Source: Aviation Week

Stability is the best the aerospace and defense industry can hope for in 2010: a year in which airlines catch their breath for a predicted upturn, commercial aircraft orders should begin to recover, and defense sales could plateau before beginning a threatened decline.

Business aviation had a horrible year, but for most industry sectors 2009 was not as bad as was feared. Commercial aircraft orders plummeted, but deliveries were maintained thanks to years-long backlogs. Military programs were terminated, but war costs kept defense spending at high levels.

Large segments of the industry dodged the brunt of the global economic downturn in 2009 and are positioned to weather whatever 2010 brings, but 2011 could prove a tougher year as the impact of defense cuts takes hold while commercial aerospace is still in the early stages of a recovery.

Budget deficits built up fighting recession are expected to constrain defense spending in several countries, and could delay or stretch out combat aircraft procurements planned for 2010. In the U.S., higher development costs and lower production rates for the F-35 Joint Strike Fighter could influence the plans of the partner nations.

With the future shape of the global fighter market highly dependent on the F-35’s price and availability, any delay and cost growth could benefit those manufacturers striving to extend the production lives of their existing aircraft, including the U.S. F-15 and F/A-18, European Rafale and Typhoon, Swedish Gripen and Russian MiG-35 and Su-35.

Primes and suppliers alike will be affected by decisions and progress this year on the F-35, although any delay to the program could drive the need to extend the lives of in-service aircraft and create retrofit opportunities for new radars and avionics as well as engine and structural upgrades.

In civil aviation, demand for air travel is reviving, but airlines need a return to profitability before orders can begin to recover from the steep drop seen in 2009. Hit by cancellations, Airbus and Boeing saw net orders fall by more than 70% from a year earlier, and bookings by regional-aircraft manufacturers were also down dramatically.

Despite the downturn, manufacturers have stuck with their product development plans: Boeing getting the 787 into flight test by the end of 2009 and major sections of Airbus’s A350 and Bombardier’s CSeries to take shape this year for final assembly in 2011 and first flights in 2012. Both Airbus and Embraer plan key narrow-body decisions this year based on the availability of new engines from CFM International and Pratt & Whitney and the launch of new competitors in the shape of China’s C919 and Russia’s MS-21.

For the most part, business-aircraft manufacturers also protected their product development plans through the industry’s most damaging downturn. There were casualties—very light jet maker Eclipse’s liquidation and the shelving of Cessna’s Columbus large-cabin jet—and there may yet be more, as any recovery in the business and general aviation orderbooks is not expected before 2011 and is projected to be slow.

The same is likely true for the civil rotorcraft market, where deliveries climbed steeply to a 2,000-aircraft peak in 2008 only to fall sharply in 2009. The decline is forecast to continue through 2012, after which a slow recovery is expected. This contrasts with the military rotorcraft market, which continues to be buoyed by the U.S. armed forces’ demand for helicopters. But the Pentagon’s focus on upgrades could put U.S. manufacturers at a disadvantage internationally, where they face competition from new European helicopters such as the AgustaWestland AW149 and NH Industries NH90.

For now, the U.S. holds pole position as both a buyer and producer of unmanned aircraft, with Israel as its main competition. Industry in Europe and Asia, however, is making a belated bid to catch up and at least meet domestic demand for UAVs. There is a window of opportunity while technology restrictions continue to constrain U.S. exports. While the U.S. will continue to outspend the rest of the world on UAVs, Europe could take the lead in approving regulations allowing unmanned aircraft access to civilian airspace—the key to a commercial UAV market some see as having unlimited long-term potential.

Europe already leads the commercial expendable launch vehicle market, but while U.S. providers depend heavily on government launch business, NASA and the Defense Dept. are also helping private-sector competitors get off the ground. NASA is supporting both SpaceX and Orbital Sciences as they develop and demonstrate commercial systems to transport cargo, and eventually crew, to the International Space Station. NASA is also looking at the potential for flying research projects on commercial suborbital spacecraft such as Virgin Galactic’s SpaceShip Two, which will enter flight testing this year.

Overall, the aftereffects of the global economic meltdown will continue to be felt through 2010, and war costs will add to the budget pressures. The aerospace and defense industry enters the year in good shape, but its fitness will be tested.