By Robert Tilton
From the March/April 2015 issue
Each industry has its ups and downs—especially since so many factors are involved in their success or failure. One industry that seems to weather storms quite well is aerospace and defense. According to the Deloitte Touche Tohmatsu Limited (Deloitte Global) Manufacturing Industry group’s 2015 Global Aerospace and Defense Outlook, after weighing the pros and cons, the industry is likely to grow at a 3 percent rate this year.
It is anticipated that the global commercial aerospace sector will sustain revenue and earnings growth in the range of 8 percent. Tom Captain, Deloitte Global Aerospace and Defense Sector Leader, says that the primary driver will be “increased production rates due to the accelerated replacement cycle of obsolete aircraft with next generation fuel-efficient aircraft, as well as the continued increases in passenger travel demand, especially in the Middle East and the Asia-Pacific region.”
Deloitte predicts that by 2025 annual commercial aircraft production levels will increase by an estimated 20 percent and found that from 1981 to 2014 passenger travel demand increased 428 percent, load factors (utilization of aircraft) have risen 25.4 percent, and the number of people flying per year increased 340 percent due to more affordable ticket prices and route options.
Conversely, the defense sector is expected to see declines of approximately 1.3 percent in global revenue. However, overall the outlook is promising for Aerospace and Defense this year. Captain says, “Technology innovation is the key to advancements in the industry in order to address current markets and to create demand in markets that have yet to be addressed.”
AERO BILLIONS KEEP GROWING IN THE SUNSHINE STATE
Florida has long been the world’s premier gateway to space, the undisputed air traffic hub of the Americas, a major hub for flight training and MRO, and home to leading manufacturers of all types of aircraft and aircraft components. As a result, Florida has a rich supply chain and talent pool benefiting industry businesses. It’s no wonder industry leaders, including Boeing, Bombardier/LearJet, Embraer, General Dynamics, Lockheed Martin, Northrop Grumman, Pratt & Whitney, Sikorsky, Kellstrom Defense Aerospace, Inc. and so many more have significant operations in Florida. In addition to a 5.5 percent corporate tax rate and no personal state or local income tax, the state also offers a sales and use tax exemption on manufacturing equipment, aircraft components and aircraft sales—all of which contribute to Florida’s ranking as the top state for aviation manufacturing attractiveness by PricewaterhouseCoopers (PwC). PwC also ranks Florida’s 87,000-member aviation and aerospace workforce #1 in the nation.
Florida is a premier aerospace and space location. Industry companies excel in areas from aircraft parts and assembly, to intelligence, surveillance and reconnaissance, to missiles. Florida also offers tremendous space launch assets. Florida is the air transport hub of the Western Hemisphere; the Sunshine State also ranks No. 1 among states for air transportation and flight training businesses.
Greater Fort Lauderdale’s aviation industry is a multibillion-dollar sector, including airlines, general aviation, airports, airframe and engine manufacturers, component parts suppliers and allied industries such as banking and insurance, and government agencies. Its hub is Fort Lauderdale-Hollywood International Airport (FLL), which has an annual economic impact of $10.6 billion. Over the decades, the airport has grown into a major transportation complex that now provides more than 135,000 direct and indirect jobs.
Many companies in the aviation sector also are investing in Greater Fort Lauderdale. AeroTurbine, a manufacturer, repairer and warehouse of aircraft engines and engine parts recently located its corporate headquarters in Miramar; Turbine Controls, Inc. (TCI) has expanded its aircraft engine component maintenance facility in Miramar; and GE Aviation recently moved to a larger facility in Pompano Beach to develop, test and manufacture advanced electrical power conversion products.
Brazil’s Embraer, one of the world’s largest aircraft manufacturers, recently added a new maintenance and overhaul facility to its North American headquarters, customer service and support complex in Fort Lauderdale to serve the executive jet and commercial jet sectors. In addition, Bombardier/LearJet’s Fort Lauderdale Service Center facility is engaged in the maintenance, repair and overhaul of business aircraft that arrive from all over the world, due to the international nature of the site.
Florida has long been considered the birthplace of the commercial aviation industry, with a 50-year legacy of space launch and exploration.
