How the War Hits Home Area Defense Firms Expect Boost from Military Spending; Boeing Will Feel Loss in Airline Business

By Comerford, Mike | Daily Herald (Arlington Heights, IL), October 11, 2001 | Go to article overview
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How the War Hits Home Area Defense Firms Expect Boost from Military Spending; Boeing Will Feel Loss in Airline Business


Comerford, Mike, Daily Herald (Arlington Heights, IL)


Byline: Mike Comerford Daily Herald Business Writer

AAR Corp.' s stock has been reeling while it lays off 10 percent of its work force this year.

Yet on Wednesday the Wood Dale-based firm, whose main customers are the airline industry and military, reported that it has racked up $16 million in military orders since Sept. 1.

It was one of the first signs that area firms may be given a boost by the current military conflict as Congress prepares to boost military spending by as much as $20 billion next year to $345 billion.

AAR, however, is saying that military sales account for 16 percent of its total sales and won't offset the damage done to the majority of its clients in the airline industry. AAR reported sales of $874 million last year, with 2,500 employees.

"We do expect our military business to grow in the next few years," said Linda Bartman, director of communications at the firm, which also has operations in Elk Grove Village. "But the whole (business) environment has worsened since Sept. 11."

That's also the case for the Chicago area economy, where defense firms will get a boost. But that isn't likely to be enough to improve the overall economic climate.

"Defense spending around here is marginal at best," said Diane Swonk, chief economist at Chicago-based Bank One Corp. "We always contributed more to Washington, D.C., than we got back."

Yet the list of area firms likely to be recipients of defense contracts include Chicago-based Boeing Inc.; Northrop Grumman Corp.' s Defensive Systems Division in Rolling Meadows; Recon Optical in Barrington; and Flight Visions Inc. at Aurora Airport in Sugar Grove.

Boeing's Military Aircraft and Missile Systems unit, near St. Louis, accounts for the bulk of its $12.5 billion a year annual sales, or about 25 percent of overall sales, said Jo Anne Davis, spokeswoman for Boeing in St. Louis.

Some analysts say that 25 percent could be boosted to 40 percent of Boeing business in two years. Some of the heaviest used products in the current conflict are Boeing jets, satellites, missiles and other so-called "smart-bomb" products. Boeing is the largest maker of cruise missiles in the world.

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