The Aerospace and Defense (A&D) industry in the U.S. is comprised of manufacturers of airplane, military aircraft, helicopters, missiles, rockets, spacecraft, and satellites. Manufacturers employ different supplier firms that make a variety of products ranging from avionics and hydraulic systems to rubber gaskets and adhesives. The industry supplies five basic markets which are: military aircrafts, commercial airliners, missiles, space, and general aviation.
In 2015, the A&D industry in the U.S. directly and indirectly employed 1.7 million people, according to research by IHS Inc. The A&D industry represented approximately 2% of the nation’s employment base and 13% of the nation’s manufacturing employment base. The research also found that Washington had the highest employment with 640,820 people employed in the industry, followed by California with 436,180 people, and Texas with 234,630 people employed in the sector.
In 2015, the industry generated $300 billion in economic value, representing 1.8% of total nominal Gross Domestic Product in the U.S, and 10% of manufacturing output. According to an annual study conducted by Deloitte Global, global revenue in the A&D sector is increasing yearly. In 2013, total global revenue was $638 billion U.S. dollars which rose to $650 billion U.S. dollars in 2014, and global revenue rose to $675 billion U.S. dollars in 2015. However, the study also found that over the last three years, global A&D industry revenue was largely impacted by decreased revenues in the U.S. defense subsector. The return to growth in 2016 is expected to be fueled by increases in the U.S. defense budget, a resurgence of global security threats, and growth in defense budgets of key nations around the world.
Announced Projects (2011-2015)
If we look at data from Conway Analytics from 2011-2015, there have been a total of 333 announced projects, out of which 133 are new projects and 200 are expansion projects. In 2013, 78 total projects were announced which is the highest number of announcements in the five years.
In 2013 and 2015, the largest number of expansion projects was announced. The largest number of new projects was announced in 2014 with 32 projects. We can see a decline in new projects in 2015. This could have been because of firms opting to expand existing facilities rather than open new ones.
According to the data from Conway Analytics, Texas has the largest number of expansion projects with 21 projects announced, followed by Alabama with 20, and Florida with 12 projects announced in the last 5 years. Expansion projects have been announced in 38 states. The highest number of expansion projects in a year is 8 projects announced in Texas in 2015. Texas is home of the well-known Johnson Space Center. Bell Helicopter, Inc. has its headquarters in Fort Worth. Bell Helicopters saw the company expanding its headquarters in Texas as a start to a $1 billion expansion plan completed in 2015. In Florida, there were 7 expansion projects announced in 2011 and 2013. Aerospace and Aviation comes under the top industries driving GDP growth in the state. The annual economic impact of aviation-related activities in Florida is estimated at $144 billion, and its 19 commercial airports account for 10% of the nation’s total passengers. As of 2014, more than 2,000 aerospace and aviation companies are located in Florida.
In the five years, new projects have been announced in 38 states. Florida has the largest number of new projects, with 18 projects, followed by Texas. The highest number of new projects announced in a year is seven in the states of Florida (in 2012) and Texas (in 2014). Florida ranks 2nd and Texas ranks 7th in a study conducted by PricewaterCoopers based on aerospace manufacturing attractiveness. In April this year, Space Florida, an aerospace R&D company, announced the construction of a new facility in Cape Canaveral, Florida which has plans to employ 250 people.
Trends in Technology
Advancement in technology will continue to create challenges for equipment suppliers, but it will bring about newer products. Evolving technology has created a challenge for defense companies. Departments and ministries for defense have shifted from defense companies to technology firms in recent times because they believe that technology firms are capable of delivering results faster. Hence, technology firms have come into the picture to provide services as contractors.
If we look at commercial aviation, companies like Airbus and Boeing are constantly challenging each other to come up with advanced products. Airbus is currently manufacturing the A350 in which the body is built from carbon fiber and is 50 percent stronger than other commercial airliners. The carbon fiber body provides the aircraft with better fuel efficiency, and low pressure inside the cabin cuts down jet lag for its passengers. Boeingis bringing out its 737 MAX with its advanced technology (AT) specifically made for the plane and has efficient LEAP -1B engines.
Like any other product, aircrafts need to be replaced with time and with the addition of new technologies. This creates challenges for manufacturers but brings opportunities for economic development agencies. Change in technology drives demand for newer products which may bring more projects and is likely to create more employment opportunities. As, technology advances, the aerospace and defense industry will also bring in more projects for economic development agencies.
Top companies are setting their site on the U.S. market. Airbus commenced operations on its first manufacturing facility in the U.S. located in Alabama on July 2015. The 53-acre site has an investment of $600 million and primarily manufactures the company’s A320 model airplane. Lockheed Martin has announced 8 projects from 2011-2015 (Conway Analytics). Lockheed Martin expanded its facility in Alabama in February 2015, adding 240 jobs by 2020, with a planned investment of $40 million. Boeing, in June of this year, announced 70 jobs in Alabama through its PAC-3 program.
These projects show the potential of growth in the Aerospace and Defense industry. Economic developers have a big opportunity to lure in companies to their area, creating jobs and economic growth in communities.
i) NAICS Code Used for Conway Anayltics Research: 336411, 336412, 336413, 336414, 336415, 336419