Whether you are piloting an aircraft or manufacturing one, the same metaphor seems to apply to the future of aerospace: boundless potential, yet fraught with peril. After several years of solid growth, U.S. production of aerospace products in 2010 will suffer a moderate decrease of 4% to 5% from the previous year. This decline will increase to 6-8% in 2011. Commercial aircraft orders should begin to recover in 2011 and beyond, but long-term orders for future defense-related projects are in serious jeopardy due to the enormous budget deficits in this country and abroad.
As the accompanying chart illustrates, the production trend for the U.S. aerospace industry tends to lag the trend in the overall industrial sector by two to three years. The last cyclical bottom for aerospace production was in late 2004. That was the result of the overall economic recession that hit bottom for most sectors of the economy in 2001 and 2002. Aerospace hit a cyclical peak in 2008 and then continued to fare well during the recession in 2009 due to the backlog of orders.
But the latest recession caused new orders of aircraft from Boeing and Airbus to plummet by as much as 70% in 2009, and this drop in orders will result in a cyclical bottom in the production data in 2011 and 2012. The cycle will follow a logical order:...
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