I. Context for a Renewed Partnership

Goals for a National Partnership in
Aeronautics Research and Technology

I. Context For A Renewed Partnership

The aerospace industry is an important part of our nation's economy. In 1994, the aerospace sector produced an estimated $102 billion in manufactured goods. It exported products worth $40 billion to 181 countries worldwide. These exports consisted almost exclusively of aeronautics products: aircraft, engines, and aviation system equipment. The aeronautics industry produced the largest trade surplus of any U.S. manufacturing industry, approximately $25 billion in 1994.

Still, U.S. aeronautics shipments have been declining for several years, and in 1994 were down 12 percent in real terms from 1993. Sales have been declining in both the civil and military sectors, the latter due to the rapid drawdown of defense budgets worldwide. This decline in both the civil and military sectors has had a severe impact on employment and manufacturing infrastructure. There are approximately a third fewer engineers and scientists in the aeronautics industry today than there were in 1991.

Economic recovery should help re-establish the commercial demand for large aircraft and components for airlines, as well as corporate, general aviation, and rotary wing aircraft. Long-term increases in demand over the next two decades--based on projected growth in airline traffic and a need for replacement of older, noisier, and less fuel- efficient aircraft--promise to renew growth within these segments of the aerospace industry. Overall, the industry expects to deliver over 14,000 transport aircraft during the next 20 years at a value of nearly $1 trillion.

On the military side, the Department of Defense devotes about one-third of its budget to the research, development, operation, and support of aircraft. Further, there are no substitutes on the horizon that offer the combination of firepower and mobility offered by aircraft -- aircraft will remain an important part of the force structure for the foreseeable future. The United States will continue to need the world’s best military aircraft, and a preeminent position in the global aircraft market is necessary to achieve this aim.

While the United States still provides the largest market for commercial aircraft purchases, its share of the global market has been shrinking for some time. Exports are therefore increasingly critical to the health of the U.S. aeronautics industry. Important in this regard is the rapidly expanding Pacific Rim market. Exports of widebody, long-range aircraft to Asian markets are expected to experience the greatest increase since this region accounts for more than 40 percent of all travel growth projected through the year 2010.

Other markets also offer export potential. Latin America presents new sales opportunities for U.S. aircraft at rates second only to Asia. The Middle Eastern market is also expected to grow as airline companies replace their aging fleets and governments seek to modernize and replace military aerospace equipment. The opening of the markets of the former Soviet Union also offers new opportunities for U.S. industry.

Although the outlook is promising, competition in the international aeronautics market is becoming increasingly global. European countries have recognized the benefits of a strong civil aeronautics industry. Favored with government subsidies covering both development and production, Europe's Airbus Industries consortium has developed a family of technologically advanced aircraft that compete head-to-head with the full line of U.S. jet transports. A marginal producer in the late 1960s and early 1970s, in 1993 Airbus's share of the world market exceeded 30 percent, with a recently stated goal of capturing over 50 percent.

Europe has also made substantial investments over the past 15 years to construct world-class wind tunnel facilities for aircraft development testing. These facilities are newer and generally have better capabilities than comparable U.S. facilities. This has led to increasing U.S. industrial dependence upon overseas facilities for aerodynamic testing which is eroding their core design and development capabilities.

The Japanese aeronautics industry has historically relied on international cooperation to build up its experience base through joint commercial design, development, and manufacturing ventures and full scale development and production of military vehicles. However, it is seeking to develop its own capabilities in these areas to become a more significant competitor in the next century. Taiwan, Brazil, Indonesia and Korea have also targeted aeronautics as key national industries. Finally, the entry of the Russian and Ukrainian aerospace industries into the commercial market will further heighten the level of competition.

These developments have reduced returns in the industry at the same time that escalating development and production costs have increased the risk associated with the development and launch of new aircraft. As a result, manufacturers have formed alliances and partnerships, often crossing national boundaries, to spread their risk, gain greater leverage from their resources, and strengthen their own core competencies. This highlights the criticality of maintaining technological leadership as the basis for U.S. industrial leadership in aviation.

In addition to managing the globalization process, aeronautics manufacturers face other challenges. There is a strong interest around the world in improving the environmental compatibility of air transportation, that is, in reducing noise and air pollution emissions. There is strong interest, as well, in improving the safety and efficiency of flight operations through improvements in aircraft, air traffic management systems, and human factors design. In much of the world, the air traffic management infrastructure is relatively undeveloped, a situation that represents both a serious challenge and a significant opportunity. Meeting these challenges will be critical to maintaining the industrial, transportation, and social benefits that accrue from a strong aviation system.

Fortunately, the United States can meet these many challenges from a position of strength. The United States is still a leader in both civil and military aircraft and has the basic infrastructure—industry, universities, and government— to support its position. Further, the aircraft industry will continue to benefit from technological investments that decrease the costs and increase the capability of aircraft. Our greatest national challenge is to capitalize and improve on these strengths to meet the challenge of the marketplace.

This effort will require a renewed partnership among government, industry, and academia. True partnership requires investment and risk by all parties. The U.S. Government will continue to invest in high-risk, high-payoff technologies—the private sector lacks the resources and incentive to invest in these areas since the benefits of such high-risk investment will not be realized until far in the future and are difficult for a single firm to fully capture. Public investment is designed to enhance capabilities in transportation, safety, environment, and national security. But the challenges of the current and future markets require that government and industry work together to identify the focus of government-funded cooperative research. Further, rigorous performance measures to assess the success of this partnership must be developed.

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Goals for a National Partnership in Aeronautics R&D

Executive Summary

About the National Science and Technology Council / OSTP

I. Context for a Renewed Partnership

II. U.S. Aeronautics Goals

III. A New Aeronautics Partnership

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