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Aerospace Prepares for Tumultuous Trek 

aerospace for spring 2013

By Rachel Duran

Uncertainties at the federal level are damaging to defense contractors.

The U.S. aerospace industry is a thriving manufacturing sector, a positive spot in the national economy, and in the local and regional economies the companies call home. Regional initiatives, led by industry members, working with economic development organizations and other partners, ensure the industry’s needs are being met today and will be in the future.

How well positioned is the aerospace industry? Overall sales projections for 2012 were expected to increase by 3.4 percent, from $211 billion to $218 billion, according to the Aerospace Industries Association. The increase, led by civil aircraft sales, recorded the ninth consecutive year of growth for the industry. However, there are bumps in the forecast. The AIA stated in its annual year-end review and forecast report: “Unsurprisingly, there was a downturn in the shipments of military products, as the federal budget came under pressure across the board and procurement accounts faced reductions. However, overall aerospace exports were up $10 billion, with positive growth in shipments across most sectors.”

It is important to note that analysts on Wall Street have not been overly concerned with the budget sequestration due to the fact that the estimated $120 billion to $140 billion in cuts, spread across 18 months to 24 months, is a trivial amount in a $17 trillion economy, notes Ken Goldstein, economist, The Conference Board. However, the federal budget cuts will have effects down the road in the form of job losses, for example.

While projections are generally positive, there are uncertainties in the defense sector of the industry due to federal budget concerns, such as the sequestration, which went into effect on March 1. If by March 27 the Continuing Resolution has not been extended to fund federal agencies for the current fiscal year, which would reverse the budget sequester, the Department of Defense’s funding will be slashed. The sequestration is an across the board cut of federal agency budgets put in place as a way to deal with the nation’s budget crisis.

As this article goes to print, the aerospace industry was waiting to learn what would happen with the federal budget situation, and preparing for the possible impact the cuts may have on federal defense contracts. It is important to note that analysts on Wall Street have not been overly concerned with the budget sequestration due to the fact that the estimated $120 billion to $140 billion in cuts, spread across 18 months to 24 months, is a trivial amount in a $17 trillion economy, notes Ken Goldstein, economist, The Conference Board. However, the federal budget cuts will have effects down the road in the form of job losses, for example.

Local Initiatives Expand Industry

At the regional and local levels, economic developers continue to team with aerospace industry members and other parties to ensure the health of the industry. Economic development officials in the north central region of Florida are exploring ways to strengthen the region’s aerospace industry advantages and expand the cluster. Examples of private-public collaborations include the Upper Michigan Green Aviation Coalition and the New Hampshire Aerospace and Defense Export Consortium.

 “Rather than compete for the same passengers traveling in and out of our region, we wanted to create an economic development model to focus on other revenue producing areas for airport operations,” says Vikki Kulju, executive director of Telkite Enterprises LLC, which manages Sawyer International Airport in Gwinn, Mich. The site is the former K.I. Sawyer Air Force Base. “In order to do that we needed to develop the small businesses in the region involved in the supply chain for the aviation industry.”

In Florida, the North Florida Economic Development Partnership’s 14-county marketing area consists of a workforce that is skilled at working in manufacturing jobs. The region is ideal to support aerospace manufacturers in training and educating their workers, and in moving their goods.

The region features available sites, and a strong transportation network consisting of rail services, interstate and four-lane highway services, and access to the Port of Jacksonville. What’s more, the region features several technical schools and access to the University of Florida and Florida State University, says Jeff Hendry, executive director, North Florida Economic Development Partnership.

The partnership’s region features a number of regional and local airports, which feature adequate acreage to support businesses. TIMCO Aviation Services operates a large MRO operation at the Lake City Gateway Airport, located in Columbia County. At the Williston Municipal Airport in Levy County, Team Tango is partnering with a Chinese company to develop small airplanes for Chinese customers. From Williston, Team Tango makes two seat and four-seat airplane kits for customers to assemble.

In New Hampshire, the aerospace consortium is underway “to expand the industry’s export impact to the state,” says Karen Pollard, deputy city manager and director of community development, city of Rochester. “Of course, they already work with companies globally. We are well positioned to offer support to the industry from our local resources.”

The New Hampshire Aerospace and Defense Export Consortium launched this winter, and leadership is reaching out to the 300 companies in the state that are involved in aerospace manufacturing. The state is home to large OEM aerospace companies, with the majority of the industry comprised of small firms of 50 people or less.

“First and foremost we want to meet the needs of the firms of the industry in this region,” Pollard says. “As a local contributor, I meet with local businesses constantly to make sure we have what they need not only today but for the future.”

