San Diego Union Tribune

December 9, 2004

Aerospace industry posts big gains in '04
Defense sector helps jobs, sales growth

By Otto Kreisher

WASHINGTON – Aerospace sales, profits and employment showed substantial gains this year, fueled mainly by increased defense spending, the industry reported yesterday.

Equal or better gains are expected next year with increased sales of civil aircraft joining continued growth predicted in purchases of military planes, missiles, satellites and associated products, said John Douglas, president of the Aerospace Industry Association.

Sales increased by at least $12 billion, to $160.7 billion this year, and are predicted to grow a similar amount in 2005, Douglas said.

Aerospace employment, which hit a 50-year low in February, ended a five-year drop and added 18,900 jobs for a predicted total of 587,600 by year end, he said.

"This is clearly good news for aerospace," Douglas said at the industry association's annual year-end luncheon.

Much of the industry's projected growth is dependent on continued increases in federal spending on military aerospace hardware, NASA's ambitious space exploration initiatives and the Federal Aviation Administration's costly air traffic control modernization program. Those programs could be squeezed by congressional concerns over the soaring budget deficit in the face of continued heavy spending on the global war on terrorism and a slow growth in the domestic economy.

Douglas acknowledged that "it looks tough" and that "there are some negative things on the horizon." He noted that NASA was "coming up on a tipping point" in finding a replacement for the space shuttle.

Although Douglas pointed to an increase in the aerospace trade surplus, resulting from an increase in exports and a drop in imports, he expressed concern about several issues that could hurt U.S. sales of aviation and space products overseas.

The top issue was the industry's long-standing complaint over the stringent rules controlling the export of items considered to have potential military use.

To illustrate the problem, Douglas held up two similar looking metal tubes used for aircraft hydraulic systems, one of which could be sold overseas without restrictions while the other required a lengthy licensing process to be exported. He also displayed a simple metal bracket that is used on farm tractors but is restricted because it also could be used on military aircraft.

Those items are available widely around the world and have no national security reason to be restricted, he said.

Douglas called on President Bush to make good on his campaign promise of four years ago to make dramatic changes to the export control process.

He also urged Congress not to force additional ethics or "revolving door" regulations on the industry because a former Air Force procurement official gave favorable deals to Boeing in exchange for a high-paying job, or to make further attempts at "buy America" restrictions on military items.

House Armed Services Committee Chairman Duncan Hunter, R-El Cajon, has tried for two straight years to impose "buy America" rules on major defense items and has opposed softening of the export rules.

Douglas said Hunter was "a patriot" and was "reasonable" and surely would agree that the export control restrictions on items such as the hydraulic lines were unnecessary.

Douglas said the United States also had to go to the World Trade Organization to resolve the festering dispute between Boeing and the European-owned Airbus over which company was getting unfair government assistance in their competition to sell airliners around the world.

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