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 AIA UPDATE: January/February 2008, Volume 12, No. 5
President Directs Export System Upgrades In the drive to modernize the U.S. export control system, AIA and its coalition partners say they will engage the administration and Congress in the months ahead to ensure implementation of a package of export directives President Bush signed on Jan. 22. In a statement, the White House said the directives "will advance a more efficient and transparent export licensing process and enhance dispute resolution mechanisms. They will also help ensure proper levels of control for continued U.S. economic competitiveness and innovation while protecting national security." The package specifically includes provisions for an updated electronic license processing system and additional resources for the timely evaluation of defense trade licenses at the State Department as well as the development of a regular systematic review of dual-use products and services controlled by the Commerce Department. "Making improvements to the export control system will increase our ability to fight shoulder-to-shoulder with our allies and friends around the world," AIA President and CEO Marion Blakey said in response to President Bush's action. "It also helps ensure the U.S. armed forces have the best weapons and equipment available to do their job at the best price to the taxpayer. A modernized export control system also promotes our nation's continued economic and technological leadership while supporting hundreds of thousands of high-paying, highly skilled jobs around the country." AIA and its members have long advocated export control modernization to support defense and dual-use trade and technology cooperation. AIA is a founding member of the Coalition for Security and Competitiveness, a diverse group of leading industry and trade organizations committed to improving the U.S. export control system. Visit www.securityandcompetitiveness.org. AIA Source: remy.nathan@aia-aerospace.org AEROSPACE FOCUS: The Speaker in the House  Although the Senate was in recess, the House had reconvened, and more than 20 House members joined congressional staff and industry representatives to show their support for Blakey and AIA. Introduced by AIA Chairman Clay Jones, Blakey pledged that the association would continue to work closely with Congress to advance the objectives of the aerospace industry. She urged members and staff to review the association's 2008 election issues briefing papers available online. WASHINGTON PIPELINE: AIA Takes Stand on Aerospace Issues in 2008 Election By Marion C. Blakey, AIA President and CEO Since joining AIA in November, I've been impressed over and over with examples of how closely the economic well-being and national security of America are linked to the vitality and accomplishments of the aerospace and defense industry. In December, for example, we presented our annual Year-End Review and Forecast, and the news was good for aerospace and the nation. With records in overall sales and many other categories, aerospace in 2007 reinforced its standing as a critical cog in the U.S. economy. We also registered another stellar year in foreign trade, posting a surplus of nearly $57 billion, and we added some 26,000 well-paying jobs to America's overall workforce. As you might expect, the association's foremost objectives this year are tied to the U.S. presidential and congressional elections. Following precedents in 2000 and 2004, we've tailored our 2008 priorities toward the campaigns to ensure that industry's issues are prominent when the new president and the new Congress take office next year. We've cast a wide net, reaching out early to each campaign before the candidates and their staffs could be overtaken by the daily grind of caucuses and primaries. This approach has already seen results with several candidates publicly favoring elements of such important aerospace issues as space and defense funding. Here's an overview of some of our priority election issues and where we stand on them:
Other key issues include export control modernization, research and development investment, and the looming workforce crisis. I look forward to advancing aerospace industry priorities among the candidates. I hope you'll visit our Web site at www.aia-aerospace.org under the "Issues & Policies" tab where we regularly update initiatives that AIA is taking on the election issues and what candidates are saying about the aerospace and defense industry. Jones Chairs 2008 AIA Board of Governors Clayton M. Jones, chairman, president, and chief executive officer of Rockwell Collins, has been elected 2008 chairman of AIA's Board of Governors. He succeeds William H. Swanson, chairman and chief executive officer of Raytheon Company. Robert J. Stevens, chairman, president, and chief executive officer of Lockheed Martin Corporation, was elected AIA vice chairman. The board also confirmed Marion C. Blakey as AIA president and chief executive officer and Ginette Colot as secretary-treasurer. Before adding the duties of chairman to his position in June 2002, Jones was chief executive officer and president of Rockwell Collins. He previously served as president of Rockwell Collins and as a corporate officer and senior vice president of Rockwell International. Earlier, Jones was vice president and general manager of the Collins Air Transport Division and corporate senior vice president of government operations and international in Washington, D.C. In 1982, he was sponsored by Rockwell to serve a fellowship in a White House