Wednesday, March 4, 2009
Military market a bright spot for avionics suppliers
Reports are all over the Internet about how the tanking economy is killing jobs and revenue in the commercial aircraft market. News stories about Boeing and Airbus cutting back deliveries and major layoff announcements at Boeing and other companies are making headlines.
I even saw a story yesterday about how business jets manufacturers are taking a hit because such jets are seen as luxury items and bad press for companies taking federal bail outs.
Yet, as I travel to different trade shows and conferences for our sister publication Military & Aerospace Electronics, I find just the opposite outlook. Military avionics suppliers tell me they've never been so busy.
Many I talk to are cautiously optimistic based on their projected backlogs for 2009 and solid funding in the last budget of the Bush Administration. Come January 2010 will things be as positive? Will President Obama make deep cuts in his first defense budget, even canceling large programs such as Future Combat Systems? Or will he just cut back on procurement?
One industry source says he believes that it is republican administrations that cut programs, while democrats just cut back. That they are loathe to eliminate large programs as it could mean eliminating thousands of jobs.
Recent news reports are echoing that statement. They hint that Obama might not order any new F-22s, but that he will not kill the program all together.
In leiu of new programs and orders, Defense Department officials may spend funding on retrofits and upgrades of current systems.
Many avionics and other electronics suppliers to the defense community are forecasting growth based on that possibility.
Yes, the Army killed the Armed Reconnaissance Helicopter program, but the Apache upgrade is moving along and additional upgrades are planned for the Kiowa helicopter and the Black Hawk helicopter. Rockwell Collins also announced the first delivery of the Block I Modernization for the U.S. Navy's E-6B Mercury aircraft.
A dangerous world keeps defense suppliers busy and opportunities abound. That said it's not an easy market to break into and newcomers looking to offset losses in the commercial sector will have a hard time gaining a foothold in defense.