Aviation Executives to Cantwell: U.S. Leadership in Aerospace Manufacturing at Risk – Unless America Innovates

Global demand for airplanes could create 200,000 U.S. jobs, but fierce global competition growing

WASHINGTON, D.C. – The worldwide aircraft fleet is projected to double over the next 20 years, creating a demand for 35,000 new planes and a $4.8 trillion economic opportunity for manufacturers. However, the United States risks losing its competitive advantage, Boeing’s Chief Operating Officer said Thursday during a hearing before the U.S. Senate aviation subcommittee.

This projected demand could mean 200,000 new American aviation jobs, said U.S. Senator Maria Cantwell (D-WA), Chairwoman of the U.S. Senate Subcommittee on Aviation Operations, Safety, and Security. Cantwell convened Thursday’s hearing to look at challenges facing the U.S. aviation industry, and what steps the U.S. can take to maintain its leadership in the global market and create American jobs.

Testifying before the committee, Dennis Muilenburg, Vice Chairman, President and Chief Operating Officer of the Boeing Company, said Boeing faces increasing competition from foreign countries making significant government investments into their aerospace industries.

“U.S preeminence in aerospace is eroding, and is at risk,” Muilenburg said. “The increasing demand for airplanes presents a great opportunity for Boeing and for U.S. commercial aerospace – but it is an opportunity that must be seized. Competition with Airbus, our principal competitor, is fierce, and airplane manufacturers in Canada, Brazil, Russia and China are all soon to enter markets currently served by Boeing products.”

“Our biggest challenge is to meet this demand, regain market share from aggressive competition, and have the profitability to invest in future products,” he said.

Cantwell heard testimony from Muilenburg, as well as top leaders from the Aerospace Industries Association, Airlines for America and the AFL-CIO. Aviation manufacturing is vital to the U.S. economy, representing more than 1 million jobs. In Washington state, there are 1,350 aerospace-related companies that employ 132,515 workers. With increased demand from a growing middle class in places such as China and India, airlines are predicted to need 35,000 new airplanes in the next 20 years, representing $4.8 trillion in potential value. About 79 percent of that demand will come from outside of North America.

“One fact has been clear for some time: the days of North American and European domination of air transportation are long gone,” said Nicholas E. Calio, President and Chief Executive Officer of Airlines for America. “Governments in key countries have recognized the increased and critical role global air traffic will play in future economic development. They have created clear, national strategic aviation plans that have served to develop integrated aviation eco-systems that are very effective vehicles for national economic growth.”

In her opening statement, Cantwell called for five steps to boost U.S. competitiveness:

  • Increased investment in science, technology, engineering and mathematics (STEM) education and apprenticeship programs to ensure the U.S. has a robust supply of skilled workers. Cantwell pointed to an aging workforce as a serious challenge to U.S. aerospace manufacturing. Nearly 30 percent of aviation workers will be eligible for retirement by 2016. In Washington State, more than 20,000 new aerospace workers will be needed over the next decade.
  • Challenging unfair subsidies provided by foreign governments to their manufacturers through the World Trade Organization.
  • Continued export financing through the Export-Import Bank.
  • Modernizing the nation’s air traffic control system through implementation of the NextGen satellite-based system.
  • Investment in the research and development of composite materials like those used in Boeing’s 787 and 777X.

“There is a demand in the aerospace market for 35,000 planes, and there is demand for about 200,000 new aviation workers. These are everything from technicians to engineers to machinists to pilots and airplane mechanics,” Cantwell said during the hearing. “While we have a tremendous opportunity, we also face real threats to American aviation manufacturing.

“We need to make the right investments to stay competitive on a global stage,” Cantwell said “Today’s hearing is about taking the next steps to ensure that the nation is poised and ready to capitalize on this opportunity – to talk about job creation.”

Cantwell also noted that one factor contributing to demand is airlines must replace old aircraft with new, more fuel efficient models like the Boeing 787 to combat the rising cost of oil – which accounts for about 30 percent of their costs – and to reduce emissions.

