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Record attendance marked the AIA Board of Governors meeting May 25-26. More than 200 representatives from AIA companies converged in Williamsburg, Va., for two days of business meetings, speakers and panels, with lots of conviviality to boot. The meeting was also an occasion to mark the association’s rapid growth in members, which has increased by 50 percent since January 2010.
The kick-off meeting of the Chief Financial Officers Council brought Undersecretary of Defense (Comptroller) Robert F. Hale, NASA’s CFO Elizabeth Robinson and the FAA's Acting Director of Budget Carl Burrus to talk about how to address common financial challenges.
The meeting was also an opportunity for the Civil Aviation Leadership Council, chaired by Michael T. Strianese, chief executive officer of L-3, to update its members on progress on air traffic management, environmental and security issues.
Below are highlights from the meeting.
In his remarks to the Board, AIA Chairman James F. Albaugh, president and CEO of Boeing Commercial Airplanes, took stock of the U.S. aerospace industry, identifying threats to future growth and recommending policies to ensure continued leadership in the 21st century. Albaugh was specifically concerned about international governments investing in their industries and distorting free trade. He called for strengthened rules-based global trade, like that reflected in the recent WTO ruling on European subsidies and a strengthened, agile U.S. Export-Import Bank. “The traditional duopoly between Boeing and Airbus is over”, he said. “Other countries and companies are attracted by the $3.6 trillion [large commercial transport] market.” Albaugh also observed U.S. industry’s demand for technical workers is outstripping supply. Despite spending more, the United States is falling behind. He called this the “intellectual disarmament” of the United States and called for industry involvement in identifying, measuring and promoting more successful STEM education programs.
AIA President and CEO Marion C. Blakey called on attendees to support the association’s Federal Budget Education Campaign, an initiative to educate the new Congress about the benefits of aerospace and defense to our national security, economy and civil aviation and space infrastructure. She acknowledged that the aerospace and defense industry will have to do its part to get the nation’s economic house in order but “we need to make the case that ill-considered cuts can have unintended consequences.” She added that the association would be counting on attendees to help unify our voice, resulting in a stronger industry and nation.
Preserving the Aerospace Industrial Base Forum
A panel of industrial base experts kicked off the meeting’s speaking sessions with a session on the aerospace and defense industrial base. In introducing the panel, Jim Albaugh said that America’s industrial base equipped us to win World War II and the Cold War, put a man on the moon and made America the worldwide leader in space, commercial aviation and space. “But a strong industrial base is not a given. It’s a product of the right policies, investments and priorities—not of time,” he said.
Dr. Andrew Krepinevich, panel moderator and president for the Center for Strategic and Budgetary Assessments, described the current U.S. economic situation as a result not of imperial overstretch, but more one of entitlement overstretch. He said that we badly need a strategy to preserve our defense industrial base as a strategic asset and that the impact of budget cuts was likely to fall disproportionately on DOD modernization accounts.
Brett Lambert, deputy assistant secretary of defense for Manufacturing and Industrial Base Policy, said that DOD was working to establish guideposts from the perspective of the taxpayer and warfighter in laying out a merger and acquisition strategy. He stressed that the department realized the importance of a healthy industrial base especially in light of the challenging economic struggles likely to lie ahead.
Industry’s perspective was provided by Pratt & Whitney President David P. Hess, BAE President and CEO Linda Hudson and Spirit AeroSystems President and CEO Jeffrey L. Turner.
Hess called for a stronger partnership with DOD to solve some very challenging issues such as insourcing.
BAE’s Hudson said, “In my view, before an industrial base strategy can be developed and implemented, there must be some clarity about the nature of future demand and the capabilities required to meet that demand. Only then can it be translated into a strategy for the workforce and production facilities needed for the future.” Hudson underscored the dissonance between the buyer and industry, citing a DOD procurement out-year funding line for a weapon system that was baselined at $250 million in fiscal 2012. It plummeted to $25 million in fiscal 2013 and is then forecasted to increase to half a billion dollars in fiscal 2014 and $850 million in fiscal 2015, a trajectory Hudson called extremely harmful to the industrial base.
Spirit AeroSystems’ Turner said that his company’s approach was to exercise leadership and align closely with employees during the tough economic environment of the general aviation industry in Kansas.
