This post is sponsored by Lockheed Martin.
Marion C. Blakey is president and chief executive officer of the Aerospace Industries Association. AIA is the most authoritative and influential voice of the aerospace and defense industry, representing approximately 340 of the industry’s leading manufacturers. In her position Blakey has led the industry’s fight against arbitrary and severe budget cuts to national security, civil space programs and Federal Aviation Administration operations mandated by the Budget Control Act of 2011. She has also played a leading role in promoting the export of civil and defense aerospace products, and supported the priorities of America’s thousands of suppliers to aerospace and defense programs.
Question: How is government spending affecting the industry?
Marion Blakey: Federal spending dropped in 2013 and 2014. Normal procedures for issuing contracts have in some cases been disrupted by Congress’ use of continuing resolutions rather than regular budget order. In addition, spending on important, long-term projects has been delayed or stretched out.
As a result, revenues in the defense sector in particular have dropped. Cuts in spending have also impacted companies working with the FAA on the air traffic control modernization program and working with NASA on commercial and exploration programs in space.
However, the biggest impact on industry is uncertainty. Companies with uncertain revenue streams are unable to complete forward planning, which restricts their ability to invest in plant, infrastructure and jobs. Good management practices are helping our companies work through this uncertainty, but our workforce is shrinking and companies are looking to shift resources away from the defense sector into adjacent areas in civil aviation, IT and other markets. There could be significant long-term consequences to the capabilities of the defense industrial base.
Q: What are AIA’s major legislative priorities in the next year?
MB: Four priorities are at the forefront.
First, we will continue to advocate for relief from the budget caps imposed by the Budget Control Act of 2011. Those caps on discretionary spending – both for defense and non-defense programs – are set too low to address the global security threats we face, and to invest in the innovative technologies required to maintain U.S. military superiority, infrastructure requirements, and economic health.
Second, while Congress did reauthorize the Export Import Bank – an important tool for leveling the playing field against competitors receiving significant foreign government financial backing – that short-term authorization expires in June. We’ll be working hard for a long-term extension to ensure American exporters can continue to have the support of the U.S. government as we compete for sales overseas.
Third, 2015 could be the year when meaningful DOD acquisition reform can be enacted. Congressmen Mac Thornberry, Adam Smith, and others have been working on drafting legislation to address some of the most critical problems in defense procurement to streamline and speed up the process and reduce cost. AIA has been working closely with the congressmen and their staffs to ensure our members’ concerns and priorities are incorporated.
Finally, the FAA’s authorization expires in September 2015 at the end of the fiscal year. Important functions such as product certification, air traffic control, airport improvements, implementation of the NextGen modernization program and integration of unmanned aircraft systems into our national airspace will be degraded or delayed if Congress is not able to pass a new long-term reauthorization in a timely manner. No aviation product can be introduced into the market without FAA approval. We will continue to push for greater certification efficiency and reduction of cycle time. Our global competitiveness depends on it.
All three issues have direct impacts on our members and will be top priorities for AIA in 2015.
Q: How important is it for companies to stay ahead and continue to innovate?
MB: In a constricted budget environment, continued innovation is going to be the key to survival, let alone staying ahead. Companies will need to become ever more efficient to stay competitive. Whether it’s exploiting mature technologies in new and different ways, developing new approaches to existing problems or exploring cutting-edge processes, technologies and products, our members will need to devote significant energy to innovation to secure their future.
At AIA, we’ll be advocating strongly for taking the shackles off of industrial innovation. From increasing R&D budgets to reducing regulatory burdens, we need engagement from our government partners to help spur and reward the kinds of innovative ideas for which our industry is best known. For instance, in the unmanned systems sector, we are told FAA is on the cusp of releasing its small UAS rule, setting the stage for real progress to be made on integration of these systems into the national airspace. In addition, export control restrictions for UAS under the Missile Technology Control Regime need to be revisited. Currently, American companies are losing market share to foreign competitors because of MTCR restrictions. In fact, Israel passed the United States this year as the number one exporter of UAS platforms. To regain our leadership in this sector, the government must reconsider its approach to exporting these systems.
Q: How important are overseas markets to the industry’s future success?
MB: Overseas markets are a critical source of revenue to companies functioning in a constricted domestic budget environment. In a recent victory for some of our members, export controls for commercial satellites and related parts and components were moved from the overly restrictive U.S. Munitions List to the far more appropriate Commerce Control List. This move has been a long-time focus of AIA’s advocacy, and Congress and the administration deserve recognition for their support for the U.S. commercial satellite industry.
But that’s only part of the battle. The administration is in the process of reviewing the entire USML and moving dual-use technologies to the CCL. This is an important effort, as is finding mechanisms to make easier technology transfer of items staying on the USML to our close allies and partners. Export control reform is only one part of a broader need for a National Defense Export Strategy to support overseas sales that further our national security, foreign policy, and economic interests. ExIm Bank reauthorization will also play a role in enhancing U.S. export opportunities for commercial and dual-use products.
In short, increased export opportunities will comprise an important part of our members’ business plans going forward, and AIA will be at the forefront of industry’s advocacy efforts to bring together industry and government in a partnership as we compete in the global marketplace.