Index Industry Awaiting Aerospace Commission Krapek Elected Chairman of AIA Association Awards "Wings of Liberty" to Senator Warner The President's WASHINGTON PIPELINE: Association Offers Support for Transition and Presidential Commission AIA Projects Rise in Aerospace Sales AIA Leads U.N. Space Symposium Industry Supports New International Noise Standard AIA Unveils New Logo, News, Web Looks Association Submits Aerostructure Testimony Martin-Baker America Joins Association Association Membership Surges in 2000 New AIA Members In 2000 J.P. Stevens has been promoted to vice president for special projects. Industry Saddened WASHINGTON WATCH: Space Commission Recommends Emphasis on Military Space New Administration Facing Export Control Issues New AIA Fellow Arrives from NASA 2001 AIA Top Ten Issues

Industry Awaiting Aerospace Commission

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Karl J. Krapek, president and chief operating officer of United Technologies Corporation (UTC), is the new chairman of the Board of Governors of the Aerospace Industries Association for 2001.

His election took place at the association’s December board meeting.

Marshall O. Larsen, president and chief operating officer of BFGoodrich Aerospace, was elected vice chairman of the board.

Krapek has been president and chief operating officer of United Technologies since April 1999. Before then he had been executive vice president of UTC and president of Pratt & Whitney, a division of UTC.

A member of the corporation’s board of directors, which he joined in 1997, Krapek previously served as president of UTC’s Otis Elevator Co. and Carrier Corp. Before joining Otis, he was an executive at General Motors.

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AIA presented its first "Wings of Liberty" award to Senate Armed Services Committee Chairman John Warner (R-Va.) in January in recognition of his contributions to aerospace and defense.

Board of Governors Chairman Karl Krapek, president and chief operating officer of United Technologies, presented the award during the association’s executive committee meeting.

Krapek noted that Warner "has for many years been a strong supporter of the aerospace industry" and has been "instrumental in the adoption of aircraft modernization programs, acquisition reform, and increased defense spending."

The award was designed to acknowledge congressional leaders who recognize the unique role aerospace plays in the nation’s economy and its security. Krapek noted that Warner has always placed America’s interests first and has been a major force in developing bipartisan support for national defense.

AIA President and CEO John W. Douglass said at the presentation that a robust U.S. aerospace industry played a major role in ending the Cold War, bringing a period of relative peace around the world.

"Liberty and freedom have truly ridden upon the wings of American aircraft," he said. "Leaders in Congress, such as Senator Warner, have worked hard to guarantee that a strong aerospace industry will continue to ensure peace around the world."

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The Aerospace Industries Association (AIA) joins the nation in congratulating President George W. Bush and his cabinet as they begin the important task of governing.

As always, when a new president is inaugurated, there is excitement and anticipation in the air in Washington. There also is a sense of renewed energy and enthusiasm throughout the country that accompanies a change in government. This is a time for all of us to reflect on our blessings as a nation and to be thankful for the foresight of the founding fathers in establishing a democracy responsive to the needs of its citizens.

The association was pleased with the interest in aerospace industry issues expressed by candidate Bush during the campaign, particularly his commitment to an increase in the defense research and development and procurement budgets. We look forward to working with President Bush on increasing defense budgets as well as other issues of great importance to the nation and the aerospace industry.

AIA began creating a productive working relationship between the aerospace industry and the Bush administration on December 29 when we delivered a package of 16 issue papers on aerospace matters to the Bush/Cheney transition office. Included with the papers were recommendations for appointment to executive branch positions important to the aerospace industry. The names submitted seem to be receiving appropriate consideration.

The papers present the most pressing aerospace issues that should be addressed quickly because of imminent events likely to occur in the early days of the new administration.

Among the topics is a recommendation for a significant increase in the government’s spending on aerospace research and development and procurement and several recommendations regarding the Presidential Commission on the Future of the U.S. Aerospace Industry.

In addition, there are papers on topics in the areas of aerospace industry stability and strength, international trade, civil aviation, and various government business policies and procedures.

