17,068 10,220 1,040 6.1 10.2
1992 16,799 9,946 936 5.6 9.4
1993 16,774 9,901 825 4.9 8.3
1994 17,020 10,132 728 4.3 7.2
1995 17,241 10,373 673 3.9 6.5
1996 17,237 10,486 672 3.9 6.4
1997 17,419 10,705 714 4.1 6.7
1998 17,560 10,911 741 4.2 6.8
1999 17,322 10,831 709 4.1 6.5
2000 17,263 10,877 666 3.9 6.1
2001 16,441 10,336 661 4.0 6.4
2002 15,259 9,485 618 4.1 6.5
2003 14,509 8,964 587 4.0 6.5
2004 14,315 8,925 592 4.1 6.6
2005 14,227 8,956 612 4.3 6.8
2006 14,155 8,981 632 4.5 7.0
2007 13,879 8,808 647 4.7 7.3
2008 13,406 8,463 660 4.9 7.8
2009 11,847 7,284 644 5.4 8.8
2010 11,528 7,064 624 5.4 8.8
2011 11,726 7,273 625 5.3 8.6
2012(P) 11,918 7,462 631 5.3 8.5
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Labor Statistics (BLS),
2013.
a. See Glossary for detailed explanation of Aerospace Employment .
b. BLS discontinued reporting employment-related statistics using the SIC in 2003; the NAICS is now
used. Prior years (back to 1990) revised for consistency.
P. Preliminary.
Appendix 353
ANNUAL PAYROLL:
ALL MANUFACTURING AND AEROSPACE INDUSTRIES
Aerospace Industry Aerospace

All as Percent
Manufacturing Production Other of All
Year Industries Total Workers Workers Manufacturing
1988 529,900 35,262 12,581 22,681 6.7%

1989 547,900 36,982 13,327 23,655 6.7
1990 561,300 35,635 14,360 21,276 6.3
1991 562,300 34,643 13,839 20,804 6.2
1992 583,400 33,262 13,053 20,209 5.7
1993 592,300 30,521 11,821 18,700 5.2
1994 620,400 28,471 10,964 17,506 4.6
1995 647,400 26,696 10,267 16,430 4.1
1996 673,600 28,075 11,179 16,896 4.2
1997 717,600 31,687 13,374 18,313 4.4
1998 675,200 33,083 14,084 18,999 4.9
1999 697,100 31,276 14,275 18,396 4.5
2000 749,300 31,490 13,513 19,143 4.2
2001a 704,095 40,903 13,641 27,262 5.8
2002 670,677 40,700 12,330 28,370 6.1
2003 663,931 40,528 12,023 28,505 6.1
2004 682,379 42,727 12,490 30,237 6.3
2005 699,396 45,972 14,318 31,654 6.6
2006 725,669 50,389 18,748 31,641 6.9
2007 739,918 52,355 23,023 29,332 7.1
2008 728,017 54,131 (D) (D) 7.4
2009 648,066 54,196 (D) (D) 8.4
2010 660,826 54,099 (D) (D) 8.2
2011 692,844 56,493 (D) (D) 8.2
2012(E) 710,182 58,125 (D) (D) 8.2
Source: U.S. Department of Labor, Bureau of Labor Statistics (BLS); Bureau of Economic Analysis, Survey of
Current Business, 2013.
a. Due to changes in BLS survey methodology (the North American Industry Classification System
replaced the Standard Industrial Classification (SIC), some aerospace industry (NAICS)
employment-related statistics reported prior to 2001 may not be directly comparable to those reported
from 2001 onward, although overall trends should be retained.
D. In 2008, BLS discontinued reporting "Production Workers" within the data series "Search, Detection,
and Navigation Instruments", a component of "Total Aerospace".
E. Estimate.
AEROSPACE RELATED EMPLOYMENT
Aircraft, Engines, and Parts
Guided Search,
Aircraft Other Aircraft Missiles, Detection &
Total Engines & Parts & Space Vehicles Navigation
Period Employment Total Aircraft Parts Equipment & Parts Instruments
All Workers (Thousands)
2000 666.1 438.4 242.7 98.1 97.6 78.4 149.4

2001 660.7 434.5 241.3 95.6 97.6 76.5 149.8
2002 618.4 396.7 220.2 87.9 88.6 73.6 148.1
2003 587.1 371.9 209.1 81.3 81.5 70.2 145.0
2004 592.0 369.9 207.2 79.2 83.5 71.6 150.5

2005 611.7 380.0 211.3 81.9 86.8 75.1 156.6
2006 631.8 398.5 221.7 84.4 92.4 75.5 157.7
2007 646.8 413.6 230.2 85.3 98.1 75.5 157.6
2008 659.8 428.9 237.4 87.2 104.3 77.6 153.3

2009 644.4 414.0 234.9 80.4 98.7 78.3 152.2
2010 623.6 401.7 228.2 76.6 96.9 75.9 146.0
2011 625.4 412.1 234.4 77.8 99.9 74.6 138.7
2012 631.4 424.9 238.6 80.5 105.9 72.4 134.0
1Q11 620.2 404.2 230.1 76.0 98.1 75.3 140.7

2Q11 622.6 408.8 232.8 77.1 98.8 75.0 138.9
3Q11 629.4 416.4 237.2 78.7 100.4 74.8 138.2
4Q11 629.1 419.0 237.5 79.3 102.2 73.1 137.0
1Q12 628.9 420.1 236.5 79.8 103.9 72.7 136.1

2Q12 629.5 421.7 235.5 80.5 105.7 72.9 135.0
3Q12 634.1 428.6 240.9 80.8 106.9 72.3 133.2
4Q12 633.0 429.4 241.5 80.8 107.1 71.9 131.8
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Labor Statistics (BLS).
Appendix 355
AVERAGE WEEKLY EARNINGS IN THE AEROSPACE INDUSTRY

Production Workers Only
Aircraft, Engines and Parts

Guided
Missiles, Search,
Aircraft Other Aircraft Space Detection &
a
Total Engines Parts & Vehicles Navigation
Year Aerospace Totala Aircraft & Parts Equipment & Parts Instruments
AVERAGE WEEKLY EARNINGS
1993 $691 $722 $761 $735 $615 $659 $614

1994 728 761 803 775 645 697 641
1995 732 764 812 792 634 716 637
1996 774 808 861 837 675 745 668
1997 818 851 919 863 708 792 687
1998 822 855 932 865 704 794 692
1999 816 849 923 883 686 803 687
2000 855 902 992 924 726 803 681
2001 882 929 1,025 955 744 848 694
2002 901 936 1,025 968 757 906 732
2003 927 963 1,033 1,024 780 941 771
2004 984 1,021 1,117 1,112 780 999 829
2005 1,020 1,075 1,205 1,131 818 1,038 829
2006 1,103 1,154 1,297 1,183 891 1,146 930
2007 1,232 1,227 1,349 1,294 966 1,368 1,146
2008 1,305 D 1,380 D 997 D D
2009 1,399 D 1,460 D 1,073 D D
2010 1,452 D 1,486 D D D D
2011 1,481 D 1,534 D D D D
2012(P) 1,431 D 1,504 D D D D
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Labor Statistics (BLS), 2013.
Notes: BLS discontinued reporting employment-related statistics using the SIC in 2003; the NAICS is now used.
Prior years revised for consistency.
a. Total columns are employment-based weighted averages.
D. Series discountinued by BLS.
P. Preliminary.
AVERAGE HOURLY EARNINGS IN THE AEROSPACE INDUSTRY

