Aerospace Market Forecast

Barr Group Aero Indicator—Hits a New Yearly High
For each of the past five months, the Aero Indicator has been on the rise. In May it hit an index of 106, up from 102.76 in March, meaning the industry will see a 6% annualized rate of growth over the next six months. However, we are expecting the Aero Indicator to fall, due to reduced DOD spending.

1. Aerospace Industrial Production
While aerospace manufacturing production is off from its all time peak in December of 2008, where the index hit 104, it is now at the highest it has been since March 2009, hitting 96 in April 2011 and up about 2% since January 2011.

2. Aerospace Capacity Utilization
Before you get too excited, remember that since 1972, the highest aerospace capacity utilization has ever been was in September 2007 at about 88% of capacity. The latest figures put it at 72.5%, up more than 2% points since January, still more than 2% points below the average for all U.S. manufacturing.

3. U.S. Aircraft Production Workers
Between March 2001 and March 2011, the trend in the employment of aircraft production workers is up. The lowest number of production workers was 74,300 in September 2004, while the latest figures put it at 113,000 as of March 2011 – this compared to the 2010 average of 111,300 workers.

4. U.S. Aircraft Passenger Market
According to the latest data for the top U.S. airlines, revenue passenger miles (RPM) were up 4.9% from a year ago (SkyWest grew by 54%, while Horizon Air was off 4.1%) with overall load factors off by about 1% point. The top three – United/Continental, Delta, and American had 62% of the RPMs in April 2011.

5. U.S. Air Cargo and Air Mail
In thousands of tons, air cargo and mail has grown from 1,644 in February 2010, to 1,671 in February 2011 (up about 1.6%).

6. U.S. Aerospace Net Profits
More than half of the 20 OEMs and primes in the Barr Group Aerospace AD-20 Stock Index, had corporate profits for Q1 2011 that beat Wall Street earnings estimates. The biggest surprises were Northrop Grumman and Goodrich, beating their estimates by $0.20/share or more. Lockheed Martin made the largest quarterly after profit of all at $530 million. Every firm in the AD-20 Stock Index showed a profit.

7. DoD Spending and Aerospace
While spending on aircraft for FY11 is forecast at nearly $39.4 billion, DoD projects are to increase to $41.4 billion in FY12. Between FY11 and FY12, the F-35 will be off about 17%, F-22 off 14%, F-15 off 21%, F-16 off 29%, A-10 off 12%, and the EA-6B off 7.2%. On the other hand, spending on the F/A-18E/F will rise 35%, while the EA-18G and the AV-8B will be up too, but by less than 1% each. Overall, in FY12, the DoD plans to procure five fewer fighters, three fewer military transports, but 23 more rotorcraft and 940 more UAVs.

8. Aerospace Trade
While both exports and imports in the first quarter of 2011 were down 8%, we continued to export about twice as much as we imported. However, data indicates a slow draw of overall aerospace product and parts production out of the United States.

9. Sales of Civil Aircraft and Engines
Sales of civil aircraft have been below the 2008-2011 averages all year, but for each of the first three months of this year they have been up. Aircraft engine sales, on the other hand, were below the 2008-2011 average in January, but in March sales rose above this average period.

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