“Florida is a great place to do business from every perspective: a strong business environment, a skilled workforce and an important mix of industrial capabilities to run a global operation,” said Marco Tulio Pellegrini, President & CEO, Embraer Executive Jets.
When Embraer made the decision 35 years ago to expand its aircraft manufacturing from Brazil to the U.S., choosing Florida—the world’s largest market for private aircraft—was an easy decision. Although the founders of Embraer anticipated finding great success in Florida, they never imagined an evolution from a two-man operation to the world’s leading producer of small commercial jets.
Today, Embraer is one of more than 2,000 aviation and aerospace companies that call Florida home. With several facilities located around the state, Embraer’s story has become a perfect example of the climate of success that Florida offers all sectors of the industry.
“All the requirements to build and operate an industrial operation as we intended were conveniently found right here in Florida,” said Pellegrini, citing the state’s 19 commercial airports, established supply chains and global reach as other major advantages.
In addition to low corporate tax rates and no personal income tax, Embraer is able to benefit from the state’s sales and use tax exemption on manufacturing equipment, aircraft components and aircraft sales.
While Northrup Grumman has long had a presence in Florida, the company’s recent decision to build two of five nationally designated Centers of Excellence confirms Florida’s reputation as an ideal location for aerospace industry activity. Combined, the Centers of Excellence will employ 1,500 high-skill workers.
In addition, the company announced one of its largest projects to date—an expansion of its Melbourne campus that will bring up to 1,800 jobs and a $500 million capital investment into the Space Coast community.
For the company’s new projects to be successful, access to a highly educated and tech savvy workforce is imperative. Northrop Grumman can find those capabilities in Florida’s substantial aviation and aerospace talent pool, ranked the best in the nation by PwC. The company also can benefit from hiring displaced workers from the closing of NASA’s space shuttle program.
Additionally, Florida’s emphasis on STEM (Science, Technology, Engineering and Math) and efforts to bridge the gap between academia and industry in its public education system, have allowed Northrop Grumman to take a proactive role in workforce creation.
“The focus on high tech is evident,” said Rick Matthews, Vice President, Aerospace Operations and Melbourne Site Manager. “We work with academia, state government and industry to predict and align training and education organizations with future workforce needs.”
As a result, Northrop Grumman has formed strategic partnerships with leading post-secondary institutions like Florida Institute of Technology and Embry-Riddle Aeronautical University, the top aviation and aerospace university in the world, ensuring the company will continue to benefit from Florida’s top-tier workforce for years to come.
While Florida’s aviation and aerospace market is among the most competitive in the nation, the state’s defense and homeland security sector is equally strong. With 20 active military installations and three unified combatant commands, it’s easy to see why Florida consistently ranks as one of the top-five recipients of Department of Defense Contract awards.
Virtually every major defense contractor from the U.S. and abroad has significant operations in Florida. Companies like Lockheed Martin, Boeing, General Dynamics and Pratt & Whitney, have all chosen the state for its substantial talent pool of highly-trained veterans, as well as access to the world’s largest simulation cluster, and an abundance of defense research and testing facilities.
Over the past two years, global defense leader Pratt & Whitney has announced two expansions to its West Palm Beach location—an Engine Center to manufacture engines for Airbus aircraft and F-35 Lightning II fighter jets and an expansion of the company’s military Auxiliary Power Unit (APU) business. The two projects combined will bring 340 new jobs and $88.7 million in capital investment to the region.
By leveraging Florida’s premier multimodal infrastructure and access to deep seaports, Pratt & Whitney can lower the cost of bringing in parts and shipping out manufactured goods. The dredging and deepening Port Miami and other Florida ports will make it even easier for larger vessels to dock and ship goods to Central and South America as well as take advantage of the Panama Canal expansion and the potential for increased trade with Asia.
KS: PAST AND PRESENT OF AVIATION
Kansas and aviation have shared deep connections for more than a century. Aviation pioneers turned a fledgling industry into a roaring manufacturing hub in south central Kansas. Cessna, Beech Aircraft and Stearman were just a few of the early innovators that began designing and building planes in Kansas, earning Wichita the title of “Air Capital of the World.”