All 16 issue papers are available on the AIA Web site at www.aia-aerospace.org.

Next, we have undertaken a major effort to encourage a timely start to the process of setting up the presidential commission on aerospace. We have prepared a guide the administration can use in organizing the commission as well as a series of white papers covering topics pertinent to aerospace industry issues requiring study by the commission.

AIA staff has begun working with AIA member companies to complete the commission issue papers. We intend to have them available by March 1 — the anticipated start date for the panel.

The next several months will be busy for AIA as well as for the new administration. I want the association to be as helpful to the president and the administration as possible. Most of all, I want us to be supportive. As I’ve said before, it’s up to us who care about the aerospace industry to devote ourselves at this time to fostering a business environment conducive to its growth and financial strength.

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The U.S. aerospace industry generated $144 billion in sales last year — down nearly 5 percent from 1999’s record. Civil aircraft sales accounted for the majority of last year’s sales decline.

Industry sales are projected to rise in 2001 to $145 billion as commercial transport production increases following last year’s record $155 billion in total orders.

The U.S. aerospace industry posted an estimated $9.4 billion in profits during 2000 — down from $10.2 billion in 1999 but still the second highest on record.

Reduced shipments of commercial jetliners pulled civil aircraft sector sales down. General aviation billings, on the other hand, are projected to eclipse 1999’s record. Civil helicopter sales also increased. Taken together, civil aircraft shipments declined $5.8 billion to $39 billion in 2000, and military aircraft sector sales also dropped.

Reduced exports were largely responsible for the sector’s sales decline. Military aircraft sales are chiefly driven by the Defense Department’s funding of aircraft procurement, which Congress reduced in FY 2000.

Increased exports of missiles, rockets, and parts contributed to the missile sector’s sales growth. However, increased congressional funding for defense missile procurement in FY 2000 was the primary reason missile sector sales rose.

Commercial space sales recovered from a spate of launch failures in 1999. Including federal spending, total space sector sales increased.

U.S. aerospace industry sales are forecast to rise in 2001 on the strength of DoD increases while NASA and other non-defense federal agencies space-related spending falls. Sales to customers other than the U.S. government, such as airlines and private corporations, are forecast to rise slightly.

Shipments of complete civil aircraft will rise in 2001. AIA estimates 530 airliners will be shipped in 2001, some 80 percent, or $33 billion, of the total value of civil aircraft shipments.

Source: David Napier, 202-371-8563.

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AIA will moderate the United Nations’ second annual industry symposium on space technology on Feb. 19 in Vienna, Austria.

The topic will be "Emerging Applications of Global Navigation Systems: A New Utility with Global Benefits."

Association staff also will give a presentation on the U.S. global positioning system (GPS) and its potential benefits to developing countries. Emphasis will be on GPS applications for improving productivity of infrastructures in transportation, oil and gas networks, agriculture, telecommunications and disaster preparedness, and relief.

Representatives of other nations will give presentations on other global navigation systems.

Less than three percent of hardware sold for receiving GPS signals is military. The other 97 percent goes to civilian uses, including mapping, aviation, marine, and automobile navigation. The potential for GPS signals helping developing nations has hardly been tapped.

The symposium will be attended by diplomats, scientists, and government officials from many nations, some of which are just developing an interest in the use of space systems to benefit their people.

The event will take place during the yearly meeting of the Scientific and Technical Subcommittee of the U.N.’s Committee on the Peaceful Uses of Outer Space.

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AIA has joined aviation and environmental stakeholders in endorsing an International Civil Aviation Organization (ICAO) call for a more stringent noise standard for large civil aircraft.

ICAO’s Committee on Aviation Environmental Protection (CAEP) produced a new certification standard in Montreal in late January.

The standard, which will go into effect on Jan. 1, 2006, requires new airliners to be at least 10 decibels quieter than the existing ICAO standard. In the United States, new aircraft now are certified to the FAA’s "Stage 3" standard, which is based on the current ICAO "Chapter 3" rules.

