Testimony by John W. Douglass before the House Science Committee

"Implementing the Recommendations of
The Commission on the Future of the U.S. Aerospace Industry"

March 12, 2003

Introduction

On behalf of the member companies of the Aerospace Industries Association of America, or AIA, I wish to thank Chairman Boehlert, Congressman Hall and the Members of the House Science Committee for the opportunity to testify this afternoon regarding legislative implementation alternatives proposed by the report of The Commission on the Future of the U.S. Aerospace Industry. The House Science Committee has worked diligently on issues affecting the vitality of our industry, and AIA is grateful for your efforts. We also appreciate, Mr. Chairman, your early and vocal support for the mandate and the recommendations of the Aerospace Commission.

AIA operates as the nation’s largest trade association representing small, medium and large manufacturers of aerospace products. We currently have approximately 80 regular and 150 associate member companies involved in the design and manufacture of aircraft and spacecraft as well as related systems and subsystems. After discussing some of the key economic and technological indicators of the industry’s position today, I will address the Commission’s Research and Development (R&D), civil aviation and space recommendations of particular interest to the Committee and then highlight several military programs of importance to the long-term defense of our homeland as well as our allies and interests overseas.

A Snapshot of the Aerospace Industry

A Record of Industrial Innovation
The aerospace sector of our economy, Mr. Chairman, generates economic activity equal to nearly 15% of the nation’s Gross Domestic Product and supports approximately 11 million American jobs. Our industry leads the nation in net exports, posting a $30 billion surplus in 2002. Aerospace workers furthermore represent 4.5% of all manufacturing employment, and their productivity generated $148 billion in sales last year. Of this amount, civil aircraft revenue totaled $43.3 billion while military and space-related sales accounted for $80 billion.

Aerospace enterprises contribute directly to the economic and national security of the United States. Civil aviation, for example, enables the movement of people, resources and ideas that anchor jobs at home while expanding our trade and investment opportunities abroad. Cable and wireless technologies pioneered by the military planted the seeds for the Internet and mobile telecommunications. Materials and optical transmission research done by NASA and its contractors have advanced life-saving diagnostic procedures, land management techniques and our understanding of climate change. And in the realm of national defense, Mr. Chairman, precision-guided weapons and real-time reconnaissance systems prepare our dedicated forces to protect the United States from new adversaries who blur the boundaries – and the standards of conduct – between nations.

The Challenges Ahead
Economic, political and demographic developments of the last several years, however, pose immediate challenges to the aerospace industry. Since the end of the Cold War, two recessions, business re-structuring and subsidized foreign competition have caused the U.S. share of the global aerospace market to fall from 72% in 1985 to less than 52% today. AIA forecasts that sales of civil aircraft alone will decline by nearly $20 billion between 2001 and the end of this year. Commercial space sales peaked in 1997 at six billion dollars but had fallen to $3.4 billion by the end of 2002. Most dramatically, the aerospace manufacturing segment, with 689,000 employees as of last December, stands at its lowest level since World War II. Just since the attacks of September 11th, this workforce has declined by 13%. In answer to the second question of your invitation letter, Mr. Chairman, the near-term decline in aerospace sales and employment have harmed the overseas competitiveness of U.S. producers. The superiority of American satellite, space-based communications, military and civil airframe products, paired with ongoing improvements in worker productivity and manufacturing automation, will aid our companies in the search for stable international markets. But as the Aerospace Commission made clear, prudent investment, regulatory strategic policies on the part of government, which I will discuss beginning in a few minutes, are equally vital to the long-term health of the industry.

I would like to address another question of interest to the Committee concerning the relative impact of economic conditions and evolving business models on aerospace profitability. Market- and merger-driven business model reforms, compounded by changing government funding cycles, have pressured the revenue streams of the industry. DOD’s FY04 procurement request, for example, recovers barely more than one-half of the FY85 highpoint of $142 billion. Corporate mergers and the rise of European state-subsidized consortia have intensified the development of low-cost, highly-automated production lines in the civil transportation segment just during the last seven years. Industry business models, by emphasizing higher productivity per employee, should have a stabilizing effect on cash flow. But long-term profitability depends on the recovery of the civil aviation market and substantial increases in defense procurement. Unfortunately, the pending crisis in Iraq is eroding investment in each of these markets as civil flights continue to decline and the operational needs of our forces shift investment from modernization.