Aircraft, Engines and Parts

Guided
Missiles, Search,
Aircraft Other Aircraft Space Detection &
a
1993 16.53 17.13 18.51 17.19 14.36 15.93 14.63

1994 17.20 17.85 19.52 17.82 14.63 16.34 15.06
1995 17.27 17.96 19.96 17.85 14.55 16.43 14.87
1996 17.82 18.54 20.48 18.76 15.00 17.15 15.13
1997 18.25 18.90 20.76 19.12 15.31 18.23 15.31
1998 18.60 19.18 21.09 19.48 15.55 18.71 15.87
1999 19.02 19.64 21.79 20.04 15.61 18.91 16.31
2000 19.81 20.52 23.07 20.76 16.23 19.31 16.69
2001 20.57 21.25 24.06 21.27 16.83 19.92 17.46
2002 21.46 22.08 24.94 21.95 17.68 20.65 18.37
2003 22.27 22.93 25.41 23.50 18.36 21.44 19.29
2004 23.36 23.93 26.87 24.87 18.36 22.90 20.90
2005 23.91 24.82 28.37 25.41 18.82 24.26 20.53
2006 25.43 26.31 29.84 26.23 20.17 26.84 22.39
2007 28.20 28.40 30.52 28.87 22.10 31.90 27.27
2008 29.93 29.93 31.72 D 23.03 D D
2009 32.25 32.25 33.06 D 24.35 D D
2010 33.65 33.65 33.95 D D D D
2011 33.85 33.85 34.50 D D D D
2012(P) 33.02 33.02 34.39 D D D D
a. Total columns are employment-based weighted averages.
D. Series discontinued by BLS.
P. Preliminary.
Appendix 357
AVERAGE HOURS IN THE AEROSPACE INDUSTRY

Aircraft, Engines, & Parts

Guided
Other Missiles, Search,
Aircraft Aircraft Space Detection &
a
AVERAGE WEEKLY HOURS
1998 44.2 44.3 44.2 44.4 45.3 41.4 43.6

1999 42.8 43.0 42.4 44.1 43.9 40.8 42.1
2000 43.1 43.6 43.0 44.5 44.7 41.1 40.8
2001 42.7 43.4 42.6 44.9 44.2 41.0 39.7
2002 41.9 42.3 41.1 44.1 42.9 41.8 39.8
2003 41.6 41.9 40.7 43.6 42.5 42.1 40.0
2004 42.1 42.6 41.6 44.7 42.5 42.8 39.7
2005 42.6 43.2 42.5 44.5 43.5 42.6 40.4
2006 43.3 43.8 43.5 45.1 44.2 42.2 41.6
2007 43.7 44.0 44.2 45.1 43.7 42.5 42.1
2008 43.6 43.6 43.5 D 43.3 D D
2009 43.4 43.4 44.2 D 44.1 D D
2010 43.1 43.1 43.8 D D D D
2011 43.8 43.8 44.5 D D D D
2012(P) 43.3 43.3 43.7 D D D D
AVERAGE WEEKLY OVERTIME HOURS
1998 6.6 7.3 6.6 6.6 9.8 5.2 3.5

1999 5.1 5.6 4.7 5.9 6.8 6.3 3.0
2000 5.4 5.8 5.1 6.6 6.9 4.1 3.7
2001 5.2 5.6 4.6 6.7 6.9 3.8 3.2
2002 4.7 5.0 4.4 6.0 5.6 3.4 3.2
2003 4.7 5.2 4.8 6.1 5.5 3.9 2.7
2004 5.1 5.5 4.4 6.9 6.2 5.5 3.2
2005 5.2 5.7 4.8 6.7 6.4 5.5 3.3
2006 5.0 5.5 4.8 6.1 6.0 5.7 3.3
2007 4.7 5.1 5.0 5.4 5.9 3.7 3.0
2008 4.8 4.8 5.4 D 5.0 D D
2009 4.6 4.6 5.8 D 4.9 D D
2010 4.7 4.7 5.5 D D D D
2011 5.2 5.2 5.9 D D D D
2012(P) 4.9 4.9 D D D D D
a. Column reports employment-based weighted averages.
D. Series discountinued by the BLS.
P. Preliminary.
WORK STOPPAGES IN THE AEROSPACE INDUSTRY

Number of
Number of Workers Work-Days
Year Strikesa Involved Idle in Year
1988 3 10,600 415,800

1989 2 58,500 1,848,000
1990 1 2,300 56,700
1991 1 1,500 -
1992 1 3,800 11,400
1993 2 27,800 34,600
1994 - - -
1995 1 33,000 1,551,000
1996 2 7,800 90,100
1997 - - -
1998 - - -
1999 - - -
2000 3 22,400 566,400
2001 1 5,000 45,000
2002 3 7,500 118,100
2003 1 4,000 40,000
2004 - - -
2005 3 22,800 441,300
2006 3 6,600 194,800
2007 - - -
2008 2 32,200 1,151,800
2009 1 2,500 67,500
2010 1 1,700 30,600
2011 - - -
2012 - - -
Source: Bureau of Labor Statistics (BLS), Major Work Stoppages (Annual), 2012.
a. Strikes beginning during calendar year.
Appendix 359
OCCUPATIONAL INJURY AND ILLNESS INCIDENCE RATESa

ALL MANUFACTURING AND AEROSPACE INDUSTRIES
MANUFACTURING SECTOR 2007 2008 2009 2010 2011
All Manufacturing:
Total Cases 5.6 5.0 4.3 4.4 4.4
Lost Workday Cases 1.3 1.2 1.0 1.1 1.1
Non-Fatal Cases Without Lost Workdays 2.5 2.3 2.0 2.0 2.0
Total Aerospace:
Total Cases 3.9 3.6 3.3 3.2 3.3
Aircraft Manufacturing:
Total Cases 4.1 3.7 3.7 3.7 3.8
Aircraft Engine and Engine Parts Manufacturing:

Total Cases 3.6 3.4 2.9 2.7 2.5
Other Aircraft Parts and Auxiliary

Equipment Manufacturing:
Total Cases 5.3 4.9 4.2 4.3 4.5
Guided Missile and Space Vehicle Manufacturing:

