TECH TALK
revenue historically comes from customers from outside the United States. Obviously this provides a large amount of well-paying jobs (not to mention the impact from the thousands of suppliers, approximately 75 percent of which are in the U.S.). Airbus has also begun
manufacturing aircraft in the U.S.. According to Airbus, for the production of its jetliners, it spends 42 percent of its aircraft-related procurement in the U.S. — buying more parts, components, tooling and other material from the U.S. than any other country.
Both of these companies, as well as for smaller aircraft OEMs, engine OEMs and parts suppliers, any disruption to aircraft coming off of production lines is a major concern. All of these larger companies have many foreign sub-component suppliers or commodity providers. The international supply chain for the aviation world is vast and wide, and is highly dependent upon international agreements to smooth the flow of parts and services. This is why Trumps protectionist stances have riled the industry (at least the commercial side of aviation). Another simmering topic is in
regards to the Export-Import Bank providing financing for exported Boeing aircraft (which provided financing for ~11% of Boeing’s sales in 2015). This represents a major conflict for Trump, as his stated intent to not only create jobs, but protect U.S. interests, and he has come out against the Ex-Im. Expect more fireworks on Capitol Hill on this issue, as this will be addressed once again. And again. And probably again. Exports of Boeing aircraft (and GE and Pratt engines) to China are about 15 to 20 percent of their backlog, and China has been adept at shifting orders between Airbus and Boeing as political winds shift. Iran has taken note of this, per their split order from Airbus and Boeing to meet their air transport
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needs. With Congress attempting to block the deal, or at least the Ex-Im financing, this may have an impact on Boeing sustaining its 777 production line (not to mention the production by suppliers) until the 777X is ready. Boeing and its suppliers need access to the Chinese market, since it represents a major growth area, so any trade issues that Trump might affect will have an outsized effect on aerospace. For this reason, we may not see as much negative action against China as we may have heard during the election. Boeing is an adept political player, as is the entire aerospace industry lobby. Solutions will be found to not upset the status quo much, it would seem. Will Trump’s administration take
a hard stance with other countries which have key aviation supply chain partners, such as in Canada, Japan, Mexico, Singapore, Australia, South Korea and the EU? Especially since most of these have a trade surplus with the U.S.? Aviation is one of the most complicated, globally interwoven industries and aircraft large and small depend upon a flow of parts to meet tight production schedules (as well as for spare parts needs in the aftermarket). Haphazard treatment of trading partners could have an impact on this, and it would doubtfully be negative. Trade agreements that govern such relationships have been forged over many years, and we are all co-dependent upon many others to build aircraft or keep them flying. The key question is what happens to U.S. aviation suppliers export orders to foreign aircraft/engine OEMs if trade issues influence how other nations treat our exports? In many cases these foreign OEMs will switch to non-U.S. suppliers whenever possible. This is a dicey situation for the entire aerospace supply chain. In fact, the success of Trump’s
presidency might be at least partially judged on how he handles international
trade relating to aviation. Hopefully he will realize that the constant march of technology, including factory automation (and 3-D printing), has a dampening effect upon employment (as well as the wider topic of vocational education and job re-training). Trade wars often have no winners in the long run, and as a country we have much more to lose here.
MAINTENANCE
AND AFTERMARKET Aviation maintenance, aftermarket services and movement of spare parts across borders depend upon bilateral aviation safety agreements which allow such trade to happen smoothly. This is another reason why some of the election rhetoric is unsettling. Repair stations need to be able to be able to operate with certainty, and aircraft parts need to be able to quickly move on an as-needed basis. Anything that impacts this will be a negative to the aviation aftermarket. Trump’s views on global maintenance issues are unknown, so the hope is that his administration will have staff who will recognize the special needs of this market.
TRAVEL AND TOURISM Trump might have promised to
“make America great again,” but that sales pitch might not win over some international tourists. Policy proposals from the
president-elect may cause concerned tourists to avoid coming to the U.S., as the strong dollar already has begun to (from countries which have suffered a currency imbalance with the U.S.). This will affect not only the airlines, but also airports, hotels, rental car companies and other ancillary businesses. Conversely, many more Americans will be able to travel cheaper overseas due to the strong dollar, and you have a possible downturn for travel-related companies domestically.
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