executive exchange program. A native of Nashville, Tenn., Jones joined Rockwell International in 1979 after serving in the U.S. Air Force as a fighter pilot. He earned a bachelor's degree from the University of Tennessee and a master's in business administration from George Washington University. Jones is a director of the General Aviation Manufacturers Association and the Smithsonian National Air and Space Museum. He is also a member of The Business Council and the President's National Security Telecommunications Advisory Committee, an Honorary Fellow of the American Institute of Aeronautics and Astronautics, and a director of Unisys Corporation and Deere & Company. AIA Source: ginette.colot@aia-aerospace.org WASHINGTON WATCH: AIA Champions Free Trade Promotion Pacts AIA and its partners in the Latin America Trade Coalition and the U.S.-Korea Business Council are aggressively seeking passage of pending free trade promotion agreements in the second session of the 110th Congress. Under consideration are three trade promotion agreements signed by President Bush with Colombia, Peru, and Korea. The agreements with Colombia and Peru will help support two stable democracies and promote economic development throughout Latin America. The pacts will also cultivate increased demand for infrastructure improvements and capacity expansion in the civil aviation sector. The U.S.-Korea agreement would make Korea the largest U.S. free trade partner in 15 years. In 2006, U.S. exports to Korea totaled $32.5 billion, with American aerospace exports to Korea reaching $3.46 billion. The pact would also strengthen the U.S.-Korea bilateral relationship, underscoring the importance of the U.S. commitment to allies in East Asia. Nearly one quarter of U.S. gross domestic product is tied to international trade and to the 95 percent of the world's consumers who live outside the United States. Trade agreements must be negotiated to remove trade barriers and expand access to international markets. Free and fair trade enhances partnerships and dialogue with countries that share our security concerns and is critical, therefore, to America's prosperity and national security. With aerospace exports soaring to $92.5 billion in 2007 and imports reaching $36 billion, the aerospace industry helps offset the chronic U.S. trade deficit by maintaining the largest positive balance of trade of any U.S. manufacturing sector. AIA Source: joseph.lai@aia-aerospace.org WASHINGTON WATCH: Lawmakers Return To Unfinished Aerospace and Defense Business When the second session of the 110th Congress convened in January, lawmakers faced a number of items important to the aerospace and defense industry. The FAA reauthorization bill — critical legislation that will affect safety oversight, repair stations, fees for manufacturers, and funding for the transition to the Next Generation Air Transportation System (NextGen) — remains to be completed. The agency's current authorization expires Feb. 29. NextGen initiatives to modernize air traffic facilities and services as well as funding and management challenges for the Joint Planning and Development Office (JPDO), the multi-agency entity responsible for planning NextGen, are included in the reauthorization process. Congress also will determine the scope of JPDO's efforts, deciding the technology investment and deployment strategy for NextGen and aligning budgets of agencies involved in the NextGen framework, primarily FAA and NASA. Provisions in the House-approved version of the reauthorization bill regarding foreign repair stations, it's feared, might have the unintended consequence of damaging U.S. relationships abroad and threatening agreements with the European Aviation Safety Agency. The use of foreign repair stations to maintain international and domestic aircraft fleets is critical to U.S. airlines needing the availability of a network of international repair stations. The solvency of the Airport and Airways Trust Fund is another priority for FAA reauthorization. Allowing the current authorization to lapse could harm the operational and financial health of the industry and its ability to implement needed infrastructure improvements in a timely way. Congress is expected to act on FAA reauthorization this spring. In another matter, the revised fiscal 2008 National Defense Authorization Act was signed on January 28. The bill contains several acquisition reform provisions, including one that allows contracting offices to obtain adequate data to justify fair and reasonable prices in sole source commercial sales. The authorization bill would also help AIA member companies comply with Defense Department specialty metal provisions. A new provision, for example, will minimize the use of waivers, substituting self-executing provisions such as new exemptions and self-certifications for compliance. On taxes, the fixed-price research and development tax credit that lapsed at the end of the last congressional session will need to be renewed in the new session. Also, AIA expects a handful of new tax legislation proposals this year. AIA Source: cord.sterling@aia-aerospace.org WASHINGTON WATCH: Report Supports Export Licensing Recommendations A Government Accountability Office (GAO) report has confirmed AIA's concerns about delays in the export-licensing process at the State Department's Directorate of Defense Trade Controls (DDTC). Calling the export control licensing process "a key component of the U.S. export control system to help ensure arms do not fall into the wrong hands," the GAO reported in November that it had found that the number