Easing the sequester’s near-term effects under the congressional budget deal reached in late December was welcome news for our industry providing a measure of relief for important federal national security, civil aviation and space functions. But although we won’t be facing the full brunt of sequestration’s worst two years—or another government shutdown for the foreseeable future—defense spending will still be $30 billion below the President’s budget request for the year, and funding for FAA, NASA and NOAA will still be on the downward arc that began in 2010. That said, the deal represents a first step toward a long-term agreement that could eliminate sequestration altogether, reverse the current “investment deficit” in programs that make our nation strong and secure, and finally address the mandatory spending accounts that are the real drivers of our nation’s debt and deficit problems.
We remain deeply concerned about the consequences of ongoing budget cutting to the health of the industrial base and our ability to support America's national security and economic requirements today and in the future. These concerns were reinforced by the results of the recently released 2013 Aerospace and Defense Market Survey, jointly sponsored by AIA and the Computer Sciences Corporation (CSC). “There is no doubt that sequestration is having a direct impact on government/military OEMs and their tiered suppliers,” report the authors of this 13th annual survey. “These companies are juggling the financial impacts of delays, workforce displacement, supplier disenfranchisement and general uncertainty.”
A key survey finding was that 91 percent of companies report moderate to significant challenges in attracting and retaining skilled workers and 35 percent reporting that the aging and retiring workforce has resulted in an erosion of knowledge in their firms. “The retirement rate in aerospace and defense is creating a growing knowledge gap that needs to be filled with the next generation of workers,” observed Tim Ellis, CSC’s Aerospace and Defense industry general manager. “To compete with an array of tech companies and green industries, A&D companies need to embrace the modern workplace such as ‘Bring Your Own Device,’ social media, telecommuting and more.”
For the second consecutive year, when asked about what are the top three aerospace and defense industry macro forces affecting their organization over the next two to three years, the largest response given was “reductions and reallocations in defense spending and pricing pressures in the commercial market.”
Another key finding of the survey is that commercial companies are under increased pressure to lower aircraft acquisition costs and ongoing operational costs. The survey found many of them are using the following strategies to grow revenues and remain competitive:
• Design and produce innovative products.
• Focus on new revenue streams in aftermarket services or new geographies.
• Offer more flexible pricing to meet customer cost demand.
• Implement process improvement programs with the highest near-term return on investment.
I think the main take-away from the survey is that it demonstrates the importance of our nation’s continued investment in dynamic and cutting-edge research and programs. As the respondents clearly stated, our ongoing budget austerity is degrading the capabilities of the aerospace and defense industrial base. We’re losing skills and knowledge as workers are forced to leave our industry – skills that once lost cannot be replaced. AIA will continue to make it our top priority for 2014 and beyond to ensure that we have adequate, stable and predictable budgets for the programs that will allow our supply chain companies to retain and recruit the quality workforce our nation counts upon to maintain American leadership in all matters related to national defense, civil aviation and space.