Total Cases 1.3 1.1 1.0 0.8 0.8
Guided Missile and Space Vehicle Propulsion

Unit and Propulsion Unit Parts Manufacturing:
Total Cases 2.1 1.8 1.7 1.2 1.5
Source: Bureau of Labor Statistics(BLS), Nonfatal Injuries and Illnesses, and Fatal Injuries (IIF), 2011.
a. Defined as the number of injuries and illness cases per 100 full-time workers.
FEDERAL CIVILIAN EMPLOYMENT IN THE DEPARTMENT OF DEFENSE

Civil Military
Year Total Functions Functions
1983 1,026,461 30,816 995,645

1984 1,043,747 28,681 1,015,066
1985 1,084,549 28,754 1,055,795
1986 1,067,974 28,511 1,039,463
1987 1,090,018 28,352 1,061,666
1988 1,049,619 28,419 1,021,200
1989 1,075,437 28,081 1,047,356
1990 1,034,152 27,651 1,006,501
1991 1,012,716 27,385 985,331
1992 982,774 27,584 955,190
1993 921,179 27,055 894,124
1994 879,878 28,001 851,877
1995 831,806 27,790 804,016
1996 795,813 27,823 767,990
1997 749,461 26,429 723,032
1998 717,901 25,349 692,552
1999 690,706 25,027 665,679
2000 676,268 25,021 651,247
2001 668,364 24,027 644,337
2002 666,560 24,797 641,763
2003 660,267 25,081 635,186
2004 664,666 23,601 641,065
2005 667,946 22,455 645,491
2006 671,469 22,704 648,765
2007 669,539 21,644 647,895
2008 689,866 21,796 668,070
2009 731,205 23,750 707,455
2010 765,048 24,559 740,489
2011 766,968 24,438 742,530
2012 780,549 23,977 756,572
Source: Office of the Assistant Secretary of Defense - Public Affairs, DoD Personnel and Procurement
Statistics, Civilian Employment Statistics, September 2012.
Appendix 361
U.S. AEROSPACE INDUSTRY EMPLOYMENT:

TOP 25 STATES
Percent
Change
State 2008 2009 2010 2011 2010-2011
U.S. Total 659,800 642,010 622,424 624,001 0.3%

California 116,957 112,903 109,663 106,568 (2.8)
Washington 84,697 84,600 82,488 88,275 7.0
Texas 55,996 55,926 55,901 56,059 0.3
Arizona 36,561 38,698 35,751 34,727 (2.9)
Kansas 44,383 38,432 33,892 33,145 (2.2)
Connecticut 33,463 32,372 31,636 31,640 0.0
Florida 29,767 28,505 27,896 28,078 0.7
Georgia 19,990 20,213 20,473 21,992 7.4
New York 19,413 19,181 17,871 17,286 (3.3)
Ohio 18,198 17,428 16,635 17,224 3.5
Massachusetts 17,885 17,884 17,750 16,576 (6.6)
Missouri 15,049 15,374 15,089 14,631 (3.0)
Alabama 14,278 14,728 14,429 13,996 (3.0)
Pennsylvania 11,715 12,234 12,971 13,198 1.8
Colorado 10,091 9,966 9,560 9,424 (1.4)
New Jersey 10,222 9,699 9,189 8,989 (2.2)
Indiana 8,735 8,635 8,400 8,557 1.9
Utah 8,685 8,126 6,640 6,830 2.9
New Hampshire 1,178 1,113 1,065 6,421 502.9
Oklahoma 6,121 5,421 5,539 6,120 10.5
Maryland 5,415 5,999 6,162 5,770 (6.4)
Michigan 5,849 5,380 5,236 5,481 4.7
Illinois 5,508 5,475 5,378 5,278 (1.9)
South Carolina 1,383 1,938 3,012 4,550 51.1
North Carolina 4,018 3,900 3,710 4,451 20.0
Source: Aerospace Industries Association (AIA), based on data from the Bureau of Labor Statistics (BLS)
Quarterly Census of Employment and Wages, 2013.
( ) Indicates negative growth.
AEROSPACE MANUFACTURING EMPLOYMENT BY AGE GROUP

(Thousands of Employees)
Calendar Year 2011
Aerospace
Aircraft Products Percent
Age and Parts and Parts Total of Total
16-19 1 2 3 0.4%
20-24 18 13 31 3.7
25-34 65 82 147 17.8
35-44 81 86 167 20.2
45-54 125 141 266 32.1
55-64 89 96 185 22.3
65+ 11 18 29 3.5
Total 16+ 390 438 828 100.0%
Median Age 48.4 48.0
Calendar Year 2010
Aerospace
Aircraft Products Percent
Age and Parts and Parts Total of Total
16-19 2 1 3 0.4%
20-24 25 11 36 4.6
25-34 54 70 124 15.8
35-44 85 85 170 21.6
45-54 138 127 265 33.7
55-64 71 88 159 20.2
65+ 9 21 30 3.8
Total 16+ 383 403 786 100.0%
Median Age 46.2 47.9
Source: Bureau of Labor Statistics (BLS), Current Population Survey, National Labor Force Statistics, 2011.
Note: Data reported on this page is derived from a different BLS survey than that used elsewhere in
Aerospace Facts & Figures.
Appendix 363
EMPLOYMENT AND COST OF R&D SCIENTISTS AND ENGINEERS

ALL INDUSTRIES AND AEROSPACE INDUSTRY
(Thousands of Employees)
Employmenta Cost Per R&D Scientist and Engineerb
Aerospace
as a Percent of
Year All Industriesc Aerospaced All Industries All Industriesc Aerospaced
1985 622.5 130.2 20.9% $130,200 $161,700

1986 671.0 144.8 21.6 128,500 149,800
1987 695.8 136.3 19.6 128,800 180,400
1988 708.6 136.4 19.2 132,300 193,300
1989 722.5 134.8 18.7 134,500 207,300
1990 743.6 115.3 15.5 141,300 213,700
1991 773.4 100.2 13.0 148,600 177,000
1992 779.3 92.9 11.9 157,912 180,552
1993 764.7 97.9 12.8 153,336 176,450
1994 768.5 72.8 9.5 157,459 186,898
1995 746.1 63.5 8.5 167,339 213,328
1996 832.8 95.5 11.5 168,362 170,733
1997 885.7 94.6 10.7 171,499 208,217
1998 951.5 77.0 8.1 173,589 228,159
1999 997.7 66.4 6.7 180,989 237,058
2000 1,037.0 55.3 5.3 193,719 256,692
2001 1,048.1 25.1 2.4 190,654 356,018
2002 1,071.1 19.1 1.8 180,628 374,186
2003 1,075.5 32.5 3.0 179,901 430,097
2004 1,156.0 40.6 3.5 183,744 333,401
2005 1,111.3 37.9 3.4 217,483 379,164
2006 1,097.7 41.5 3.8 235,208 419,381
2007 1,135.5 37.5 3.3 253,858 455,864
2008 1,425.0 103.0 7.2 NA NA
2009 1,424.0 89.0 6.3 NA NA
Source: National Science Foundation, Business Research and Development and Innovation Survey (BRDIS), 2009.
a. Employment as of January. Scientists and engineers working less than full time have been included in terms of their full-time equivalent
number.
b. The arithmetic mean of the numbers of R&D scientists and engineers reported for January in two, consecutive years, divided into the
total R&D expenditures of each industry during the earlier year.
c. All manufacturing industries and those non-manufacturing industries known to conduct or finance research and development.
d. Companies classified in NAICS code 3364, having as their principal activity the manufacture of aerospace products and parts. Prior to
1999, data categorized using SIC system and reported combining codes 372 and 376.
NA. Not available.
U.S. DEGREES AWARDED IN SELECTED ENGINEERING DISCIPLINES