of arms export license applications increased about 20 percent, from 55,000 to 65,000 annually, between 2003 and 2006. During that same period, the median processing time for licenses at DDTC nearly doubled from 14 days to 26 days. GAO attributed the license processing delays, in part, to insufficient staff and the lack of a modernized computer system to handle the in-creased volume of license applications. In March 2007, AIA and its partners in the Coalition for Security and Competitiveness announced proposals to enhance America's national security, economic strength, and technological leadership by modernizing the U.S. export licensing system. The proposals to make the system more predictable, efficient, and transparent include increased funding for DDTC, more staff, and streamlined licensing practices. Many of the coalition's proposals were included in a series of export control reform directives signed by President Bush on Jan. 22. The GAO report can be accessed at www.gao.gov/new.items/d0889.pdf. AIA Source: remy.nathan@aia-aerospace.org NextGen Work Plan Will Seek Public Comment The Joint Planning and Development Office (JPDO) was expected to release on Feb. 18 a revised Integrated Work Plan (IWP) for developing the Next Generation Air Transportation System, known as NextGen. The latest IWP, designed as an evolving roadmap, will be available for six weeks of public review and comment. The document is now undergoing internal review and input within JPDO working groups. Along with JPDO's Concept of Operations and Enterprise Architecture strategies, the work plan completes foundational documents intended to direct NextGen implementation and how it will operate. The completed IWP is expected to identify a critical path, at least for the near-term, that will drive vital elements, such as R&D priorities and business investment decisions. AIA will send copies of the plan to committee members for review and will submit consolidated association comments to the JPDO. AIA Source: susan.mertes@aia-aerospace.org AIA Reports Record Aerospace Sales in 2007 Sustained growth in the civil aircraft market boosted the aerospace industry in 2007, taking total sales to yet another record level, AIA reported in its December state-of-the-industry analysis. For the fourth year in a row, U.S. aerospace sales increased in virtually every industry sector, reaching nearly $200 billion. AIA's Research Center projects that 2008 sales will punch through the 2007 milestone by approximately $11 billion. While sales in 2007 increased across the board for nearly all product and customer categories, most notable was the 16 percent surge in the civil aircraft sector. Aerospace also logged a notable $56.5 billion positive trade balance, a testament to the industry's position as a leader in the increasingly global marketplace, AIA President and CEO Marion Blakey said. With exports soaring to $92.5 billion in 2007 and imports reaching $36 billion, the aerospace industry continues to help offset the country's chronic trade deficit, she pointed out. "With good news in nearly every sector, I am pleased to see the American aerospace industry's strong international presence continuing to keep pace with our domestic successes," Blakey said. "Our impressive trade balance and surging sales in the civil aircraft market have laid a foundation for the industry's continued vitality. Additionally, a 19 percent increase in the backlog of civil orders indicates good days ahead." The industry also increased its production workforce by 25,900 jobs, or about 8 percent, to help boost the average number of total aerospace employees for the year to 637,000. According to the latest available figures, more than 642,000 total workers were employed by the aerospace industry in September. Blakey presented the results during AIA's 43rd Year-End Review and Forecast luncheon, addressing about 300 members of the media, industry, and government. The event showcased the many industry statistics tracked by AIA's Aerospace Research Center, including industry performance over the last 12 months and a look ahead to 2008. AIA Source: william.chadwick@aia-aerospace.org Mark Sullivan Honored with 2007 Lyman Award Mark Sullivan, center, accepts the 2007 Lauren D. Lyman Award for outstanding achievement in aviation public relations during AIA's Year-End Review and Forecast luncheon in Washington. The award is administered through AIA. Sullivan, a 26-year communications veteran with United Technologies, retired in 2006 after 17 years as the chief spokesman for UTC's Pratt & Whitney where he created the popular "Engines 101" course for journalists and others. Jay DeFrank, right, UTC director of communications and public relations, presents the award while Rick Kennedy, media relations manager for GE Aviation, looks on.  