* Prospects boosted by worldwide demand for civil aircraft
* U.S. military aircraft sector continues to shrink
* Outlook clouded by possible Pentagon 10 percent purchase
By Jim Wolf
WASHINGTON, Dec 5 U.S. aerospace and arms
companies are poised for 2.8 percent overall sales growth next
year to about $224 billion, which would mark their 10th straight
year of growth, barring steep Pentagon budget cuts, the
industry's chief trade group said on Wednesday.
The forecast does not factor in so-called sequestration, a
process that would lop about 10 percent off Pentagon arms
purchases starting next month if Republicans and Democrats fail
to agree on a new plan to pare federal deficits.
Exports of civil aircraft, engines and parts - which
represent about 88 percent of all aerospace exports - are
expected to account for most of the industry's sales growth in
The U.S. military aircraft sector, on the other hand,
continues to shrink even as foreign sales of U.S. warplanes are
Aerospace and arms companies, one of the economy's perennial
bright spots, continued to lead the United States in the net
export of manufactured goods, buoyed by strong civil aircraft
sales, the Aerospace Industries Association said in its annual
year-end review and forecast.
Exports rose 12 percent to an estimated $95.5 billion this
year from $85.3 billion last year and are likely to grow during
"at least the next several years" based on order backlogs, the
Order books for civil aircraft makers such as Boeing Co
, the world's largest maker of commercial jetliners and
military aircraft combined, now contain a six- to seven-year
backlog, the report said.
U.S. military purchases of hardware may decline slowly or be
hit with indiscriminate, sequester-related cuts that could cause
major disruptions in the supply chain, especially for smaller
manufacturers, the AIA said.
Sequestration clouded the outlook for 2013 and was hard to
factor in because of unknowns about how mandated cuts would be
carried out, Marion Blakey, AIA's president and chief executive,
told an industry luncheon.
"It's an industry that remains healthy despite the
obstacles," she said.
For 2013, overall sales are projected to rise 2.6 percent to
$223.6 billion from an estimated $217.9 billion this year. In
2012, the estimated total was up 3.4 percent from $210.8 billion
the year before.
Leading U.S. aerospace companies and top Pentagon suppliers
include Lockheed Martin Corp, Boeing, Northrop Grumman
Corp, BAE Systems Plc, Raytheon Co and
General Dynamics Corp.
Roughly $600 billion in combined U.S. tax increases and
spending cuts are to take effect in January for fiscal 2013
alone - the so-called fiscal cliff - unless President Barack
Obama and Republicans in Congress strike an alternative
The across-the board spending cut, known as sequestration,
would cull about $54 billion from U.S. national security
spending with purchases of weapons nipped, the trade group said,
an estimated 10.3 percent.
Demand for U.S. military exports is anticipated to remain
strong for the few years, AIA said, citing concerns about Iran's
disputed nuclear program as contributing to large purchases by
oil-rich Gulf states, among other factors.
Similarly, growing Chinese defense budgets have led to
significant new U.S. sales in Asia - deals that should more than
offset ebbing sales to European countries that are trimming
military spending, the report said.
The U.S. military aircraft sector continues to contract,
falling 2.4 percent over the past year. It is projected to sink
more than 10 percent in 2013.
Closure of Lockheed Martin Corp's F-22 fighter production
line and decisions not to fund additional Boeing Co C-17
military transport plane purchases or development of a future
strategic lifter, each took a toll.
As of 2012, no fewer than three key military production
lines - for Boeing's C-17 military transport aircraft, its F-15
tactical fighter and Lockheed's F-16 multi-role fighter - are
being sustained largely by international export demand.