Marion Blakey, president and chief executive officer of the Aerospace Industries Association, told the subcommittee that another crucial step is moving forward with streamlining the Federal Aviation Administration’s certification process for aircraft parts and equipment. A former FAA administrator, she cautioned against future cuts to the FAA budget, which delays investments in new technologies and programs such as NextGen.

“As a nation, we need to ensure that our tax policies and financial support provide incentives to maintain jobs here in the United States and are competitive with the policies of other nations,” Blakey said in written testimony. “And we need to ensure that our aerospace workforce is prepared to handle the challenges and changes coming to the global marketplace over the next decade or two.”

“We know that the expansion of international air transportation opportunities can offer lucrative business opportunities for U.S. airlines and, if done the right way, create good aviation jobs. At the same time, we know that globalization without checks and balances can have devastating effects on entire industries and middle class American jobs,” said Ed Wytkind, president of the Transportation Trades Department, AFL-CIO, in written testimony.

Cantwell also raised questions about the disappearance of Malaysia Airlines Flight 370, and the data the aircraft stores and transmits.

“I want to offer my condolences to the families of the victims of Malaysian Flight 370 – my thoughts are with them. It is a tragic situation, and reminds the aviation community that as we see the growth of system across the world we must remain vigilant in regards to safety, and continue to work day in and day out to prevent such tragedies,” Cantwell said.

“I think that people are anxious to know – is there data collected on these planes as a normal part of engine maintenance and what is that information and how can it be made available to people?” Cantwell asked during the questioning.

Blakey, the former FAA administrator, said newer-model airplanes are “flying computers” with tremendous amount of data that is recorded and transmitted. “Because they do monitor – in-flight for example – the health and activity of engines. That is something that new engines will do – they do it periodically during the flight. If there are anomalies that begin to appear in terms of the data, then that monitoring becomes more intense and transmission to the ground is available – again, depending upon the model,” she said.

“Finally when they land – of course – you can download all of that. So that from a maintenance standpoint – as well as from the standpoint of trends and issues – we’ve got a tremendous amount of information available, that certainly is a part of the picture in all of this,” Blakey said.

Below is a transcript of Cantwell’s opening statement:

The Senate Commerce Subcommittee on Aviation will come to order. I want to thank my colleague Senator Klobuchar for being here I know that Senator Ayotte is finishing up with questioning at an Armed Service Committee meeting at this moment and will be here shortly to give her comment and statement. But since everyone is on a tight time-frame this morning we want to go ahead and get started.

I want to thank our witnesses who are here with us today – Dennis Muilenburg, Chief Operating Officer from Boeing Commercial Airplane Company thank you for being here. The Honorable Marion C. Blakey the President and CEO of Aerospace Industries Assocation and obviously we are very familiar with much of your work in the past. Nick Calio, President and Chief Executive Officer of Airlines for America and Ed Wytkind, President, Transportation Trades Department, the AFL-CIO.

First before we turn to the subject of the hearing I want to offer my condolences to the families and the victims of the Malaysian Flight 370. Our thoughts are with them. I know there are several search parties and investigators working hard to locate the aircraft and find some answers – including the National Transportation Safety Board – and I want to thank them for their efforts and for their dedication.

It’s a tragic situation and it reminds the aviation community that as we see growth of our systems across the world we must also remain vigilant in regards to safety and operations of our systems and continue to work every day to prevent such tragedies.   

Today, our hearing is entitled, “The U.S. Aviation Industry and Jobs: Keeping American Manufacturing Competitive.” The U.S. aviation sector is vital to our nation’s economy. In 2009, the civil aviation industry supported over 10 million jobs and contributed $1.3 trillion to our total economic activity and accounted for 5.2% of U.S. Gross Domestic Product (GDP).

Of this total, manufacturing of aircraft and related components provided over one million jobs that produced $185 billion in economic output. While U.S. sales of equipment and parts to foreign NCs contributed $75 billion toward our nation’s trade balance.

So aircraft operations directly contribute a lot of money to the U.S. economy. We are here today to discuss a critical point in aviation manufacturing and in aviation in general. That is as world demand for airplanes continues to rise what are the challenges and opportunities?