Kaminski Named as AIA Representative to NextGen Institute Management Council Paul G. Kaminski, a leader in defense and technology fields, has been named AIA's representative to the NextGen Institute Management Council. Kaminski is chairman and chief executive officer of Technovation, Inc., and senior partner in Global Technology Partners. He is a former undersecretary of defense for acquisition and technology and was the recipient of the 2006 National Medal of Technology. AIA President and CEO Marion C. Blakey said Kaminiski "is an exceptional leader with a vision for the future and the ability to implement complex new systems such as NextGen. He will be a valuable asset in representing AIA members among the many stakeholders involved in transforming our air transportation system to deal with future growth and minimize flight delays." Kaminski earlier served on a panel that formed the vision of the new system and provided the framework for the Joint Planning and Development Office, which is implementing NextGen. The institute provides the JPDO with access to world-class, private-sector expertise, tools, and facilities in development of the new national air transportation system. Peterson Joins AIA's Supplier Management Staff William Peterson has been named AIA's Director of Supplier Management. He is responsible for international supplier initiatives, air show activities, trade missions, and member retention. He also advises and assists Vice President of Supplier Management Dave Pauling. In his most recent position as a technical advisor for a Washington, D.C., intellectual property law firm, Peterson handled state-of-the-art inventions for Boeing, NASA, and other high-technology organizations. Peterson earned a bachelor's degree in aerospace engineering from Embry-Riddle Aeronautical University. AIA Source: william.peterson@aia-aerospace.org LORD Joins Association AIA's newest member is LORD Corporation, a diversified technology company with a long history of producing devices and systems to manage mechanical motion and control noise and vibration in aerospace products and aircraft. Headquartered in Cary, N.C., LORD has technology centers and manufacturing locations around the world staffed by more than 2,400 employees. The company was founded in 1919. LORD's motion and vibration products are used in avionics products in aerospace and in automotive and industrial applications. Its noise control products are used mainly in aircraft. Visit lord.com. Temporary CAS Waiver Needed to Recover Pension Protection Act Compliance Costs Many AIA members faced a sharp increase in the cost of financing defined benefit pension plans this January as a result of the Pension Protection Act (PPA) signed by President Bush in August 2006. The PPA reduced interest rate assumptions in computing the present value of benefits, shortened periods for amortizing unfunded liabilities, and established a funding target of 100 percent of liabilities effective Jan. 1, 2008, for all but a very limited number of eligible contractors who were granted an exemption until January 2011. In addition, contractors required to comply with the government's Cost Accounting Standards (CAS) will face a cash flow burden because of a gap between when contractors must begin increased pension contributions and when the contributions can be recognized as pension costs under the current CAS regulations. The increased funding associated with meeting the PPA requirements won't be recognized immediately as costs under government contracts because the current CAS mandates the use of higher interest rate assumptions and longer amortization periods than the PPA. The estimated difference between current CAS and PPA pension measurements will be billions of dollars in increased net contractor cash outflow. With the PPA provisions, Congress attempted to address the cash flow problem by harmonizing the pension standards — CAS 412 and 413 — with the minimum funding requirements of PPA. The target date for harmonization, however, is Jan. 1, 2010 — two years after most contractors must begin meeting the PPA funding requirements. To correct the cash flow inequity before harmonization, AIA in January asked the Defense Department to request from the CAS Board a temporary waiver to CAS 412. A waiver would allow contractors to include in their forward pricing rates for government contracts a factor for the estimated impact of the differences in the PPA and CAS requirements. The amount included in contract prices could be identified precisely, AIA believes, and the contracts could permit price adjustments after the actual impact of the differences is known. AIA is also considering a request to the PPA's congressional sponsors to amend the 2006 legislation and delay the date for compliance with the funding requirement for all government contractors until Jan. 1, 2010. A decision on the request has been postponed until DoD responds to AIA's request for a temporary CAS waiver. AIA Source: dick.powers@aia-aerospace.org Strategic Missile Defense Is Vital Participants in a recent Missile Defense Round-table, co-hosted by AIA and the George Marshall Institute, agreed to coordinate efforts to educate Congress about the strategic importance of an integral, multi-layered missile defense. AIA member companies joined representatives from Washington, D.C.-based space associations and think tanks in mid-December to share information regarding their education outreach and experiences soliciting support for missile defense on Capitol Hill. With recent cuts in the Missile Defense Agency (MDA) and the likelihood of future reductions in space-based missile defense programs, AIA and the Marshall Institute gathered like-minded organizations to scope out a strategy and identify areas for collaboration. While MDA's budget went relatively unscathed in 2007, a careful review of budget deliberations on Capitol Hill suggested a scenario where future MDA budgets might be slowly eroded. A coordinated education and advocacy effort could, hopefully, temper the erosion of support, particularly regarding the controversial use of space-based assets. Even with the uncertain political environment caused by the pending presidential election, immediate action will help sustain missile defense capability development. A follow-up meeting was scheduled for Feb. 4. AIA Source: anne.connor@aia-aerospace.org |