The US Aerospace Industry: A Manufacturing Powerhouse

By Soshkin, Maksim | Business Economics, July 2016 | Go to article overview

The US Aerospace Industry: A Manufacturing Powerhouse


Soshkin, Maksim, Business Economics


Aerospace manufacturing is one of the few manufacturing industries where the U.S. still holds a dominant position, possessing a significant competitive advantage over other nations. The industry is a source of well-paid jobs and maintains a large trade surplus. Aerospace manufacturers are highly dependent on sales to airlines and the government, especially the U.S. military. Growing global demand for air travel and volatile fuel prices have led to a surge in demand for new commercial aircraft, causing a surge in commercial aerospace sales. On the other hand, military and overall government spending cuts have caused the industry's defense and space segment sales to fall. The dichotomy of the industry's various segments does not only come down to performance, with each segment differing from the other in trade, innovation, competition, and consolidation trends.

Business Economics (2016) 51, 166-180. doi: 10.1057/s 11369-016-0008-y

Keywords: aerospace, defense, manufacturing, trade, government spending

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1. Introduction

The aerospace manufacturing industry is one of the United States' few production powerhouses. The industry is a vital component of globalization, creating products necessary for worldwide interconnectivity. Commercial aircraft allow for the rapid transportation of people and goods throughout the world. Just over half of international trips and 35 percent of the value of goods transported are conducted by air [United Nations World Tourism Organization 2015; Air Transport Action Group 2016]. Furthermore, the development of space launch vehicles and spacecraft has led to satellites that enable everything from instant worldwide communication to observation and navigation. Aerospace products such as combat aircraft and missiles have also become an essential part of warfare and account for a large share of United States' government spending. As a result, aerospace manufacturers lay at the nexus of business, globalization, politics, and fiscal policy.

From the U.S. economic prospective, the aerospace manufacturing industry is a major source of well-paid employment, investment, and exports. The industry employed nearly 490,000 people in 2015, generating $47.5 billion in wages. These figures translate into nearly 5 percent of employment and about 8.7 percent of wages in the US manufacturing sector. In particular, industry average wages reached nearly $98,000 in 2015, which is 72 percent higher than the overall manufacturing average [IB IS World Staff 2016a, b]. Moreover, the industry has been able to successfully supply the growing global demand for commercial aircraft and defense equipment, accounting for an estimated 9.6 percent of the value of goods exported by the United States. Buoyed by rising global and domestic demand, after 2010, the U.S. industry revenue climbed at a rate of 6.3 percent to a level of $259.2 billion in 2015 (Figure 1).

This paper will review ongoing developments in the demand for various types of the products produced by the industry, and discuss the competitive environment faced by the firms. In general, private demands appear to be strong, while military and space demand seems to be stabilizing after some tailing-off. Overall, the sector looks like it will sustain its role as a robust part of the U.S. manufacturing.

2. Product Segments

Aerospace manufacturing industry products can be divided in numerous ways, including commercial versus defense equipment, or by types of aircraft. The classification below is based on the North American Industry Classification System (NAICS). It is also important to note that based on the NAICS system and this analysis, satellites, avionics, and other aerospace-related electronics are not included in the aerospace manufacturing industry. Figure 2 shows the 2015 industry revenue by product category.

Aircraft manufacturing is by far the largest product segment. …

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