U.S. aerospace sales will rise 2.8 percent to $223.6 billion next year, led by demand for commercial aircraft, an industry trade group predicted.
The Aerospace Industries Association today projected the increase from an estimated $217.9 billion in revenue this year. An 11 percent boost to commercial airplane sales in 2013 would make up for a decline in orders for military jets and missiles amid cuts to defense spending, the group said in its year-end review and annual forecast.
“The overall projections for 2013 are generally positive –- excluding the domestic military market -– and illustrate the health of the industry,” the Arlington, Virginia-based group said in its report. “The defense sector appears to be the most problematic in 2013 and beyond, particularly with respect to the domestic market.”
The association, with members including Lockheed Martin Corp. (LMT), Boeing (BA) Co., Northrop Grumman Corp. (NOC), and Raytheon Co. (RTN), has led the U.S. defense industry in lobbying against Pentagon budget cuts. The Defense Department’s projected budget over 10 years already has been cut by $487 billion. The agency may lose an additional $500 billion in the next decade if Congress and the White House fail to agree on a plan to avert automatic budget cuts and tax increases before the end of this month.
The trade group’s projections were based on the assumption that the automatic cuts, known as sequestration, won’t take effect.
In the longer term, the U.S. may have to increase its air and naval power to support the Pentagon’s strategic shift toward the Asia-Pacific region, the group said.
Global air traffic is estimated to grow at an annual rate of 5 percent for the next 20 years, faster than the anticipated rate of economic growth, which will drive airlines to take deliveries of 34,000 new airplanes by 2031, with a value of about $4.5 trillion, the group said.
Boeing and Airbus SAS, a unit of European Aeronautic, Defence & Space Co. are the world’s largest markers of commercial planes.
Demand for general-aviation aircraft and business jets is projected to recover during the five years ending in 2017.
Larger business jets will lead sales, “particularly in the Middle East and Asia,” the group said. “China is a prominent growth market and it has been estimated that by the end of the decade, the nation could account for 20 percent of all global business jet deliveries, up from today’s seven percent,” the organization said.
General Dynamics Corp. (GD)’s Gulfstream unit makes the G450 and G550 large-cabin business jets.
Sales of military aircraft -- including fighters, transports and helicopters -- may decline 2.4 percent to $56.8 billion in 2013 compared with 2012, the group said. Missile sales are projected to decline 5.6 percent, while sales of space and other defense equipment will increase slightly, the trade group said.
Net exports of aerospace products grew 14 percent to $63.5 billion in 2012, led by commercial airplane sales, the organization said.
Overseas demand for U.S. military equipment “is also anticipated to remain strong for the next few years,” the group said, citing threats posed by Iran’s and China’s growing defense spending.
The group said the U.S. must “resolve export issues” to allow foreign sales of unmanned aerial vehicles to avoid losing the market to other exporters.
Overall, aerospace orders for 2012 may fall 2.5 percent to $241.9 billion, and the backlog may grow 5.1 percent to $526.5 billion, the association said.
Even with job cuts in U.S. defense work, employment in the aerospace industry may increase less than 1 percent to 629,000 compared with 2011, the group said.
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