We should note that for the first time in history, a truly global middle class is emerging. By 2030, it’s projected that middle class will double in size – from 2 billion today to 5 billion. This will support a strong and steady growth in air service and aircraft.

At the same time while we look at this tremendous opportunity we know that airlines – and I’m sure we’ll hear from Mr. Calio – must replace oil aircraft with new, more fuel efficient models so they can combat the rising cost of oil – which accounts for about 30 percent of their costs and the issue of reducing emissions.

As a result the forecast for new commercial planes over the next 20 years is over 35,000 planes. The market value for these planes is about $4.8 trillion. This is a huge economic opportunity for America to drive high-wage manufacturing and transportation related jobs over the next decades.

But, this economic opportunity is not guaranteed. While the U.S. has been a leader in aircraft manufacturing for 100 years the competition is coming on fiercely. Other nations want to build those 35,000 planes and we can’t rest on our laurels. The majority of demand for new planes will come from abroad – an estimated 80 percent of new planes will be sold outside of North America.

And more than 1 in 3 planes will go to the rapidly growing Asia market. The European Union continues to make substantial investments in aerospace manufacturing. New government-backed competitors in China, Brazil, Russia and Canada have emerged as players in the aerospace markets over the last few years – and they are playing for keeps.   

While we have a tremendous opportunity, we also face real challenges in aviation manufacturing. We need to make the right investments to stay competitive on a global stage. Financing that is also a challenge. We have to keep moving or we will lose ground.

Today’s hearing is about taking the next steps to ensure that the nation is ready and poised to capitalize on this opportunity – to talk about the job creation activities. There is a demand in the aerospace market for those 35,000 planes. There is a demand for about 200,000 new aviation workers.

These are everything from technicians, to engineers, to machinists, to those involved – if you just look at the number of flights that are going to be involved – for pilots, airplane mechanics and repairs. So these are big issues that are going to provide opportunity for us. So while the aviation sector supports a lot of jobs across our nation – and many states in the United States of America support these jobs – just to name a few: Missouri 15,000, California 18,000, Washington state we have about 80,000 so these are all areas of our country that depend on the aviation economy and we want to be competitive.

Today, we are going to hear and talk about how we educate and train the next generation of aerospace workers. That means making investments in programs like STEM and worker training. I plan to move forward working with my colleagues on both sides of the aisle on new aviation jobs training and apprenticeship programs to make sure we have some of those 200,000 people we need for the future.

I want to note with the 777X plane development – the fact that manufacturing is being brought back to the United States from overseas. Manufacturing is a very telling opportunity for America as we move forward with advanced materials like composites to continue to stay ahead and show that the American workforce delivers the best product.

We also are going to hear about how we need to make sure that there is a level playing field. The Chinese government has committed $30 billion to developing a 737 competitor. The Brazilians have increased their investment in vocational training. We are going to make sure that when it comes to the World Trade Organization – that if there are illegal subsidies those subsidies are stopped.

We are going to hear from Mr. Calio about the competitive nature of what the airlines themselves are facing – about high fuel costs and challenges as people add to the costs of aviation. The U.S. airline industry needs to have our support in making sure that carriers are on an equal footing in the global marketplace.

I look forward to hearing his ideas on how we do that. We will continue to talk about export investments and modernization of our air-traffic control system, which as many of you know, is long overdue. These improve safety, expand capacity, they lessen congestion and provide greater efficiencies and opportunities for airlines to run efficiently.

We’ve had great success with the Greener Skies program in Seattle, which was lowering costs for airlines by reducing noise and carbon dioxide emissions by putting people on a more direct path to landing and to their destinations.

But we need to make stronger progress on implementing NextGen if we want to be a global leader. NextGen is not just critical for the airlines – it is critical for the manufacturers and the sooner the Federal Aviation Administration (FAA) implements NextGen the sooner our manufacturers can start exporting the technologies and creating even more jobs here in the United States.

I look forward to hearing from the witnesses on all of this and how we maintain our competitiveness in the manufacturing industry. This is an incredible opportunity for us. Not every day you can look forward and say there is an opportunity for 200,000 more jobs. We have to be ready for the competition and put a game plan in place to capture that opportunity.