The aerospace industry, for purposes of this chapter, includes firms whose value of shipments and employment is classified under the following SIC categories: Aircraft (3721), Aircraft Engines and Engine Parts (3724), Aircraft Equipment, Not Elsewhere Classified (N.E.C.) (3728), Guided Missiles and Space Vehicles (3761), Guided Missile and Space Vehicle Propulsion Units and Parts (3764), and Guided Missiles and Space Vehicle Equipment, N.E.C. (3769).
Before reading this chapter, please see "How to Get the Most Out of This Book" on page one. It will clarify questions you may have concerning data collection procedures, factors affecting trade data, forecasting methodology, the use of constant dollars, the difference between industry and product data, sources and references, and the Standard Industrial Classification system (SIC). For other topics related to this chapter, see chapter 31 (Radio Communications and Detection Equipment).
The current-dollar value of product shipments has doubled during this decade and is estimated to reach $120 billion in 1990. Steady worldwide sales of large commercial transport aircraft are sustaining the industry's growth. Between 1980 and 1990, the inflation-adjusted valued of shipments grew at a compound annual rate of 3.6 percent. Although the aerospace industry as a whole continues to grow, some sectors are not expanding. Declining defense budgets for aerospace products both in the United States and in other developed countries have reduced procurements of military aircraft and missile systems from U.S. suppliers. In addition, many foreign countries are becoming more self-sufficient in military aerospace equipment, thus reducing U.S. manufacturers' opportunities for export sales.
The shift in demand from the military to the civil aircraft sector is apparent in the business indicators published by the Bureau of the Census. In 1989, civil aircraft represented 74 percent of the total order backlog, while military aircraft accounted for the remaining 26 percent. This contrasts sharply with 1985, when the civil aircraft sector accounted for only 37 percent of the backlog.
INTERNATIONAL COMPETITIVENESS
Increased foreign demand for U.S. civil aircraft and the growing trend toward international industrial cooperation continue to foster more U.S. aerospace trade. In 1990, exports and imports of aerospace products climbed to record highs, with exports topping $35 billion for the first time ever. Exports of large commercial transport aircraft accounted for more than 40 percent of the total.
The aerospace sector remains one of the leading contributors to the plus side of the U.S. trade balance. Even though imports rose to an estimated $10.2 billion in 1990, the trade surplus hit an all-time high of about $28 billion. In 1991 the surplus is forecast to rise to $32 billion, mostly because of growing exports of widebody jets.
The enormous cost and high risk of new technology has stimulated a proliferation of cooperative programs between U.S. and foreign aerospace manufacturers. In both military and civil programs, U.S. manufacturers are relying more on foreign technology, manufacturing facilities, and capital to develop and market new products. This globalization is a long-term trend, and many of the cooperative projects will not be completed in this decade.
As U.S. companies rely on foreign subsystems for use in U.S.-made aircraft or engines, imports rise (Table 3). U.S. purchases of foreign aircraft engines and aircraft parts totaled $7.3 billion in 1990 and accounted for 70 percent of total aerospace imports. In 1991, engines and parts are expected to grow to almost $7.7 billion. Imports of complete aircraft will also rise appreciably in 1991, as Airbus Industries recovers from the 1990 strike at British Aerospace and Fokker continues deliveries of the F-100 transport aircraft. Imports of business and commuter aircraft from Brazil, Canada, and Europe will continue to add more than $1 billion to aerospace imports. [Tabular Data Omitted]
Outlook for 1991
Industry indicators point to slower growth in U.S. aerospace sales in 1991. In January through July 1990, manufacturers added $79.8 billion to their order books, down 14 percent from the corresponding 1989 period. The decline in orders does not yet threaten the expansion of the industry, since the manufacturers still have a huge backlog. In July 1990, unfilled orders stood at $234.9 billion, enough to keep factory floors busy at existing production rates for 20 months. Two firms, Boeing and McDonnell Douglas, account for almost one-half of the backlog.
Aerospace manufacturers will ship products valued at about $127 billion in 1991, a real increase of 3.6% over 1990. Large jet aircraft production will lead industry growth with shipments of almost $28 billion. Growth in aircraft production will help boost aircraft engine and component shipments, forecast to be almost $44 billion, a real increase of 3 percent over 1990. Growth in these areas as well as in the general aviation and space sectors will partially offset the expected decline in military aircraft and missiles.
