(The following first appeared as a Comment article in Flight International, 12-18 February 2013)
One thing that characterises managers in any industry or region is that they work hard to give the impression they’re in control – even if they don’t know what’s going on. So, when they don’t know what’s going on and admit it, things are probably getting bad.
Alarmingly, that’s a dynamic that can be observed in the aerospace industry today – but don’t blame the management; the problem is with politicians in Washington DC. Their 11th-hour deal to prevent the US federal budget from going off the so-called fiscal cliff of automatic spending cuts on 1 January did nothing but push the cliff back a couple months, so a new cliff looms.
There is much to argue about the amount of money that should be spent on everything from new equipment to modernisation. But the real problem is uncertainty. The US Air Force has warned Congress that the budget impasse may force it to cut back on key programmes. Just about every recent corporate financial report has flagged up uncertainty as cause for worry.
Consultants PwC have concluded the defence aerospace industry is in need of consolidation – but important players are waiting for clarity from Washington.
The Aerospace Industries Association may not be overstating the dangers by warning that automatic budget cuts “threaten to throw the economy into a tailspin”. But even without a tailspin, loss of altitude can bring danger.