Percent Percent
Change Change
2009 2010 2011 2010-2011 2002-2011
Bachelors:
Aerospace 3,057 3,218 3,459 7.5% 102.2%
Computer 3,394 3,340 3,381 1.2 (28.4)
Electrical 9,859 9,634 9,942 3.2 (12.8)
Mechanical 17,375 18,391 19,241 4.6 45.2
Masters:
Aerospace 1,075 1,166 1,398 19.9 90.2
Computer 1,880 1,712 1,783 4.1 20.1
Electrical 6,137 6,345 6,666 5.1 85.3
Mechanical 4,757 5,066 5,915 16.8 65.9
Doctoral:
Aerospace 276 254 280 10.2 32.7
Computer 230 248 229 (7.7) 201.3
Electrical 959 992 1,030 3.8 64.3
Mechanical 1,216 1,078 1,225 13.6 53.9
Source: American Society for Engineering Education, Engineering By The Numbers, 2011.
Appendix 365
Income Statement, Balance Sheet,

and Other Financial Information
INCOME STATEMENT AND OPERATING RATIOS

FOR AEROSPACE COMPANIESa
INCOME STATEMENT 2009 2010 2011 2012
Net Sales, Receipts, Operating Revenues ......................... $238,571 $241,863 $253,103 $269,838
Less: Depreciation, Depletion, and Amortization
of Property, Plant, and Equipment ................................. 4,761 4,987 4,844 4,844
Less: All Other Operating Costs and Expenses,
including Selling Costs and General and
Administrative Expenses ..................................................
213,865 216,997 223,721 239,548
Income (or Loss) from Operations ...........................
$19,944 $19,877 $24,537 $25,444
Net Non-Operating Income (Expense) ................................ 959 1,393 3,433 5,470
Income (or Loss) before Income Taxes
= (Total Income) ................................................ $21,182 $21,359 $24,691 $27,512
Less: Provision for Current and Deferred
Domestic Income Taxes .................................................4,702 4,891 5,888 7,670
Income (or Loss) after Income Taxes
= (Net Profit) ....................................................... $16,424 $16,516 $18,802 $19,842
Cash Dividends Charged to Retained
Earnings ..........................................................................6,038 6,411 6,298 7,604
Net Income Retained in Business ...........................
$10,163 $9,967 $12,501 $12,238
Retained Earnings at Beginning of Yearb ....................... 88,169 93,934 100,257 111,386
Adjustments to Retained Earningsc .............................. (3,331) (4,888) (2,141) (930)
Retained Earnings at End of Yeard ........................

$95,224 $99,151 $110,620 $122,694
OPERATING RATIOS
Income before Taxes as Percent of Net Sales…....… 8.9% 8.8% 9.8% 10.2%
Provision for Current and Deferred Domestic Income
Taxes as Percent of Income Before Taxes
(Total Income) ........................................................ 22.2 22.9 23.8 27.9
Income after Taxes (Net Profit) as Percent of
Net Sales ................................................................ 6.9 6.8 7.4 7.4
Stockholders’ Equity ................................................ 26.9 22.9 24.3 25.5
Total Assets ................................................................. 5.5 5.5 6.1 5.9
Source: Bureau of the Census, Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations, 2013.
a. Based on sample of corporate entities classified in NAICS code 3364, having as their principal activity the manufacture
of aerospace products and parts.
b. Beginning-of-year retained earnings for any particular year do not equal end-of-year retained earnings for the previous
year because of rotation of small companies in survey sample.
c. Other direct credits (or charges) to retained earnings (net), including stock and other non-cash dividends, etc.
d. Retained Earnings at End-of-Year CALCULATED as Retained Earnings at Beginning-of-Year PLUS Income (Loss)
after Income Taxes MINUS Cash Dividends Charged to Retained Earnings PLUS Adjustments to Retained Earnings.
BALANCE SHEET FOR AEROSPACE COMPANIESa

As of End-of-Year, 2009–2012
BALANCE SHEET 2009 2010 2011 2012
ASSETS:
Current Assets:
Cash ........................................................................
$14,903 $12,647 $14,854 $15,036
Securities, Commercial Paper, and Other
Short-term Financial Investments ............................ 6,449 5,432 3,847 4,234
Total Cash and U.S. Government and
Other Securities ............................................... $16,470 $19,950 $16,687 $23,209
Receivables (Total) ...................................................
75,132 46,296 37,222 36,324
Inventories (Gross) ....................................................
66,113 78,110 90,444 94,831
Other Current Assets ........................................................
14,099 14,623 15,336 15,115
Current Assets—TOTAL .................................................
$176,696 $158,980 $163,535 $169,478
Net Plant, Property, and Equipment .................... 30,916 33,549 32,590 33,880
Other Non-Current Assets ............................................
106,864 113,479 121,766 140,397
Assets—TOTAL ................................................... $314,476 $306,008 $317,891 $343,755
LIABILITIES:
Current Liabilities:
Short Term Loans ....................................................$1,089 $1,011 $1,307 $934
Trade Accounts and Notes Payable ................................ 17,735 19,192 21,639 22,947
Income Taxes Accrued ............................................... 773 63 259 783
Installments Due on Long Term Debts ............................ 2,706 2,103 2,427 2,475
Other Current Liabilities ...........................................
121,799 99,044 93,706 95,970
Current Liabilities—TOTAL ...................................... $144,102 $121,413 $121,829 $127,108
Long Term Debt ..........................................................49,739 51,605 46,911 55,019
Other Non-Current Liabilities ..........................................55,394 59,088 71,764 81,347
Liabilities—TOTAL ..........................................................
$249,233 $232,107 $245,966 $269,490
Stockholders’ Equity:
Capital Stock ................................................................
($28,875) ($25,642) ($38,877) ($44,849)
Retained Earnings .........................................................94,118 99,543 110,802 119,114
Stockholders’ Equity—TOTAL .....................................
$67,324 $74,919 $71,925 $74,265
Liabilities & Stockholders’ Equity

TOTAL ........................................................................
$314,476 $306,008 $317,891 $343,755
Net Working Capital .....................................................

