Aerospace Sales On New Flight Plan Trend Shows Commercial Buyers Outpace Government Contracts

Throughout its history, the aerospace industry has relied on government contracts for the bulk of its sales. But in 1998, starting a trend that is expected to continue, the majority of the industry’s sales will be commercial aircraft and space products, such as satellites.

“This year we are at the crossover point in the industry’s long transition from a workload pattern driven by government contracts to one driven primarily by commercial sales,” Don Fuqua, president of the Aerospace Industries Association, said in December.

Fuqua said sales to the U.S. government have at times made up as much as 90 percent of the industry’s income, and have only once in the past been surpassed by sales to other customers. But this year only half the industry’s sales are to the government, and next year that number is expected to drop to 45 percent.

Fuqua made his comments during the trade association’s 33rd year-end review and forecast luncheon, an annual gathering of industry officials and reporters who cover them. The trade association represents U.S. manufacturers of commercial, military and business aircraft, and the group’s biggest member is the Seattle-based Boeing Co.

Among the highlights of Fuqua’s report:

Overall sales and employment in the aerospace industry are up. The industry recorded $129.6 billion in sales this year, up 11 percent over last year, and that number is expected to reach $144.5 billion next year. Employment in the aerospace industry rose to 869,000 this past July.

Profits, new orders and military sales are down. Sales to NASA are down $600 million this year, and total military aircraft sales are down 8 percent to the lowest level since 1983. Industry profits are down 7 percent since last year because of production problems at Boeing. Orders are down 14 percent since 1996.

One of the biggest areas of potential growth for the industry is in commercial space. Sales in this area are up 18 percent this year.

Fuqua, a former congressman from Florida who has headed the industry group since 1987, is retiring from his $437,000-a-year job this year. In his swansong speech, he also bemoaned what he described as increasing isolationism in the United States, unfair protectionism in Europe and a bloated bureaucracy at the Pentagon.

“We are all disturbed at the U.S. trend toward isolationism, which we must disavow,” Fuqua said, alluding to Congress’ refusal thus far to grant President Clinton so-called “fast-track” authority to expedite passage of international trade agreements.

Fuqua said the aerospace industry must do more to persuade the public of the benefits of exports - a message Boeing has been promoting with increasing vigor.

Fuqua suggested that he believes Europe is trying to place stumbling blocks in front of Boeing to buy time for Airbus. He cited the European Commission’s stance on the merger of Boeing and McDonnell Douglas, a European threat to withdraw from an agreement on aircraft trade and an increase in noise and emission regulations in Europe.

Regarding the Pentagon, Fuqua said he is concerned about “several decades of overregulation” and complained about “the huge infrastructure the department has built up” made up of support staff.