Although the Chapter 4 rule will impose new costs on manufacturers and airlines, AIA members endorse ICAO’s action as necessary to ensure continuing environmental progress.

CAEP’s work concluded with a set of recommendations for the ICAO Council. The new "Chapter 4" standard is the principal result. It is based on detailed study of the costs and benefits of 28 possible noise reduction strategies for world airports.

ICAO’s goal is to reduce the number of people affected by excessive noise from aircraft while accommodating projected traffic growth. The goal also applies to emissions.

AIA President and CEO John Douglass said, "The overarching issue here is to achieve consensus on a single global standard for all aircraft." He thanked FAA’s James Erickson who led the U.S. delegation to the CAEP for achieving international consensus and cited important contributions by Ed Stimpson, U.S. ambassador to ICAO.

Formed three years ago, the CAEP committee is made up of government policymakers, technical experts, and economists from 18 countries. The CAEP recommendations will go to the ICAO Council to be developed into a work plan.

The council is expected to ratify the new standard and take up the issue of restrictions on use of existing aircraft when it meets this spring.

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AIA has submitted written testimony to the U.S. International Trade Commission, which is conducting a study on the large civil aircraft aerostructures industry in response to a request by the House Ways and Means Committee.

The study is expected to be completed in July.

The testimony notes that consolidation among prime contractors has reduced potential markets for aerostructure suppliers, and primes are demanding that their suppliers take on higher levels of assembly design, production, and financial risk in new products.

U.S. suppliers face competition from Europe, where governments often provide product development support, and Asia, where countries have demanded offsets and licensed production in exchange for purchasing commercial and military aircraft.

In the United States, government aerospace research and development has declined 50 percent since 1987. By contrast, aeronautics R&D funding in Europe has increased dramatically over the last decade.

For the U.S. aerospace manufacturing industry and its supplier community to remain competitive, the U.S. government must restore support for the basic, pre-competitive research that 20 years ago inspired the basic technologies that U.S. companies developed for today’s civil aircraft.

National governments play positive roles to further the commercial aircraft industry, including aerostructures, by supporting basic research, airport construction, or improved air traffic control systems.

Governments can also distort the global industry, however, by subsidizing domestic firms, devising certification and safety regulations that favor one product over another, and pressuring domestic purchases of aerospace products to favor one supplier over another.

The United States needs to eliminate the latter types of activities through actions in the World Trade Organization and by pressing for adherence to the terms of the bilateral agreement with the European Union on large civil aircraft.

Aerospace is a mainstay of the U.S. economy, and it is critical for the government to help assure that industry can compete in a fair and open international marketplace.

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This edition of AIA UPDATE launches a bright, four-color design for the association newsletter. The frequency of the publication will continue to be 10 issues during the calendar year. Five are scheduled to be four-color editions: January/February, April, June, September, and November.

There’s more new at AIA.

Over the past 81 years, flight has been represented in AIA’s logos. The new symbol and signature continue that tradition by retaining the wings.

The updated site will feature quicker, easier access to member-only information and expanded sections on issues, policies, and member services.

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Martin-Baker America Inc., AIA’s newest member, is best known as the world’s longest established and most experienced manufacturer of aircraft ejection seats and related equipment.

Founded as an aircraft manufacturer in 1929 by James Martin and Capt. Valentine Baker, the company in 1944 began pioneering work in the field of aircrew ejection, carrying out its first live demonstrations in 1946.

The company has established itself as the largest global supplier of ejection seats. To date, Martin-Baker ejection systems have saved the lives of more than 6,700 aircrew, including 3,320 American flyers.

Corporate headquarters are at Higher Denham in Buckinghamshire, England. Martin-Baker America opened a plant in Johnstown, Pa., last June and a support facility in Boothwyn, Pa., in October.

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Fourteen companies joined AIA in 2000, bringing the number of full members to 63, an increase of 12 percent despite some losses through industry mergers and acquisitions.