$32,594 $37,567 $41,706 $42,370
Source: Bureau of the Census, Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations, 2013.
a. Based on a sample of corporate entities classified in NAICS code 3364, having as their principal activity the
manufacture of aerospace products and parts.
Appendix 367
NET PROFIT AFTER TAXES

ALL MANUFACTURING
AEROSPACE INDUSTRY PROFITS
CORPORATIONS
Year
Millions of As a Percent of: Profits as a Percent of:
Dollars Sales Assets Equity Sales Assets Equity
1993 4,621 3.6 3.5 13.2 2.8 2.9 8.1

1994 5,655 4.7 4.3 14.8 5.4 5.8 15.6
1995 4,633 3.8 3.5 11.1 5.7 6.2 16.2
1996 7,150 5.6 5.1 17.1 6.0 6.5 16.8
1997 7,221 5.2 4.8 17.3 6.2 6.6 16.6
1998 7,701 5.0 4.8 18.0 6.0 6.1 15.7
1999 10,214a 6.4 6.0 21.2 6.2 6.1 16.5
2000 7,260 4.7 4.3 14.2 6.1 5.9 15.2
2001 6,565 3.9 3.6 11.6 0.8 0.8 2.0
2002 6,572b 4.2 3.7 12.2 3.3 2.9 7.8
2003 7,225 4.2 3.3 12.5 5.4 4.7 12.1
2004 10,291 5.5 4.3 15.3 7.1 6.4 15.8
2005 12,383 6.3 4.6 16.5 7.4 7.0 16.6
2006 14,203 6.8 5.1 18.7 8.1 7.7 17.5
2007 18,658 8.0 6.6 24.1 7.3 6.7 15.2
2008 14,568 6.1 4.7 18.6 4.2 3.8 8.9
2009 16,424 6.8 5.5 26.9 5.6 4.2 10.3
2010 16,516 6.8 5.5 23.0 8.3 6.6 15.1
2011 18,802 7.4 6.1 24.3 9.2 7.7 17.0
2012(P) 20,260 10.2 6.1 25.7 8.6 7.0 15.8
Source: Aerospace Industries Association (AIA), based on data from the Bureau of the Census, Quarterly Financial Report for
Manufacturing, Mining, and Trade Corporations, 2013.
a. Includes non-operating income (less interest expense) totaling $4.4 billion.
b. Includes non-operating expenses (less interest expense) totaling $3.5 billion.
P. Preliminary.
CAPITAL EXPENDITURES
All
Manufacturing
Year Industries Aerospacea Aircraft Missiles
1982 $74,562 $2,142 $1,680 $462

1983 61,931 2,159 1,530 629
1984 75,186 3,050 2,091 960
1985 83,058 3,784 2,429 1,356
1986 76,355 4,145 2,818 1,327
1987 78,650 3,612 2,536 1,075
1988 81,593 3,388 2,362 1,026
1989 98,738 3,921 2,800 1,121
1990 105,018 3,490 2,621 869
1991 103,003 3,407 2,823 584
1992 103,188 3,860 3,384 476
1993 103,133 2,725 2,307 418
1994 112,784 2,363 1,969 395
1995 128,473 2,114 1,734 380
1996 139,323 2,513 2,023 490
1997b 151,511 3,132 2,380 752
1998 152,708 3,477 2,613 864
1999 150,325 3,422 2,338 1,084
2000 154,479 2,326 1,894 432
2001 143,083 2,449 2,059 390
2002 123,067 2,842 2,354 488
2003 112,176 2,389 1,859 530
2004 113,793 2,164 1,784 380
2005 128,292 2,981 2,247 734
2006 135,801 2,889 2,424 465
2007 155,776 3,125 2,711 414
2008 166,086 3,644 3,168 476
2009 130,081 2,934 2,432 502
2010 127,639 3,183 2,600 583
2011 146,652 3,847 3,394 453
Source: Bureau of the Census, Annual Survey of Manufacturers, 2011.

a. Combined total for establishments in Aircraft, Missiles, Space Vehicles, and Parts
Manufacturing.
b. Prior to 1997, figures included only new capital expenditures.
Appendix 369
Key Operating Costs for Selected Aerospace

Manufacturing Centers
KEY OPERATING COSTS FOR SELECTED AEROSPACE

MANUFACTURING CENTERS
As of 2011
Total Annual Hourly Land Cost

Operating Costa Labor Power per Acre
State Location (in millions) Cost (¢/kwh) (in thousands)
CA San Jose/Sunnyvale $29.31 $27.61 11.90 $1,181.71

CA Los Angeles/Torrance 28.42 26.21 10.64 1,400.00
MA Boston/Lexington 27.10 26.07 11.48 220.00
WA Seattle/Everett/Renton 27.00 25.69 7.24 530.00
CT East Hartford/Middletown/Cheshire 26.10 25.57 16.78 152.00
MD Bethesda/Rockville/Gaithersburg 25.83 24.77 10.16 600.00
MA Worcester/Marlborough 25.51 24.34 10.34 143.00
IL Chicago 25.37 25.17 10.95 425.00
CA Riverside/San Bernardino 25.23 25.03 10.64 339.00
PA Philadelphia/King of Prussia 24.99 24.80 7.47 290.00
NY Rochester 24.14 24.18 9.11 60.00
AZ Phoenix/Mesa 24.05 23.06 7.47 506.00
MN Minneapolis/St. Paul 24.04 24.33 5.94 270.00
ME North Berwick/Portland 23.66 22.59 13.66 109.00
CO Boulder/Denver 23.46 24.41 5.91 196.00
OH Cleveland 23.22 23.63 8.03 109.80
TX Houston 23.11 23.95 9.33 139.00
OH Cincinnati 22.60 23.20 7.00 74.00
MO St. Louis 22.54 23.16 4.52 201.00
TX Dallas/Fort Worth/Irving 22.53 23.57 7.91 130.00
NC Charlotte 22.19 23.06 4.31 102.90
OK Tulsa 21.88 22.24 4.85 68.00
FL Pensacola 21.81 21.63 8.93 61.00
GA Savannah 21.71 22.06 6.86 58.80
SC Greenville/Spartanburg 21.03 22.01 4.96 55.00
IA Cedar Rapids 21.00 22.13 4.68 85.75
Source: BizCosts.com. Twenty-six of 62 major U.S. aerospace markets surveyed in 2011 Comparative Aerospace Industry
Manufacturing Costs.
a. Based on a representative 250-worker aerospace manufacturing plant occupying 150,000 sq. ft. on a 25-acre industrially-
zoned site.
(Continued on next page)

KEY OPERATING COSTS FOR SELECTED AEROSPACE

MANUFACTURING CENTERS
As of 2011, continued
Construction Property Tax Sales Tax

State Location ($/sq ft) (per $1,000) (state and local)
CA San Jose/Sunnyvale $104.22 $11.00 $9.25

