On September 1st, 2011 the International Association of Machinist and
Aerospace Workers contacted President Obama in order to help preserve
the Aerospace and Defense Industry and its workforce from substantial
downsizing that defense budget cuts will bring. But it may have been too
little too late as a combination of issues such as the culmination of
the Iraq war, Afghanistan winding down and an unprecedented national
deficit at hand were enough for the congress to agree last month on
approving cutting military spending by $350 billion over the next 10
years. The fiscal 2012 defense appropriated bill that has already been
passed by the U.S. House of Representatives is a testimony to what’s
coming with $119 billion already trimmed from defense spending,
representing a steep 24.6% decline from 2011 .
This and similar news stories have led to a
contraction in defense industry orders from aerospace manufacturers. The
aerospace manufacturing sector is feeling the pinch as a significant
percentage of their revenues stem from government contracts. Yet,
commercial sector orders are set to rapidly expand with new commercial
orders and the increasing demand within emerging markets. A news-worthy
bright spot within this sector has been Delta Airline’s order for 100
Boeing narrow-body jets in a deal estimated to be worth more than $8.5
billion. The ramping up of orders is helping to improve the economic
outlook for not only commercial aircraft manufacturers but also
aerospace suppliers who provide services to such as aerospace painting,
non-destructive testing and anodized coating.
At
first glance, the Delta deal would seem to be an uptick for the
American aerospace industry. Upon closer observation, the deal appears
to be no more than a stabilizing counter in light of more recent news
that American Airlines opened up their purchasing options to foreign
aircraft manufacturers and awarded EADS the “largest aircraft order in
history” for 260 Airbus A320s. But everyday new silver linings arise
within America’s commercial aerospace sector as new global markets open
up. One juggernaut of a market that has recently begun to open up its
aerospace industry to private participation is India. Boeing has already
established a strong presence in Indian aerospace manufacturing by
partnering with Hindustan Aeronautics Limited (HAL). The HAL partnership
coupled with $1 billion worth of orders that Boeing expects to receive
from India by 2017 exemplifies the American aerospace industry’s
resilient ability to find opportunities for growth that will offset
dwindling government defense contracts.