The reputation that was first earned during the 1920s and 1930s was solidified during and after World War II. Boeing’s B-29 Superfortresses, along with a number of other planes that supported the war effort, rolled off Wichita’s assembly lines. In 1954, Wichita’s workers began producing the iconic B-52 bombers, aircraft that are still in service.
Today, 105 years after the first plane was built in Kansas, the Sunflower State remains a hotspot for aviation manufacturing. Spirit AeroSystems, which employs nearly 11,000 in Kansas, manufactures Boeing 737 fuselages and cockpits for the Boeing 787 in the state. Cessna, Beechcraft and Learjet continue to call Wichita home, while Airbus operates an engineering center and design office in the city. General Electric recently decided to build its next-generation Passport 20 business jet engine in nearby Arkansas City.
These globally recognized companies are joined by many small and mid-size manufacturers that support aviation. From aircraft windows to metal components to maintenance and repair, a wide variety of high quality products and services are offered by the companies of the Kansas aviation cluster to plane manufacturers and owners around the world.
Aviation manufacturers benefit from the presence of outstanding universities across the state, including several institutions that emphasize aerospace research and development. Wichita State’s National Institute for Aviation Research conducts research and technology transfer in many aviation related fields, while the university’s new Innovation Campus supports research ventures and technology with industry applications.
With so much history in aviation, it is hardly surprising that Kansas has a workforce with unsurpassed experience and training. As the industry has advanced and required ever higher levels of technical skills from its employees, Kansas has continued to develop and implement educational programs and initiatives. These ensure that industry needs are met, allowing aviation manufacturers and their employees to keep achieving success in the state.
Kansas is making significant investments in an engineering initiative at its universities. During a 10-year period, the state is investing $210 million to increase the number of engineering graduates from Kansas State University, the University of Kansas and Wichita State University. With the demand for engineers steadily increasing, Kansas is positioning itself to meet the current and future needs of aviation and other advanced manufacturing sectors.
The National Center for Aviation Training in Wichita serves as an additional resource for aviation manufacturers. By partnering with industry, NCAT’s world-class facility provides students with training that is critical for the state’s businesses.
A new pilot program called Workforce Aligned with Industry Demand (Workforce AID) brings together businesses and technical colleges to design training programs in areas of high need. Employers drive the training, identifying the skills that are most important to them in hiring workers. Businesses also have the opportunity to meet with students before and during the training process to conduct interviews, discuss industry needs and expectations and provide input on training.
A Career Technical Education Initiative allows high school students to take post-secondary level classes at Kansas technical colleges free of charge. Since implementing the initiative in 2012, the state has seen a 123 percent increase in college credit hours earned by high school students. This increase makes it easier for businesses to hire workers with college level training, while giving students a jump-start on successful and rewarding careers.
Additional workforce initiatives include the Accelerating Opportunity Kansas program, which helps adults with no education beyond high school take post-secondary classes, and KanVet. KanVet provides a centralized resource to help veterans find and access training courses and take advantage of employment opportunities. The Kansas Department of Commerce also offers incentive programs to businesses to help train new hires or retrain existing employees.
MASSACHUSETTS: DRONE LEADER
Aeronautics companies with testing needs for unmanned aerial systems, sensors and related systems need look no further than Joint Base Cape Cod, MA.
This 22,000-acre historic military base—which is a uniquely organized joint installation with components from the Army National Guard (Camp Edwards), Air National Guard (Otis Air National Guard Base), United States Coast Guard (Air Station Cape Cod) and United States Air Force (6th Space Warning Squadron PavePAWS)—also is at the forefront of testing emerging aeronautic technologies, including unmanned aerial systems (UAS).
One of only six Federal Aviation Administration UAS test sites selected through a highly competitive process, Joint Base Cape Cod is part of the partnership led by Griffiss International Airport (Rome, NY) for testing and developing safe standards for the operation of UAS.