CA Los Angeles/Torrance 97.17 11.50 9.75
MA Boston/Lexington 100.22 32.68 6.25
WA Seattle/Everett/Renton 89.52 12.10 9.50
CT East Hartford/Middletown/Cheshire 92.22 37.69 6.00
MD Bethesda/Rockville/Gaithersburg 98.30 24.00 6.00
MA Worcester/Marlborough 92.44 26.92 6.25
IL Chicago 97.30 26.03 10.25
CA Riverside/San Bernardino 93.27 10.90 8.75
PA Philadelphia/King of Prussia 95.55 25.40 8.00
NY Rochester 86.60 31.10 8.00
AZ Phoenix/Mesa 73.29 23.80 8.30
MN Minneapolis/St. Paul 91.03 40.39 7.75
ME North Berwick/Portland 77.84 25.00 5.00
CO Boulder/Denver 82.71 32.26 7.72
OH Cleveland 87.60 21.54 7.75
TX Houston 72.36 22.50 8.25
OH Cincinnati 92.20 23.41 6.50
MO St. Louis 88.54 17.00 8.24
TX Dallas/Fort Worth/Irving 70.51 24.60 8.25
NC Charlotte 62.16 12.40 8.25
OK Tulsa 66.35 14.60 8.52
FL Pensacola 62.14 16.90 7.50
GA Savannah 63.44 20.30 7.00
SC Greenville/Spartanburg 56.81 19.65 6.00
IA Cedar Rapids 77.00 17.60 7.00
Source: BizCosts.com. Twenty-six of 62 major U.S. aerospace markets surveyed in 2011 Comparative Aerospace Industry
Manufacturing Costs.
Appendix 371
Major DOD and NASA Contractors
DEPARTMENT OF DEFENSE:
a
TOP 25 MAJOR CONTRACTORS
2008 2009 2010 2011 2012
TOTAL CONTRACT AWARDS $397,231 $372,923 $367,674 $373,983 $360,822
Lockheed Martin Corporation 28,054 30,648 27,889 33,192 28,398

The Boeing Company 20,757 20,065 17,797 20,132 27,793
Raytheon Company 14,166 15,496 14,602 13,940 14,093
General Dynamics Corporation 14,997 15,842 14,671 18,593 13,541
United Technologies Corporation 8,302 7,128 6,473 7,241 7,919
Northrop Grumman Corporation 15,848 14,209 15,075 6,547 7,226
L-3 Communications Holdings Inc. 6,350 6,866 6,827 6,755 6,406
BAE Systems PLC 15,487 7,028 6,406 6,896 5,924
SAIC, Inc. 4,391 4,905 4,810 5,283 5,074
b
Huntington Ingalls Industries Inc. 2,618 2,021 NA 3,179 4,038
Humana Inc. 2,960 3,440 3,249 3,445 3,472
Triwest Healthcare Alliance Corporation 2,369 2,672 2,722 3,093 3,008
Health Net, Inc. 2,438 2,834 2,961 2,963 2,933
Bell Boeing Joint Project Office 2,801 2,666 2,815 2,668 2,895
Royal Dutch Shell PLC 1,594 1,908 1,044 895 2,872
Veritas Capital Fund II L.P. 67 60 42 2,862 2,850
Supreme Group Holding SARL 647 913 2,123 2,033 2,828
Booz Allen Hamilton 1,898 2,273 2,583 2,616 2,555
General Electric Company 3,456 3,445 2,971 2,700 2,546
Bechtel Group Inc. 2,056 2,328 2,106 2,490 2,441
General Atomic Technologies Corporation 1,074 1,346 1,807 1,954 2,421
United Launch Alliance LLC NA 217 117 535 2,385
Textron Incorporated 2,798 1,594 2,197 2,494 2,345
Northrop Grumman Systems Corporation 611 943 778 1,903 2,309
URS Corporation 2,338 2,495 2,146 2,153 2,257
Source: Aerospace Industries Association (AIA), based on data from USAspending.gov, Department of Defense, Prime Award
Spending Data, 2013.
a. Ranking based on net value of prime contracts awarded during the last fiscal year.
b. 2008 and 2009 data reflects Northrop Grumman Ship Systems, Inc.
NA. Not available.
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION:

TOP 25 MAJOR CONTRACTORSa
2009 2010 2011 2012
TOTAL PROCUREMENTS $15,316 $16,106 $15,399 $15,379
Lockheed Martin Corporation $1,962 $2,096 $1,824 $1,618

The Boeing Company 1,091 1,182 1,246 1,440
Jacobs Technology Inc. 696 827 681 684
United Space Alliance LLC 1,523 1,808 1,140 627
Russian Space Agency 387 341 414 586
Raytheon Company 98 119 261 432
Orbital Sciences Corporation 92 194 354 422
Alliant Techsystems Inc. 710 627 505 338
United Launch Alliance LLC 276 294 345 315
Northrop Grumman Corporation 375 320 206 299
United Technologies Corporation 454 614 424 285
Stinger Ghaffarian Technologies, Inc. (SGT) 278 306 282 276
Science Applications Int’l. Corporation 364 336 273 263
Space Exploration Technologies Corp. 26 115 195 256
URS Corporation 156 155 204 219
Arctic Slope Regional Corporation 192 221 220 213
Qinetiq North America Inc. 87 68 238 201
Computer Sciences Corporation 254 239 210 194
General Dynamics Corporation 58 59 126 190
Ball Aerospace & Tech Corporation 141 124 138 182
Exelis Inc. 105 104 121 168
Wyle Laboratories 148 144 156 104
Abacus Technology Corporation 92 103 93 91
Hewlett-Packard Company 2 1 3 90
Honeywell International Inc. 16 22 22 83
Source: Aerospace Industries Association (AIA), based on data from USAspending.gov, National Aeronautics and Space
Administration, Prime Award Spending Data, 2013.
a. Ranking based on net value of prime contracts awarded during the last fiscal year. Awards are also given to non-
business firms, which include educational institutions, non-profit organizations, the Jet Propulsion Laboratory,
government agencies, and outside U.S. contracts.
373
About the Authors
Robert Materna, Ph.D. CPL

Dr. Materna is a Professor of Business Administration and Director
of Research at the Center for Aviation and Aerospace Leadership in
the College of Business at Embry-Riddle Aeronautical University–
Worldwide. Dr. Materna was a Command Pilot in United States Air
Force and served in a number of increasingly responsible positions
in the areas of program management, acquisition logistics, logistics
management, and international logistics during his Air Force career. He
completed his military service as an Officer Scholar at the Air Force
Institute of Technology. Dr. Materna is also a Certified Professional
Logistician (CPL) and possesses an Airline Transport Pilot rating.
Following his Air Force career, Dr. Materna spent over a decade as
a Senior Manager at Andersen Consulting (Accenture), Director
of Research at NCR Corporation (World Headquarters), and Vice
President of Research for a small non-profit organization that special-
ized in doing research for large corporations worldwide.
Dr. Materna’s research interests focus on international business,

aerospace manufacturing, supply chain management, leadership, and
innovation. He has been a frequent speaker at conferences across the
U.S., Europe, Asia, and South America and has authored a number of
white papers and articles in publications such as the Air Force Journal
of Logistics, the International Society of Logistics’ Spectrum, and the
Academy of International Business (SE) Journal on Research, Teaching
and Practice. He also wrote a chapter on Air Cargo Transportation for
a widely used text on International Logistics, and was one of the primary
authors of the Aerospace Industry Report 2011.
Dr. Materna is a graduate of the U.S. Air Force Academy and the Air
Force Institute of Technology. He obtained his Ph.D. in Business
Administration, with a major in International Business, from Georgia
State University.
Dr. Materna can be reached at Robert.Materna@erau.edu
Robert E. Mansfield, Jr., Brig. Gen., USAF (Ret.)