Next to revenue and job losses, the industry faces a significant shortage of younger, technically-skilled professionals. The average age of the aerospace manufacturing employee is now 51; the same number for engineers rises to 54. In 2008, 27% of aerospace workers will become eligible for retirement. Government agencies confront similar demographic trends. NASA’s personnel under the age of 30, for instance, are one-third the number over the age of 60. As the workforce ages, technical professionals also migrate to other disciplines. Twenty-four years ago, aerospace companies employed 20% of the nation’s R&D scientists and engineers; by 2001, the level had tumbled to 2.4%. At the same time, foreign nationals represent 40% of the students now earning engineering and science doctoral degrees in the United States. These young people often return to their native countries or cannot qualify for sensitive domestic defense and space jobs.

By acting now, we have the opportunity, Mr. Chairman, to revitalize the markets and human capital of an industry so critical to our freedom, mobility and prosperity. As you and the Committee know, the Aerospace Commission report contains nine overall recommendations for civil aviation, space, military, acquisition, research and workforce reforms. In the following sections of my testimony, I will offer some legislative and policy proposals on aspects of the report that fall under the jurisdiction of the Science Committee. I will then detail a few items from the defense budget to complete the picture of how the aerospace industry makes an integrated contribution to our national security and socio-economic quality of life.

Aerospace Research and Development

The first question of your invitation letter, Mr. Chairman, accurately noted that the federal government spends more on aerospace research than any other country. But as your question further anticipated, the Aerospace Commission found that the government should create a systematic framework to support pre-competitive basic aerospace research. This process would embrace the policy of fostering capabilities for industry to apply in advanced air transportation, navigation, surveillance and telecommunications products. Our foreign competitors not only appreciate the value of pre-competitive research, but also focus investment on product development. In a bold 2001 document entitled A Vision for 2020, the European Commission (EC) established a multilateral goal for obtaining "global leadership" in civil aviation during the next 17 years. More importantly, the EC has committed $93 billion to its vision, making government entities responsible for the funding of 30% of the continent’s civil aeronautics R&D. And as you wrote to the Secretary of Transportation on October 1, 2002, Mr. Chairman, the European Air Traffic Alliance has started to work on a next-generation Air Traffic Management system scheduled for activation by 2018.

In the United States, however, the tide has moved in the opposite direction. Since 1998, the combined NASA and DOD investment in aeronautics research and technology programs has fallen by one-third. Federal R&D and research infrastructure investments in aerospace dropped 75% from 1987 to the year 2000 (after adjusting for inflation). Taking these factors into account, the Aerospace Commission warned that the nation could miss several opportunities to incubate "breakthrough capabilities" in high-performance computers; propulsion and energy systems; noise and emissions mitigation; and hydrogen-fueled engines.

The President’s FY04 NASA and FAA budget proposals represent a modest start in addressing our federal R&D resource gaps. I respectfully urge the Committee to support NASA’s $959 million Aeronautics Technology and the FAA’s $100 million Research, Development and Engineering requests. These two programs devote the majority of their funding to civil aircraft safety and structural improvements. As a complement to the President’s budget, I also recommend that the Committee pass the Aeronautics Research and Development Revitalization Act of 2003 (H.R. 586), introduced on a bicameral, bipartisan basis by Senators George Allen, Christopher Dodd and Representative John Larson of this distinguished Committee. H.R. 586 gradually increases the NASA and FAA research budgets between now and FY08, with more than 50% of the authorized funding reserved for low-noise, low-emissions aircraft and aviation safety programs. The passage of H.R. 586 would signal domestic air travelers and our competitors in Europe that the United States has a vision of reliability for the civil aviation realm to match our global superiority in the military realm. It would also give the FAA more flexibility to adapt military surveillance and communications technologies in upgrading the air traffic control network.