The UAS industry is projected to create an estimated 70,000 new jobs nationwide by 2017 and more than 100,000 by 2025. Total U.S. economic impact of the UAS industry will reach $82 billion by 2025 according to the Association for Unmanned Vehicle Systems International. For companies looking to expand their UAS capabilities to compete in this rapidly growing industry, Joint Base Cape Cod and Massachusetts offer many opportunities.
“Joint Base Cape Cod offers one of the premier locations for unmanned aerial systems testing due to the availability of airspace, weather and landscape diversity combined with the concentration of industry and academic expertise in Massachusetts,” said H. Carter Hunt, Jr., VP, Defense Sector Initiatives at MassDevelopment & Executive Director of the Massachusetts UAS Test Center.
Joint Base Cape Cod and Griffiss International Airport are teamed with the Northeast UAS Airspace Integration Research Alliance (NUAIR), a consortium of more than 40 public entities, private industry and academic institutions in Massachusetts and New York working together to operate and manage UAS test sites. Other partners include Saab Sensis, SRC, Raytheon, Lockheed Martin, Rochester Institute of Technology, Massachusetts Institute of Technology, Syracuse University, Clarkson University and Northeastern University, among others.
THE MISSISSIPPI ADVANTAGE
A growing number of global aerospace companies are finding the competitive advantages needed for success in Mississippi. The state’s affordable operating and energy costs; seamless one-stop permitting process; robust transportation network; proximity to important military installations; and its skilled, productive workforce all help ensure aerospace companies in Mississippi are positioned to compete in today’s complex market.
Mississippi has a long, rich history in the aerospace industry, dating back to the 1930s when Pioneer Aerospace, a Zodiac Company, became the state’s first resident aerospace company. Since that time, Mississippi’s aerospace industry has grown significantly, and it is primed for future growth and prosperity.
Mississippi’s well-trained, available workforce is a primary factor when companies are looking to locate or expand existing operations. Therefore, Mississippi is committed to developing and sustaining a world-class workforce that positions companies for many years of successful operations in the state. This is done through partnerships with the state’s 15 community colleges, all of which offer customized workforce training solutions to meet companies’ unique needs. Today, Mississippians are producing everything from helicopters to unmanned aerial vehicles to composite jet components.
In fact, the state’s workforce has played an integral role in the continued growth and success of aerospace leaders like GE Aviation, Rolls-Royce, Raytheon, Northrop Grumman, Aurora Flight Sciences, Airbus Group and many more.
In 2012, GE Aviation opened its second manufacturing facility in the state in Ellisville, following five successful years at its Batesville location in Northwest Mississippi. The company partnered with the Mississippi Polymer Institute at the University of Southern Mississippi—one of the state’s four research universities—as well as the Advanced Technology Center at Jones County Junior College to train its team members in team building and advanced manufacturing processes. Today, GE Aviation’s Ellisville employees manufacture advanced composites for aircraft engines and systems.
The Mississippi Polymer Institute plays a pivotal role in the state’s aerospace industry. In addition to training employees, MPI helps companies in the plastics/polymer industry solve technical challenges and improve their processes and products. The institute is home to one of the most advanced rapid prototyping systems in the world and operates as a full-service resource for polymer related industries.
Mississippi State University’s Raspet Flight Research Laboratory, a world-class aerospace research facility, also is a proven asset to the industry. Established in 1948, Raspet offers full-scale flight vehicle development and testing, advanced composites development and fabrication, computer-controlled manufacturing and tests of prototype composite structures/components.
In April 2014, commercial spaceflight company SpaceX opened its rocket engine component testing program at Stennis Space Center on the Mississippi Gulf Coast. Stennis houses the largest rocket engine test complex in the nation, which offers nearly unlimited testing opportunities. SpaceX conducts initial testing of its Raptor methane rocket engines at the E-2 test stand the company upgraded with methane capability, positioning it as one of the most sophisticated high-pressure testing facilities in the world.
In 2013, Rolls-Royce opened its second jet engine test stand at the company’s Outdoor Jet Engine Test Facility at Stennis Space Center. There, the company performs jet engine testing on the latest, most advanced Rolls-Royce civil aircraft engines, including the Trent 1000, which powers the Boeing 787, and the Trent XWB, on the Airbus 350XWB.