Brig Gen Robert E. Mansfield, Jr., USAF (Ret.) is the Executive
Director of the Center for Aviation and Aerospace Leadership in
the College of Business at Embry-Riddle Aeronautical University–
Worldwide. During his time in the Air Force, Gen Mansfield held
numerous assignments at home and abroad leading major Air Force
logistics and management operations. Prior to retirement, he served as
Director of Supply for the U.S. Air Force at the Pentagon, and led the
transformation of the USAF supply system.
Following his military career, Gen Mansfield served as a senior leader
in the Lockheed-Martin Joint Strike Fighter program. He also served
as the Director of the National Center for Aerospace Leadership and
principal investigator of the National Aerospace Leadership Initiative
funded by the U.S. Congress. He has served on the Supply Chain
Council’s Aerospace and Defense Special Industry Group (SIG) and
founded and chaired the Supply Chain Risk SIG.
Gen Mansfield has been a member of the Clarkson University
Business School’s Board of Advisors, Embry-Riddle Aeronautical
University–Worldwide Industry Advisory Board, and the Missile
Defense Agency’s Transforming Defense Supply Chains Technical
Advisory Board. He is currently a member of the Board of Directors
of the National Council for Advanced Manufacturing and chair of the
Manufacturing Committee for the Aerospace States Association. He
was co-chair of the Michigan Governor’s BRAC Task Force in 2005
About the Authors 375
and a member of the Defense Science Board Summer Study on 21st

Century Strategic Technology Vectors in 2006.
Gen Mansfield holds a Bachelor of Science degree (cum laude) from
the University of Arizona and a Master of Science degree from the
Air Force Institute of Technology. He is a graduate of the Defense
Systems Management College Program Manager’s Course, the Air War
College, and is a fully qualified Joint Service Officer
Gen Mansfield can be reached at Robert.Mansfield@erau.edu
Frederick W. Deck, III

Mr. Frederick “Derrick” Deck is the Senior Director of Research at
the Aerospace Industries Association (AIA), in Arlington, Virginia,
and is the point-of-contact for all economic research conducted at the
association. He also prepares the annual handbook Facts & Figures, a
compendium of statistics and other information relating to the aero-
space and defense industry.
Prior to joining AIA in mid-2012, Mr. Deck was the Chief
Information Officer at the Airline Industrial Relations Conference in
Washington, DC, where he oversaw airline labor and employee rela-
tions research and support, and wrote extensively on matters related to
negotiations, mediation, and employee benefits plans for both U.S. and
foreign flag air carriers.
He has also played a significant role in supporting Department
of Labor, Department of Transportation, and Federal Aviation
Administration actions on statutory and regulatory matters.
Mr. Deck has a BA in Economics from George Mason University, with a
specialty in Econometrics and Economic Problems and Public Policies.
Mr. Deck may be reached at derrick.deck@aia-aerospace.org
377
Acknowledgements
Numerous people contributed a significant amount of time writing,

reviewing, and assisting the authors with various sections of this report.
To them, we are extraordinarily grateful. The list is long and we cannot
thank everyone, but a number of major contributors stand out.
First, we would like to thank Professor Michael E. Porter and Mr.
Richard Bryden for their assistance in developing the section on aero-
space clusters. Dr. Porter is the Bishop William Lawrence University
Professor at Harvard Business School and Director of the Institute
for Strategy and Competitiveness. Mr. Bryden is the Director of
Information Products at the Institute for Strategy and Competitiveness
where his work centers on the Cluster Mapping Project, as well as
disseminating research and applied economic analysis to scholars and
practitioners worldwide. Their work provides extraordinary practical
insight into what firms, universities, government agencies and other
organizations can do to make America more competitive.
We would also like to thank Mr. K. Dunlop “Dun” Scott and the team
at Columbia Partners for their assistance in writing the chapter on
finance and alternative financing options. Mr. Scott is the President
and Chief Operating Officer of Columbia Partners where, among

other duties, he oversees the firm’s alternative investment strategies.
Dun has been an ardent supporter of the report from the beginning
and his expertise has enlightened our understanding of the critical role
of capital markets and finance in the industry. Mr. Scott’s comments
are useful for firms of all sizes, but particularly helpful for small to
medium-size aerospace manufacturers that do not always have the
resources of their larger counterparts.
Mr. William A. Chadwick Jr. was extremely helpful in framing and
writing early versions of the report. Bill has an enormous grasp of the
industry and his assistance in collecting and analyzing data was invalu-
able. Mr. Chadwick previously served as Director of the Aerospace
Research Center at the Aerospace Industries Association (AIA) and is
currently a consultant to the aerospace and defense industry.
In past aerospace industry reports, the focus has been primarily on
how the demand for aviation and aerospace products will impact
manufacturing and sales. This year, we would like to acknowledge Dr.
Aman Gupta, Chair of the Logistics and Supply Chain Management
program at Embry-Riddle Aeronautical University–Worldwide, for
introducing the topic of supply chain risk. Managing risk in the supply
chain is a major issue for both commercial and military manufacturers,
and a topic we hope to address in more detail in the future.
There are also a number of people at the Aerospace Industries
Association we would like to recognize, including: Mr. Don Forest, Chief
Operating Officer; Mr. Chip Sheller, Vice President, Communications;
Dr. Edward Goldstein, Senior Writer and Editor; and Mr. Dan Stohr,
Director, Communications. We would also like to acknowledge the
following AIA staff members who wrote or reviewed specific sections
of the report: Mr. Rusty Rentsch, Assistant Vice President, Technical
Operations; Ms. Susan Lavrakas, Director, Workforce; Ms. Anne
Ward, Manager, Team America Rocketry Challenge and International
Programs; Ms. Leslie Riegle, Director, Environment & Security; Mr.
Cortney Robinson, Director, Civil Aviation Infrastructure; and Mr. Dan
Hendrickson, Director, Space Systems.
Finally, the authors would like to thank Ms. Marion C. Blakey,
President and Chief Executive Officer of the Aerospace Industries
Association, and Dr. John Watret, Chancellor, Embry-Riddle
Aeronautical University–Worldwide. Without their steadfast support,
this report would not have been possible.
Photo Credits:
Chapter 1: Boeing 787 Dreamliner in Production at Seattle. (Credit: The Boeing

