US Aerospace Industry Foresees Further Turbulence Next Year

THE British government last week announced a $1.3 billion order for 25 military cargo planes from Lockheed Corporation. Not only did the Calabasas, Calif., aircraft maker beat out stiff competition from European manufacturers, but it also gained coveted ground in the shrinking global market for military aircraft.

Industry experts see the order as an indication that United States aircraft companies remain highly competitive in world markets.

``Foreign governments are under increasing pressure to buy aircraft from their own markets,'' says Lockheed spokesman Keith Mordoff. ``Despite all that pressure ... [Britain] chose an American company. Politically, it would have been easy to make the decision to buy European.''

Such deals, however, have been relatively rare in recent times. In Europe, US aerospace companies must compete against manufacturers that are - or have been - government-sponsored. Analysts hold little hope in the near future for a reversal in the American industry's downward spiral in sales, exports, and employment of the past few years.

``The whole shape of the industry is changing,'' says Virginia Lopez, executive director of the Aerospace Industries Association's (AIA) aerospace- research center. ``The feeling in the industry is that it's more than a cyclical thing'' like past slowdowns. While a military buildup could spur aerospace growth, possible threats to US security are ``much more fragmented'' since the breakup of the Soviet Union. ``It's not seen that our industry is going to grow to where it had been,'' she says.

Aerospace production, which includes civil and military aircraft, helicopters, missiles, and spacecraft, has long played a major role in US employment and trade. But overarching changes, such as shrinkage in domestic defense spending and slowdown in key civilian markets, have cost the industry billions of dollars in sales. The industry has slashed employment by 500,000 since 1989.

Sales dropped 9 percent this year to $113 billion, down from a high of $139 billion in 1991. And industry analysts project that sales will drop another $3.4 billion in 1995. Sales to the Defense Department, the industry's biggest customer, have dropped a dramatic $20 billion since 1987.

In the coming year, aerospace employment is expected to decline another 34,000 to its lowest level in 40 years. Although the Lockheed deal will probably not mean more jobs, Mr. Mordoff says, it will ``help maintain the work force.''

US aerospace manufacturers have pushed exports to help pick up slack left by declining defense sales. They have had some help from the Export-Import Bank (Exim), the government agency that helps finance exports. Exim Bank loans for aircraft were ``negligible'' until the last few years, says Mary Kilty, special assistant to bank chairman Kenneth Brody.

This year, Exim Bank guaranteed loans for nearly $3 billion for the sale of aircraft to Salvadoran, Romanian, and Polish airlines.

Though the US is still the world leader in aerospace products, exports declined $1 billion to $38.5 billion in 1994. The US faces growing competition from overseas manufacturers, especially Airbus Industrie, a European consortium composed of the governments of France, Britain, Germany, and Spain.

Between 1978 and 1989, aerospace output in the European Community grew twice as fast as that in the US. America is still No. 1 - last year the US maintained 65 percent of world orders for large aircraft - but Europe is closing in fast. Airbus Industrie, which in the last five years has leaped from 19 percent of the world backlog of firm orders to 34 percent, took over the No. 2 spot from aircraft builder McDonnell Douglas Corporation of St. Louis.

Next year's industry forecast looks ``remarkably similar'' to 1994, says Don Fuqua, AIA president in Washington.

The industry anticipates profits of $5.2 billion in 1994. These have been bolstered by payroll cuts, reduced research and development, and the sale of some corporate assets.

Despite the dismal outlook, analysts say the industry should stabilize by the year 2010. The decline in the domestic defense market is slowing down, says Sally Bath, director of the Office of Aerospace at the Commerce Department. ``We're looking at replacement and some growth'' in the commercial sector.