Also in 2013, Raytheon announced plans to expand its Forest, Miss., facility, which produces some of the company’s most advanced radars and other electronics. The $100 million expansion was announced in anticipation of growth in the electronic warfare and international airborne radar markets. The Forest location builds sophisticated airborne and ground-based radars, electronic warfare technology and communications systems for U.S. and allied force.
These are just a few examples of aerospace leaders that have discovered the Mississippi Advantage. From its unparalleled workforce and collaborative training partnerships, to its customized incentives portfolio, including the Aerospace Incentives Program that provides tax incentives to aerospace-related companies that locate in the state, Mississippi has the competitive edge companies depend on for success.
THE SKY IS THE LIMIT IN MICHIGAN
Launch: Michigan’s aerospace industry has taken off. The state’s 661 aerospace and defense companies generate nearly $1 billion in annual sales. More than 100 Michigan companies specialize in aerospace technology, including Advanced Integration Tooling Solutions, General Electric Aviation, KUKA Aerospace, MB Aerospace and Schwab Industries. Together, they sell over $800 million per year to the industry.
The state also has focused its manufacturing assets on aeronautic and astronautic innovations. That’s why organizations like Boeing, Lockheed Martin, Pratt & Whitney and NASA look to Michigan for expertise to meet critical needs.
Boeing wanted to improve their efficiency and turned to KUKA Systems who automated Boeing’s manufacturing systems, using robots to install up to 60,000 fasteners per fuselage. But KUKA is not the only company in Michigan to land significant aerospace projects. In fact, the state ranked second in U.S. aerospace job growth between 2009 and 2012.
New Heights: There are many reasons that Michigan is soaring to new heights. The state has as rich history in the field: it’s the birthplace of William Boeing, Charles Lindbergh and Henry Ford. During World War II, the Ford Willow Run plant produced B-24 bombers, reaching a level of 14 aircraft per day. More than 70 years ago, a Lawrence Technological University alumnus developed the revolutionary high wing/rear door design still used in cargo aircraft worldwide.
Equipped to Soar: Michigan leads the nation in terms of manufacturing and R&D capacity. In fact, Michigan is Number 1 in the nation in new manufacturing jobs with 120,000 created since 2009. Even more impressive is the fact that nine of the 10 largest aerospace/defense R&D firms are located in MI.
The leadership doesn’t stop there. Michigan has the largest supply of skilled labor in the country, with a manufacturing workforce over 500,000 strong. Michigan also ranks Number 1 in the nation for mechanical engineers. In fact, the state employs more mechanical and industrial engineers than any other state and ranks Number 1 in the concentration of engineers nationally.
63 of the top 100 automotive suppliers to North America call Michigan home, along with 35 OEM systems, components and materials plants. These manufacturers are supported by nearly 2,000 process, physical distribution and logistics consulting services in Michigan.
Brain Power: Michigan boasts nine universities offering aerospace programs, while 16 universities and colleges have nationally ranked undergraduate engineering programs. With more than 100 years of aviation research, the University of Michigan’s aerospace engineering program is ranked Number 3 in the nation. The state also is home to the top two schools for industrial/manufacturing engineering—Kettering University (#1) and University of Michigan (#2).
The State’s manufacturing leadership is amplified by graduates of Michigan’s premier supply-chain programs, who are helping the industry succeed globally by reducing costs through complex supplier and customer logistics solutions. Michigan hosts nationally-ranked supply chain management programs at the University of Michigan, Western Michigan and Michigan State University, whose Eli Broad College is the Number 1 logistics and supply chain management school in the nation.
First-Class Business Climate: Michigan ranks third in the nation in being business-friendly, thanks in part to the flat six percent corporate income tax. Recent reform of the manufacturing personal property tax cut business taxes by $500 million annually.
Economic activity in Michigan is at a 10-year high while unemployment is at its lowest in seven years. The Michigan Economic Development Corporation (MEDC) is the lead advocate for business development and stands ready to assist businesses with numerous resources, including grants and loans.
When you factor in the foresight, innovation and economic tools needed to advance the industry, it’s safe to say aeronautics will reach a whole new level in Pure Michigan.