Industry brims with enthusiasm at Farnborough, despite ominous clouds on the horizon

THE FARNBOROUGH BLOG, 9 July 2012. First impressions: I note with amusement the level of aerospace industry "confidence" and "optimism" depicted in initial press reports today at the Farnborough International Airshow in Farnborough, England.

Pick up any of the several show dailies hawked at show entrances and you'd think the industry were booming. "Highly confident," "optimistic," and "bullish," are only a few of the superlatives that decorate ebullient press coverage today at Farnborough.

Read between the lines, and one wonders about the reasons for this unbridled enthusiasm, except that ... well, what else can aerospace executives day publicly? I'll wager the industry outlook is somewhat more guarded in private.

Here are a few industry facts that might temper the much-published accounts of enthusiasm. The defense industry is becoming increasingly worried about prospects for automatic $500 billion U.S. military budget cuts called "sequestration" over the next decade that could be triggered automatically on 1 Jan. 2013 if Congress cannot agree to controlled defense cuts.

Boeing officials, in fact, have announced plans to lay off workers effective 1 Jan. in preparation for the anticipated sequestration cuts. "There's no clarity on how that $500 billion reduction will flow down into individual programs," says Dennis Muilenburg, president of the Boeing Defense, Space & Security segment in Monday's show daily put out by Aviation Week.

"Our assumption is to assume that it will happen, and then accommodate it," Muilenburg says. "These cuts will have a devastating impact on the Department of Defense, government agencies, and the industrial base. It is a federal requirement that we give 60 to 90 days advance notice on layoffs, and we are already preparing to do that."

One could infer that the U.S. defense industry could be headed for some period of decline relative to recent years. It only remains to bee seen how severe the decline turns out to be. Much could happen between now and 1 Jan. Congress could break its deadlock and take control of the defense budget for one thing ...

... then there's that interlude scheduled for early November called the presidential election.

Still, in the midst of decline U.S. defense fortunes comes an account in the Flight Global show daily of a resurgent Russian defense industry that is "gearing up to re-arm the nation after 20 years in the doldrums," with promise for broadening foreign military sales for Russian military hardware.

"Major production orders have been signed for almost 270 new combat and training aircraft, and deals are due to follow for an expected 400 more under Moscow's 10-year re-armament package for combat and transport aircraft," Flight Global reports.

Add to the mix a delay in production of the Canadian Bombardier CSeries of regional jetliners due to problems with its Parker Hannifin-provided fly-by-wire system, foot-dragging on the part of Boeing in announcing its plans for a next-generation 777 widebody jet despite pressure from its customers to do so, and a continuing worldwide economic downturn, and it's difficult to see where all this aerospace industry enthusiasm is coming from.

For more information contact the Farnborough International Airshow online at www.farnborough.com. Also follow Military & Aerospace Electronics and Avionics Intelligence daily Farnborough show coverage online at www.militaryaerospace.com/farnborough-report.

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