A boom in civil transport sales will overcome a nearly stagnant defence sector to boost overall US aerospace industry revenues by almost $14 billion in 2006, according to a new forecast.
The Aerospace Industries Association (AIA) predicts a 30% jump in civil aircraft deliveries next year will increase revenues in that sector by $10.3 billion, or three-quarters of the overall industry’s growth. “I am very confident in that number and I think it is even on the low side,” says John Douglass, president of AIA.
Ratings agency Fitch agrees that strong growth in the commercial aerospace sector in 2006 is expected to offset US defence budget uncertainty, and falling deliveries of regional aircraft.
AIA says military aircraft sales – up by $10 billion from 2003 to 2005 – are expected to rise only $800 million in 2006. Space sales would climb $1.2 billion to $38.5 billion and related aerospace products would increase from $28.3 billion to $30.7 billion. Missile sales are projected to decline by $900 million to $14.4 billion.
Military aircraft sales have leapt nearly $22 billion since 2002, but the slower pace of growth projected in 2006 does not trouble the industry trade group. “We don’t see it shrinking significantly as time passes,” says Douglass. The AIA’s estimate is based on a fiscal 2006 defence budget bill that has been stalled in Congress, and does not include outlays for replacement parts from a possible supplemental bill next year.
The industry is expected to improve profit margins from 5.2% to 6.2% next year. That trend shows it is in good health, says Douglass, but a further 1.2% improvement is needed to meet the national average for manufacturers.
Fitch says the ongoing US Quadrennial Defense Review (QDR) “adds uncertainty to the defence budget picture, but recent reports indicate that the QDR will be less disruptive than anticipated”.
The ratings agency dismisses concerns over high oil prices “because one of the key drivers of the high energy prices – healthy global economic activity – is also a driver of air traffic; and high energy prices influence demand for newer, more efficient aircraft”.
Fitch warns that supply chain and labour constraints, possible problems with increasing production and threats posed by terrorist attacks and avian flu could affect the scale and duration of the commercial aerospace upturn.
Business jet deliveries are forecast by Fitch to grow by 10-15% next year, compared with growth of 20-25% in 2005, although potentially higher fees for US airspace users could limit growth. But Fitch predicts the regional aircraft segment will continue to be the industry’s worst performer in 2006 – with a forecast 12-14% drop in deliveries for turboprops and regional jets, and a fall of more than 20% for regional jets alone.
STEPHEN TRIMBLE/WASHINGTON & HELEN MASSY-BERESFORD
Source: Flight International