Pollard says officials are willing to make things happen for businesses. An example is the installation of infrastructure to support the joint effort between Albany Engineered Composites, a division of Albany International Corp., and Safran Aerospace Composites, a division of French firm Safran. The 343,000-square-foot Safran/Albany LEAP Engine Composites facility is under development at The Granite State Business Park in Rochester. Operations are expected to begin in July, with the facility eventually employing 500 workers.

Infrastructure enhancements included the addition of 24 strands of fiber optics, and putting in roads and utilities. “The infrastructure will serve not only Albany and Safran in their new partnership, but also other companies in the area with similar skills, such as advanced manufacturers, including composite materials,” Pollard says. “We have five other companies working in composites.”

In north central Florida, local governments have proven their willingness to expedite the permitting process, Hendry says. Recently, the region put together a package of state and local incentives to support a project in Suwannee County, working with Enterprise Florida, the governor’s office, and higher education and other partners. Klausner Lumber One will construct a high-tech sawmill in the county, creating 350 jobs and investing $130 million during a three-year period.

“We have been able to bring more than $3 million worth of new opportunities to small businesses within our membership,” Kulju says. These businesses have created 50 additional jobs. Networking opportunities include an annual conference. This year’s “Green Aviation Conference,” will be held August 28-29 at the Mission Point Resort on Mackinac Island.

In Michigan, the three-year old Upper Michigan Green Aviation Coalition has been a champion of the region’s manufacturers. The region offers OEMs the opportunity to streamline operations by tapping into a full supply chain solution. “We have been able to put a national spotlight on these businesses, which may not have ever received that opportunity because of the costs involved, not to mention the time and effort involved in running their businesses,” Kulju says.

The 60-member coalition is comprised of four airports located in the Upper Peninsula, each serving an industry niche. Sawyer International Airport, which offers commercial air service from American Airlines and Delta Air Lines, focuses on disassembling and recycling aircraft. Houghton County Memorial Airport in Hancock focuses on green military R&D, and transitioning military technologies into commercial applications. The Delta County Airport in Escanaba focuses on both marine and aviation interiors. The Menominee-Marinette Twin County Airport focuses on helicopter and general aviation services.

“We have been able to bring more than $3 million worth of new opportunities to small businesses within our membership,” Kulju says. These businesses have created 50 additional jobs. Networking opportunities include an annual conference. This year’s “Green Aviation Conference,” will be held August 28-29 at the Mission Point Resort on Mackinac Island.

Industry expansions in the Upper Peninsula include a local small business working with an OEM to commercialize a process that could revolutionize the dismantling process for composites used in aircraft; composites can take 100 years to decompose. “Once composites go through the process they are completely clean and transformed into another material that can be used in a variety of applications,” Kulju says.

In other project activities, a company who recently won an SBIR grant to conduct research and development, has entered into a contract with a major OEM. In another, officials from a small business were giving a tour to representatives of an OEM and discussing a technology they were working on. It turned out the OEM was working on the technology as well; however, it wasn’t as far along as the smaller business. The two organizations formed a joint venture to move the technology forward faster.

“Small businesses are nimble, and they do not need to go through boards, or create proof of theories to change a direction,” Kulju says. “Major OEMs don’t always have this luxury.”

Available Workforce Stands Ready

Over in Rochester, economic development officials have teamed with Great Bay Community College and others to develop the Advanced Technology and Academic Support Center. The project, which kicked into gear to support the Albany-Safran project, will also support the region’s advanced manufacturing industry.  The center, expected to open in April, is a 17,000-square-foot facility that features classroom and composite lab spaces.

Rochester’s officials are also preparing their high school and middle school students for STEM-related opportunities. Rochester’s high school technology center serves a tri-city area. “About 95 percent of our high school students take at least one class at the technology center,” Pollard says.

In Florida, Brevard County, home to Cape Canaveral, is located within 40 miles of one of the 14-county north central partnership’s counties. Brevard County is home to displaced aerospace industry talent, a result of cut backs in NASA funding, and the end of its Space Shuttle program. “We can tap into that expertise,” Hendry says. “There is a highly-skilled workforce that wants to stay in Florida, and we are looking to move them into similar positions.”

Hendry and his cohorts understand that businesses need to move quickly. Pollard says in Rochester, officials respond to businesses with a sense of urgency that might not be found in other communities. “This consortium is designed to make sure we are responsive to needs at the local levels, and that we will carry them forward to the state level,” Pollard says. “We are going to do this together. We roll up our sleeves and get to work.”

Efforts by local and regional economic developers, along with state support, should offset the yet unforeseen damages the federal budget cuts could inflict on the defense portion of the aerospace industry.

Meanwhile, look for the aerospace industry to continue as a bright spot in the nation’s manufacturing economy.

Illustration by Nujalee at Free Digital Photos.net


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About the author: Rachel Duran

Rachel Duran is the editor in chief for Global Corporate Xpansion. Contact her at rduran@latitude3.com.

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