The growth is testimony that aerospace companies are still seeking a unifying organization to speak for industry and influence government and other stakeholders on issues such as export controls, competitiveness, financial health, procurement funding, research and development funding, and the environment.

The association’s Supplier Management Council (SMC) also expanded significantly last year as AIA has become the preferred association for preferred suppliers. Some 83 companies, identified as top suppliers and recommended by the industry’s leading prime and major subcontractors, joined AIA in 2000 as associate members of the SMC.

There are now 169 member company representatives serving on the council.

For information about becoming an SMC member, contact J.P. Stevens at 202-371-8514.

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Aviall, Inc.

Ball Aerospace & Technologies Corp.

Davis Tool, Inc.

DRS Technologies, Inc.

Fairchild Fasteners

Groen Brothers Aviation, Inc.

Martin-Baker America Inc.

MD Helicopters, Inc.

The NORDAM Group

Space Access, LLC

Spectrum Astro, Inc.

Stellex Aerostructures, Inc.

Swales Aerospace

Vought Aircraft Industries, Inc.

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He had been AIA’s assistant vice president, supplier management.

Stevens will be staff representative for the Aerospace Services Council (ASC) Steering Group, implementing a new council dedicated to addressing service-related concerns of AIA member companies.

The council will be responsible for issues affecting strategic industry initiatives, including regulatory issues, depot maintenance, and strategic planning.

The ASC is expected to be operational in May.

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AIA joins the rest of the aerospace industry in mourning the death of Wall Street Journal Aerospace Editor Jeff Cole in a tragic plane crash in Colorado January 24 while visiting and interviewing Atlas Air CEO Michael Chowdry.

"Jeff’s coverage of the industry set a standard for excellence in aerospace journalism that will be difficult to fill," said AIA President and CEO John Douglass. "We extend our sympathies to the families, friends, and colleagues of both Jeff and Michael."

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The Commission to Assess U.S. National Security Space Management Organization, chartered by Congress last year, recently released its findings.

Senators John Warner (R-Va.) and Wayne Allard (R-Colo.) took time out from a confirmation hearing for Defense Secretary Donald Rumsfeld to express support for the report.

Warner quoted Rumsfeld as saying that since we are highly dependent upon space, we are highly vulnerable, signifying the importance of protecting our national space assets.

Congressman Mac Thornberry (R-Tex.), in accepting the report on behalf of the House, said that just as dominance of the sky was paramount in the 20th century, dominance of space will be paramount in the 21st century.

The commission report made several recommendations, including making space a national security priority, creating a new post for an under secretary of defense for space, intelligence, and information, and forming a Major Force Program for Space so all space items in the DoD budget appear in the same account.

Also recommended was a new four-star general position for the Commander of Air Force Space Command, distinct from the Commander of U.S. Space Command and Norad.

The commission said groundwork should be laid for a separate space force or a combined aerospace force.

A report advocating sweeping changes in military uses of space would normally meet strong resistance in Congress and the administration.

Because the study was commissioned by Congress and chaired by new Defense Secretary Rumsfeld, its recommendations might receive positive consideration.

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The Bush Administration is having to quickly address a range of export control issues, forcing leadership in the State, Defense, and Commerce departments and the National Security Council to decide whether to continue reforms begun by the Clinton Administration or set off in a different direction.

The Defense Trade Security Initiative (DTSI) announced by Secretary of State Madeline Albright last May is in various stages of implementation. In one, agreement has been reached to restore the licensing waiver for much of defense and technology trade with Canada.

Canada is now implementing regulations that should allow resumption of the waiver by May.

Negotiations are also well advanced with Australia and, to a lesser degree, with the United Kingdom, and the administration will have to decide what compromises are needed to conclude those talks.

In January, the Defense Department launched an interagency program management office to improve the electronic connectivity between agencies for export licensing, another DTSI initiative.

There is still no agreement among agencies on how much data should be shared, what levels of classification to include, which agencies to include, or how much to involve industry.

The DTSI also committed the executive branch to review one quarter of the Munitions List each year, but so far no action has been taken.