Company)
Chapter 2: Boeing 747 Taking Off On-Schedule. (Credit: Yao Meng Peng, Photos.com)
Chapter 3: Taking Off from New York. (Credit: John Foxx, Photos.com)
Chapter 4: The Last Lockheed Martin Raptor. Air Force Magazine. (Credit: Damien
A. Guarnieri, Lockheed Martin)
Chapter 5: FedEx Boeing 777F Undergoing Maintenance, Repair, and Overhaul in

Memphis. (Credit: FedEx Corporation)
Chapter 6: The New Lockheed Martin Joint Strike Fighter. (Credit: Lockheed Martin)
The photos on the front and back of this report are pictures of Northrop Chapter 7: Embraer 175 and ERJ 135 Jets in Production at Sao Jose dos Campos,
Grumman’s X-47B Unmanned Combat Air System (UCAS). Brazil. (Credit: Embraer)
The X-47B is a tailless, intelligent, unmanned aircraft under development for Chapter 8: Keeping America Strong. Senior Airman Christopher Blackstone applies
the U.S. Navy to demonstrate carrier-based launches and recoveries and lubrication to the nose landing gear struts of an A-10 Thunderbolt II at Osan Air
autonomous aerial refueling. Base, South Korea. (Credit: Senior Airman Adam Grant, U.S. Air Force)
The X-47B UCAS is based on the concept of network centric warfare Chapter 9: New Bombardier Global 6000 at NetJets Headquarters. (Credit: NetJets)
where a single controller located anywhere can monitor and control several
aircraft simultaneously. When fully operational, the X-47B will be able to Chapter 10: Qube® Unmanned Aircraft System designed to meet the needs of first
suppress enemy air defenses and conduct deep strike and surveillance responders. (Credit: AeroVironment)
missions within a global command and control network.
Chapter 11: Night time image of the Northern Gulf coast. From 220 miles above
Photo credit: Northrop Grumman Corporation. Earth, one of the Expedition 25 crew members on the International Space Station
shot this image of the northern Gulf coast. (Credit: NASA)
Acronyms and Other Terms: UH-60 Blackhawk helicopter in Kandahar Province,

Afghanistan. (Credit: Sgt. Daniel Schroeder, U.S. Army)
Glossary: SpaceX Dragon Resupplying the International Space Station.

(Credit: NASA)
Appendix: Bell Helicopter 412EP. (Credit: Bell Helicopter)
About the Authors: Air Force Hunter-killer MQ-9 Reaper UAV in Afghanistan.
(Credit: U.S. Air Force)
Acknowledgements: The Ticonderoga-class guided-missile cruiser USS Cowpens

(CG 63) fires Standard Missiles (SM) 2 at an airborne drone during a live-fire
weapons shoot. (Credit: U.S. Navy)
Aerospace Industry Report 3rd Edition
Aerospace
3rd Edition
Industry Report
Facts, Figures & Outlook for
the Aviation and Aerospace
Manufacturing Industry
Facts, Figures & Outlook for the Aviation and Aerospace Manufacturing Industry
Photo courtesy of Northrop Grumman Corporation
Published by the Aerospace Industries Association of America

and the Center of Aviation & Aerospace Leadership
at Embry-Riddle Aeronautical University–Worldwide

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Aerospace Industry Report 3rd Edition

Published by the Aerospace Industries Association of America

Chapter 1: Boeing 787 Dreamliner in Production at Seattle. (Credit: The Boeing

Chapter 5: FedEx Boeing 777F Undergoing Maintenance, Repair, and Overhaul in

Acronyms and Other Terms: UH-60 Blackhawk helicopter in Kandahar Province,

Glossary: SpaceX Dragon Resupplying the International Space Station.

Appendix: Bell Helicopter 412EP. (Credit: Bell Helicopter)

Acknowledgements: The Ticonderoga-class guided-missile cruiser USS Cowpens

Robert Materna, Ph.D.

Brig. Gen. Robert E. Mansfield, Jr. USAF (Ret.)

Frederick W. Deck, III

William A. Chadwick, Jr.

Aman D. Gupta, Ph.D.

Aerospace Industries Association Center for Aviation &

All rights reserved. No part of this publication may be reproduced

© 2013 Embry-Riddle Aeronautical University and the Aerospace Industries Association

Welcome to the second joint publication of

space manufacturing in the U.S. Now in its

industry heads into what appears to be a

agencies, it is also clear that we must continue to promote an environ-

Marion C. Blakey John R. Watret, Ph.D.

The Aerospace Industries Association (AIA) is the most authorita-

Embry-Riddle Aeronautical University was founded in 1925, just 22

The CAAL Manufacturing Initiative

The CAAL Manufacturing Initiative is one of several programs

Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Chapter 9 n Finance and Capital Markets. . . . . . . . . . . . . . . . . . . . . 149

Collaboration Strategies for the Aerospace Industry. . . . 181

Cyber-Warfare and the U.S. Aerospace and Defense Industry. . 209

Figure 1.9 Aerospace Exports for Selected States in 2012. . . . . . . . 10

Figure 3.8 Dependency Ratios for Selected Countries . . . . . . . . . . 47

Figure 6.14 Trends in Pacific Region Aerospace Exports by State. . . . 92

Figure 7.2 Aerospace Trade Trends with Brazil. . . . . . . . . . . . . . . . . 112

Figure 9.11 Price Comparison S&P 500 Index vs. iShares

Figure 11.4 Global Market Distribution of General Aviation

Table 6.9 South-Atlantic Region Aerospace Exports by State. . . . 101

The Return of American

The Return of Manufacturing

Manufacturing and the Economy

ever. As stated in the report, manufacturing contributed $1.7 trillion to

Hourly Rate Wages & Salaries Benefits

Source: U.S. Department of Commerce, The Benefits of Manufacturing Jobs, 2012.

The rebound in manufacturing is also important because, as illustrated

website, a PMI reading above 50 percent indicates that the manufactur-

Figure 1.2 U.S. Manufacturing Jobs

Figure 1.3 U.S. Manufacturing Output Index

Index 2005 = 100

Figure 1.4 Index of Manufacturing Output per Person, Durable Goods

Index 2005 = 100

Figure 1.5 Manufacturing Output for Selected Countries

Billions of U.S. Dollars

Even though U.S. manufacturing output has generally increased over

Hourly Rate Wages & Salaries Benefits

Figure 1.7 U.S. Aerospace Manufacturing Jobs

Source: U.S. Bureau of Labor Statistics, March 2013.

In a manner similar to that of the overall manufacturing sector, as the

Figure 1.8 Aerospace Manufacturing Output

Aerospace Manufacturing Output per Hour Index (2002 = 100)

As we discover more about the complex ways manufacturing