Moreover, the Committee has an opportunity, in cooperation with the Ways & Means panel, to re-visit the issue of the federal R&D tax credit. The current 20% credit expires next year. Based on outdated defense spending trends from the 1980s, however, the aerospace industry qualifies only for an ‘alternative credit" of less than four percent. This inequity has a disproportionate impact on companies that invest in high-risk R&D to validate many of the aeronautics capabilities that I mentioned a few moments ago. Furthermore, a recent study by the General Accounting Office found that the R&D tax credit generated one-third of real economic growth in the U.S. during the late 1990s. Congress should act this year on the conclusions of the GAO by making the credit permanent and gradually increasing the "alternative" percentage to a level comparable with the standard rate.

Finally, I recommend that the Committee consider legislation to streamline the research information transfer process between the government and the private sector. As the Aerospace Commission noted, technology deployment often outpaces the completion of cooperative agreements among federal agencies and private sector research organizations. The manufacturing sector, in turn, has missed opportunities to capitalize on government-sponsored basic research to develop higher-performing aerospace systems. To address these problems, the FY04 NASA Reauthorization bill could serve as a vehicle for mandating an assessment of inter-agency research programs and new guidelines to streamline proposal evaluation and contractual oversight procedures.

Products and services that transform or prolong our lives always begin with bold ideas, as proven, among others, by the Wright brothers, Dr. Jonas Salk, and the information entrepreneurs who power the World Wide Web. I therefore ask the Committee to support basic aerospace R&D programs that will enable Americans to travel, trade and communicate with greater efficiency in the future.

Civil Aviation

The decline in air travel and system delays following the attacks of September 11th is temporary. Forecasters agree that growth in demand for air transportation ultimately will return to much higher historic levels and will outpace available and currently planned capacity. Aging infrastructure and often insufficient capacity, coupled with high passenger volume, should make the cause of airport and air traffic management modernization an urgent national priority. U.S. airlines and general aviation carriers serve more than 750 million passengers per year, carry 27% of the nation’s exports and imports and pump nearly one billion dollars into the domestic economy. But a duplicative infrastructure review process delays many airport facility and runway projects by between 10 and 15 years. At the same time, the Aerospace Commission found that FAA policies and oversight practices fail to take advantage of new communication, navigation, surveillance and air traffic management (CNS/ATM) products to modernize our aging and cumbersome air tr4affic control system.

NASA’s Strategic Plan estimates that as domestic and international airports reach full capacity without adequate expansion, the airline industry could lose $20 billion in output and forfeit up to 200 billion passenger miles by 2015. Your October 2002 letter to the Transportation Secretary, Mr. Chairman, also noted that while the U.S. is "the world’s preeminent provider of safe and efficient air navigation services. . . at the federal level, no department or agency has taken on the task of planning for a follow-on Air Traffic Management system."

As a result of this crisis of economics and mobility, AIA and the Aerospace Commission urge the Committee to consider the following legislative initiatives to create an integrated federal strategy for air transport modernization:

• Full funding of the FAA’s FY04 $3.9 billion request for National Airspace System (NAS) safety, homeland security, and air traffic automation programs to advance the Agency’s Operational Evolution Plan (OEP). The OEP anticipates the expansion of national air transportation capacity by 30% over the next nine years.
• Passage of an amendment to the FY04 NASA and/or FAA Reauthorization Bills establishing a joint program office among DOD, NASA, FAA and NOAA. The amendment would mandate a multi-year blueprint and timeline for a revitalized air traffic management network that leverages capabilities and resources from across the federal government. The integration and timely dissemination of information using advanced networks will enable the broad situational awareness and collaborative decision-making essential to civil and military users. Beyond the scope of OEP, this provision would also set general policy guidelines for establishing system-level performance requirements to meet long-term safety, security, capacity, efficiency and environmental needs.

  Industry could make a vital contribution to the mission of this proposed joint program office. Many AIA member companies, for example, have invested years of work with a broad group of stakeholders to develop system performance requirements as well as modeling and simulation capabilities to evaluate advanced concepts.

• Amending the Aviation Investment and Reform Act for the 21st Century (AIR-21) to require a streamlined FAA regime for airport improvements. Congress should request a detailed plan for concurrent or deadline-driven permitting, licensing and project approval milestones. A priority projects list should also be prepared for the approval of the FAA’s authorizing and appropriating committees.

