Aerospace companies are healthy but dreading sequestration, says industry chief

By Charles S. Clark

December 5, 2012

Though their sales and exports are “encouraging,” aerospace companies continue to worry about the prospect of automatic across-the-board federal budget cuts under the “Satan sandwich” or “self-inflicted wound” known as sequestration, the head of the aerospace industry lobby said on Wednesday.

“What message sequestration telegraphs to the world about our country, our commitment and the competitiveness of the next U.S. generation if our industry is relegated to the status of a political bargaining chip is difficult for me to fathom,” said Aerospace Industries Association President and CEO Marion C. Blakey at the AIA’s 48th year-end luncheon in Washington.

She called on the White House and Congress to “check partisanship” and embrace a “balanced approach” to resolving the continuing stalemate over taxes and spending to avoid the end-the-year fiscal cliff. “Let’s turn the cliff into a base jump -- all we need is a parachute,” Blakey said.

“Third and fourth-tier suppliers are extremely worried about sequestration,” she added. “They’re not in a position to weather six months of uncertainty.”

Saying the private aerospace companies can withstand almost anything, she reported that sales for 2012 are expected to rise 3.8 percent, from $211 billion to $218 billion, mostly in civil aircraft, with exports likely to rise from $85 billion to $96 billion. The projected sales figure for 2013 is $224 billion, Blakey said. The projected numbers do not factor in sequestration, she said, because the Obama administration has not released sufficient details on how the process -- which nearly all participants hope to avoid -- would unfold.

The association’s agenda for 2013 includes implementation of the NextGen air traffic control system, export control reform, extension of the research and development tax credit, “focused investment in defense procurement and R&D” and progress on NASA’s human space exploration strategy, it said in a release.

Blakey’s comments on the fiscal cliff marked a departure from the event’s traditional focus on bottom lines and future agendas. As an example of the “real-world impact” of severe budget cuts, she noted that during the recent Hurricane Sandy, the storm’s sudden turn westward toward land from its ocean path was forecast using the National Oceanic and Atmospheric Administration’s polar orbiting weather satellite, an industry product whose program would be cut under sequestration. “Imagine the loss of life if evacuation orders lacked credibility and preparations were nonexistent,” she said.

For more than a year, the AIA, through its “Second to Nine” campaign, has sounded an alarm that sequestration would cost the United States 2.14 million jobs, $215 billion in gross national product loss and a 1.5 percent uptick in unemployment. But in response to a questioner, Blakey said the industry “does not view defense as a jobs program” and does focus on national security needs as the Pentagon’s strategies shift.

“We’ve already made a commitment to getting the budget deficit in line,” she said, backing the positions taken recently by individual industry executives calling for a solution in which “everything is on the table,” including tax reform and entitlement reform. Some of the executives, she acknowledged, agree that higher income taxes may be needed, along with a new corporate tax rate.

By Charles S. Clark

December 5, 2012