Aerospace Outlook Looks Positive, Barring Fiscal Cliff
A new forecast for the aerospace industry presents a generally upbeat view of the companies that build airplanes, satellites and rockets.
That is good news for the region's economy, which depends on aerospace for thousands of jobs and billions of dollars in sales.
However, the study, released Wednesday by the Aerospace Industries Association, carried a major caveat that could render the entire forecast moot: If Congress does not agree on a new budget that President Barack Obama will sign - a scenario known as the fiscal cliff - then dramatic cuts to the federal budget would occur starting Jan. 2, with half of the decreases hitting military procurement.
However, excluding that possibility, the aerospace industry looks in relatively good shape for next year, the report said.
The nation's aerospace companies will see $223 billion in sales next year, up a moderate 2.6 percent from the expected total for 2012, the report says.
Growth will come mainly from commercial and non-U.S. government customers as the Department of Defense and other federal agencies tighten their budgetary belts amid the rising national debt.
The industry's sales to the Department of Defense next year will drop 3.2 percent to $93 billion, compared with this year.
Sales to NASA will be flat, rising less than 1 percent.
However, sales to other customers, including commercial airlines, telecom companies and foreign governments, will rise next year by a robust 10.5percent to $77.7 billion.
The nonmilitary side of the industry seems to be growing, said Gary Johnson, vice president of Ace Clearwater Enterprises, a company near Torrance that supplies parts for military and commercial aircraft.
On Thursday, Johnson was in Arizona visiting with two of his company's customers.
"They feel pretty positive about what's going on in the next two years," Johnson said. "The commercial side definitely looks pretty good from what we're hearing."
For example, Boeing sold more than 400 of its 737 airliner this year for the first time ever. Next year's sales of the medium-range plane is expected to surpass 450 units.
"The 737 sales are just going through the roof," said Johnson, whose company makes parts for the plane. "We're all over that."
The AIA report expects national employment in the aerospace industry to reach 629,000 in the final quarter of 2012, a rise of 4,000 jobs from the same period last year. This increase comes despite layoffs in some facilities that support military programs, the report said.
In September, Northrop Grumman Corp.'s Redondo Beach operations announced nearly 600 job cuts amid pressure to constrain the Pentagon's budget. Last week, Northrop announced a voluntary buyout program to cut 200 positions at facilities in Woodland Hills and Salt Lake City.
In March, El Segundo-based Aerospace Corp. said it would reduce its workforce by about 300.
The AIA report warned that if lawmakers fail to agree on a budget in the next few weeks, federal spending on military procurement programs would be slashed by 10.3 percent.
The industry has "enormous nervousness about this fiscal cliff" and how it will impact sales and employment, Johnson said.
"I'm upset about it. I just wish both sides of the aisle would just sit down and get moving," he said.
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