Finally, the Senate Banking Committee has introduced a revision of the Export Administration Act (EAA) it marked up last year. The current law expires August 20. The administration has to decide whether to support the bill, seek further revisions, or extend the current law.

AIA is working with the administration and Congress to implement the DTSI initiatives and achieve a modernized EAA that meets industry concerns.

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The newest AIA Fellow has joined AIA for 2001. She is Lyn Cywanowicz, a senior policy analyst and chief of staff for Space Operations in the Office of Space Flight in NASA Headquarters.

Cywanowicz takes the place of Donna Fortunat, who has returned to NASA after a successful year with the association.

The newest Fellow began her NASA career as a cooperative education student at the Johnson Space Center in Houston. Before moving to NASA Headquarters in 1992, she held various positions of increasing responsibility at the Johnson and Marshall space flight centers. She is a graduate of the University of West Florida.

Cywanowicz says she hopes to gain insight into issues facing aerospace industries and the processes used to obtain industry consensus when addressing those issues.

"Although government and industry share many of the same challenges, I think it will be extremely helpful to see them from the industry perspective," she said.

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Each year AIA identifies the aerospace industry’s Top Ten Issues of importance.

(See Complete descriptions of the Top Ten Issues)

1. Support the Presidential Commission on the Future of the U.S. Aerospace Industry
   Congress established the Presidential Commission on the Future of the U.S. Aerospace Industry to examine in 2001 the impact on the industry of a wide range of government policies and to assess the importance of the industry to national defense and economic security. A major objective of the commission is to develop a plan to support the U.S. aerospace industrial base.
2. Support Global Implementation of Commercial Aviation Safety Team Recommendations
   The aviation industry and safety agencies in the United States, Canada, and Europe are working together to produce concrete recommendations that will result in significant measurable initiatives to improve aviation safety. The aviation community needs to ensure that the recommendations are fully and rapidly implemented.
3. Continue Reform of Government and Industry Business Practices
   Federal government business practices must be reformed to bring them in line with commercial industry approaches and avoid costly regulatory oversight.
4. Facilitate an Integrated E-Business Environment among Suppliers, Customers, and Business Partners
   The emerging global electronic business (e-business) environment will achieve productivity gains if industry focuses on standardization of processes and information interfaces implemented throughout the product life cycle and integrated among all suppliers, customers, and business partners.
5. Continue Reform of Export Laws, Regulations, and Their Administration
   The United States must continue to modernize its export control laws and administrative practices to sufficiently protect U.S. security interests, maintain technological superiority, compete in world markets, and conduct international cooperative programs.
6. Establish International Consensus to Reduce Airplane Noise and Emissions through ICAO
   Aerospace environmental issues are becoming increasingly politicized, and the rapid growth in their number and complexity has cost, planning, and resource implications. While these issues can be resolved only by developing and adhering to a global framework, unilateral actions in some regions threaten the consensus process by which international noise and emissions standards for aircraft are developed.
7. Examine Multilateral Actions to Reduce Offsets
   Foreign purchasers of military aerospace equipment often require sellers to provide economic offsets as a condition of sale. A presidential commission on offsets is studying the practice to see if U.S. action is needed. Industry argues that remedies must be multi-lateral rather than unilateral.
8. Adequately Fund Aerospace Procurement and Research and Development
   Current funding of U.S. aerospace procurement and R&D is inadequate to maintain a healthy defense industrial base. Technological leadership and investment in the U.S. aerospace industry needs to remain competitive in the global economy.
9. Develop a National Plan to Support the Commercial Space Industry
   The U.S. commercial space industry is growing, helping to improve health, safety, and quality of life for Americans. To keep pace with foreign commercial competitors, however, the nation’s regulatory framework, launch range infrastructure, and space investment strategies must be modernized.
10. Reduce United States/European Union Aerospace Trade Tensions
    Trade disputes between the United States and the European Union (EU) inhibit the aerospace industry’s ability to compete successfully in international markets and threaten cross-Atlantic commercial and military relationships.

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