Gen. Philip Breedlove, the vice chief of staff for the Air Force, called for a partnership with industry to negotiate the challenges ahead for the service. He said the stakes ahead were as high as they have ever been, referring to the tight fiscal environment and the unprecedented uncertainty of threats.
According to Breedlove, the service is committed to recapturing acquisition excellence with industry. He cited affordability, tough and realistic cost estimates and stringent requirements as steps in this process.
The challenge in acquisition was brought home by this observation: “We are flying the oldest fleet in the history of the Air Force,” said Breedlove. “The average age of an aircraft today is in excess of 24 years.”
Breedlove concluded that with less than one percent of the population serving the nation in uniform, his top priority, which he would not compromise, was to make sure these men and women had everything they needed to do their job.
Domingo Ureño-Raso, president of the AeroSpace and Defence Industries Association of Europe, also focused on partnership in his remarks.
European and U.S. companies are partners and competitors, and the partnership between the EU and United States during this harsh economic time has been critical, he said. He cited ASD’s and AIA’s work in ethics, air traffic management interoperability and aviation emissions as examples.
He noted that the International Forum on Business Ethical Conduct met last week and was moving forward to establish a formal charter that would facilitate recruitment and further cooperative activity.
Regarding reducing aviation emissions, he said, “We don’t have a choice. We need more investment in research and development to deliver the breakthrough technologies to meet the challenge.”
Middle East Turmoil & Implications for National and Aerospace Interests Forum
Middle East experts Gen. Tony Zinni and Ambassador Wendy Chamberlin explored the geopolitical forces shaping the Arab Spring, the name used to describe the revolutionary wave of demonstrations and protests occurring earlier this year in the Middle East and North Africa. The region’s dynamics have immense importance for the U.S. aerospace industry, impacting the price of fuel and commercial and defense sales.
While the panelists did nothing to dispel the concerns about the long-term prospects of stability in the region, Gen. Zinni, who has served as U.S. Peace Envoy, among other roles, said that our military relationships in the region were a strong and important backbone. Ambassador Chamberlin, president of the Middle East Institute, agreed, noting that the “goodwill” of the military was a stabilizing force in each country. Moderator John Nagl, president of the Center for a New American Security, added that the information revolution and technologies like Twitter were having an impact in the Middle East, allowing like-minded people to come together, making traditional government control more difficult. In this context, Ambassador Chamberlin highlighted the response of many governments in the region to identify and promote new social reform measures.
The NRO Space Acquisition System is not broken was the message delivered by Maj. Gen. Susan Mashiko, USAF, deputy director of the National Reconnaissance Office. With a lot of attention and discipline, she reported that as of March, all 20 NRO programs were on target for cost, schedule and performance.
“It took a lot of discipline with a flat budget, operational tempo and current skill sets to achieve this,” said Mashiko.
Gen. Mashiko called the agency’s successful launch of five satellites in five months, “the most ambitious and successful launch schedule in its history.”
NRO is celebrating its 50th anniversary Sep. 17 during National Aerospace Week.
Federal Aviation Administrator Randy Babbitt reminded attendees that the benefits of the Next Generation Air Transportation System are starting to accrue. Fuel and emissions reductions with substantial savings are being realized by a number of airlines that are employing NextGen.
“The Greener Skies Over Seattle initiative is saving $9 million in fuel costs and reducing 34 tons of carbon dioxide emissions a year,” said Babbitt. The initiative is a partnership between Alaska Airlines, the Port of Seattle, Boeing and the FAA.
He cited a new report by Deloitte Touche, Transforming the Air Transportation System, which reports that the net present value of deploying NextGen and SESAR and other global programs is $897 billion through 2035.
During the question and answer session, Babbitt said the House funding proposal, which is 36 percent below the President’s Budget Request, will delay NextGen operational and safety procedures. “Delaying NextGen will far outweigh the cost of going forward today,” he said.
The meeting concluded with remarks by commentator and Pulitzer Prize winner Dr. Charles Krauthammer. He said the nation was “never in the middle of something so important,” as Republicans and Democrats attempted to bridge a huge divide and deal with the nation’s soaring debt.
He lamented the state of the nation’s space program, which is forcing the United States to “hitchhike to space.”
He also saluted industry for its patriotic mission in providing the most advanced technology to our soldiers. “You keep us safe in a way never seen before,” he said.
He urged attendees to go out and talk to members of Congress, including the freshmen and Tea Party members. “They will go either way until you talk to them.”