WASHINGTON — Space and defense sales could help the aerospace industry offset some of the expected decline in commercial aviation sales resulting from the Sept. 11 terrorist attacks that have dealt a harsh blow to air travel, according to a trade association representing aerospace manufacturers.
The Aerospace Industries Association here has revisied its estimates for annual aerospace industry sales in the wake of the attacks. Commercial aircraft and part sales are expected to decline by about $2 billion from earlier estimates. But industry wide, association projections show, aerospace sales will drop just $400 million overall to $143 billion.
John Douglass, president and chief executive officer of the industry association, said increased sales in space and defense may help offset some of the anticipated decline in commercial aircraft sales, depending on the way the United States responds to the terrorist attacks.
"An air campaign would have a different impact than a campaign involving the movement of large to moderate ground and naval forces," he said in written statement. "Space sales will probably increase in any event."
Expecting canceled orders for commercial aircraft in the aftermath of the terrorist attacks, Chicago-based Boeing Co. announced plans Sept. 18 to lay off between 20,000 and 30,000 employees in its Commercial Airplanes unit.
One industry analyst, however, suggested layoffs at Boeing were in the works before the attacks because of a slowing economy. Boeing said it expects reductions in passenger travel as a result of the attacks, which in turn would cause airlines to cancel previous orders for commercial aircraft in 2001 and lower demand for new planes in 2002 and 2003. "It is critical that we take these necessary steps now to size the Commercial Airplanes business to support the difficult and uncertain environment faced by our airline customers," Alan Mulally, president and chief executive officer of Boeing Commercial Airplanes, said in a Sept. 18 written statement.
The Boeing statement said it expects commercial airline deliveries to be about 500 in 2001, down from an earlier forecast of 538 for the year, while the forecast for 2002 is being scaled down to the low 400s from 510 in an earlier company forecast.
Nevertheless, analyst Bill Dane said Boeing was considering layoffs before the Sept. 11 attacks. "I think this was in the works for some time," Dane, senior aircraft analyst with Forecast International Inc., Newtown, Conn., said Sept. 19. Dane said weak economic performance the first two quarters of 2001 was reducing business travel on airlines.
Richard Aboulafia, an analyst with Teal Group, Fairfax, Va., said: "It is a very good time to assume a defensive posture."
Aboulafia suggested Boeing’s announcement of layoffs also is a tactic to help win financial assistance for U.S. airlines from Congress in the aftermath of the attacks in New York and Washington.
Boeing’s stock price has dropped nearly 50 percent to $32.75 at mid-afternoon Sept. 19 since early August when the stock was trading near $60 a share. Significant losses have come since Sept. 17. On that day, the first day of trading following the terrorist attack on the World Trade Center, Boeing’s stock was selling for $43.46 a share. However, the company’s stock had been losing ground slowly since June when it was selling for about $70.94 a share.
Commercial troubles aside, both analysts said Boeing’s V-22 Osprey tilt rotor aircraft could emerge a winner despite problems with the military program. Given the Osprey’s unique range and speed capabilities, the analysts expect the program to be accelerated and the design problems quickly resolved. "It is a question of technology maturation," said Aboulafia.
With the coming war on terrorism and the Osprey’s capabilities, Dane said, "The two dovetail almost perfectly." In addition to Boeing, Bell Helicopter Textron Inc., Fort Worth, Texas, also participates in the Osprey program.
The Pentagon wants to purchase 458 Ospreys, with 360 going to the U.S. Marine Corps, 50 to the Air Force and 48 to the Navy, at an estimated cost of $38.1 billion.
