Marion Blakey, the aviation and defense industries' chief lobbyist, gave her annual industry forecast Wednesday in Washington and said pretty much what you'd expect: 2011 was a good year, but 2012 and beyond do not look pretty.
“Annual sales are going to be up across the board in 2011,” said Blakey during the Aerospace Industries Association's annual luncheon and year ahead forecast in Washington. “But in 2012 we expect things to begin to change.”
We all know what she's talking about -- the billions in defense cuts that are expected to come in the next year. Most worrying is the threat of $500 billion in automatic cuts -- known as sequestration -- to defense coffers over the next decade that are slated to kick in starting in 2013.
“Under sequestration, our industry faces exposure all around,” Blakey said. “Not only are the defense cuts unsustainable, but domestic discretionary programs could be cut by about 7 percent as well, including deeper cuts to NASA, NOAA and critical FAA programs like NextGen.”
Most vulnerable to cuts are missile and munitions programs, said Blakely while listing off the sales numbers for U.S. military aircraft and munitions in 2011.
U.S. military aircraft sales are expect to increase by nearly 6.7 percent this year, with sales estimated at $66.5 billion. Over the past fiscal year, the Defense Department purchased more FA-18 Hornets and V-22s for the Navy and Marine Corps. Future sales also look promising, as exemplified by the $35 billion contract awarded to Boeing for 179 refueling tankers this February.While 2011 was a great year for the aerospace industry, the threat of sequestration led Blakey to caution against expecting similar growth on the military side of the business next year. In fact, military and space sales are expected to drop by more than $2 billion next year.
Missile sales posted a slight gain, from $25.1 to $25.6 billion – although for the future we think munitions demand looks vulnerable as weapons stockpiles are often the first to get cut when combat operations and defense budgets trend downward.
Given the numbers we’ve projected for 2011, you could make the assumption that it will take years to reverse the growth trend that continued this year.Unfortunately, we’re projecting that 2012 will be a much different year.Sequestration would cost hundreds of thousands of defense-related jobs claims AIA. Defense contractors and Pentagon officials are hoping that congress can come up with a way to nullify the threat of sequestration before the cuts kick in. Defense officials are pushing for surgical cuts to specific capabilities that the U.S. is less likely to need in the coming decades rather than across the board "salami slice" cuts.
Looking ahead to next year, we expect aerospace sales to decrease by about half a billion dollars.
We expect declines in nearly every product group except civil aviation. Space sales are projected to decrease by about $1 billion, and military aircraft sales are predicted to drop by $1.5 billion