AIA believes, Mr. Chairman, that legislation of this nature would begin to align the resources of government with the well-documented capacity and technology shortfalls in the civil aviation sector.

Space Exploration

Transcending their pain and grief, the families of the Columbia Seven Shuttle astronauts told the world that "the bold exploration of space must go on" because our lost heroes had accepted "risk in the pursuit of knowledge." This declaration, Mr. Chairman, defines our resilience as a people. And resilience, combined with curiosity about the galaxy beyond our skies, has propelled America into space. Drawing on the courage of the Columbia families and the determination of the Administration and this Committee, the U.S. space program can emerge from tragedy in a stronger scientific and exploratory position.

AIA and its member space companies will work tirelessly with NASA, the White House and the Gehman Board to uncover the causes of the Colombia tragedy and to implement the needed reforms in our space transportation programs. Towards this end, we commend you and the Committee, Mr. Chairman, for obtaining the cooperation of NASA last month in allowing the Board to retain independent professional analysts and to set its own investigative timetable.

The Colombia disaster also requires us to sharpen our focus on the cost, reliability, propulsion and safety hurdles posed by the exploration of space over the last three decades. In the assessment of the Aerospace Commission, government and industry must scrutinize the "significant expense to get to orbit and a hostile and highly limited environment once on-orbit." To tackle this issue, Mr. Chairman, I respectfully urge the Committee to assess NASA’s strategy for a long-term Shuttle replacement vehicle. Before the Colombia tragedy, NASA had determined that the space program would rely on the existing fleet for at least another 15 years. This timeframe may still apply, but it requires the agency to design a post-Shuttle architecture as rapidly as possible so that human observation and experimentation can continue to enrich our understanding of the universe.

Similar to the crisis in civil aviation, the challenges to the U.S. space program center on the need for inter-agency coordination guided by coherent policy objectives. In recognition of this fact, the FY04 NASA Strategic Plan, which AIA urges the Committee to support, charts an ambitious course for the country’s space research and flight programs. Six Enterprises (Space Science, Earth Science, Biological and Physical Research, Aerospace Technology, Education and Space Flight) will undertake a joint effort to breach what the Agency candidly defines as "technological barriers" in four areas: power, transportation, on-orbit human capabilities and solar system communications.

To amplify the impact of the Strategic Plan, AIA and the Aerospace Commission recommend the following amendments, summarized by program categories, to the FY04 NASA Authorization Bill. These proposals will also establish guidelines for reform in the relationship between NASA and Congress.

Next-Generation Launch Vehicles
The Committee, in evaluating the budget justifications for the Expendable Launch Vehicle, Space Shuttle upgrades and the Orbital Space Plane concept, should consider a requirement for a separate, early 2004 report from the Administrator, to be followed by an oversight hearing, on the state of research and experimentation to:

• reduce the cost to orbit;
• develop and test enabling technologies for a Reusable Launch Vehicle in cooperation with DOD, a mission endorsed by the Director of the National Reconnaissance Office;
• improve control center operations and security; and
• mitigate launch, flight and recovery constraints.

These areas, identified by the Aerospace Commission, represent the key financial, navigational and safety issues for the post-Shuttle generation of space transportation vehicles.

Power and Propulsion Systems
A second authorization amendment should formalize NASA-DOD joint efforts, possibly by creating a program office or task force under the auspices of the National Aerospace Initiative, on propulsion research and power systems. NASA and the Aerospace Commission have both targeted propulsion and power advances as the critical ingredients for the sustainability of spacecraft.

Space Launch Infrastructure Upgrades
As a result of a presentation by NASA Kennedy Space Center (KSC) officials, the Aerospace Commission revealed that the Current Replacement Value of the KSC infrastructure amounts to $3.9 billion. The main deficiencies include corrosion in the cable plant and the Vehicle Assembly Building as well as aging and underperforming Shuttle launch pad transporters. The Committee therefore should consider an amendment mandating a launch infrastructure improvement plan from NASA with out-year budget allocations based on the $3.9 billion estimate by KSC management.

As J.F. Creedon, Associate NASA Administrator for Aerospace Technology, testified on February 27th before the Senate Commerce Subcommittee on Science, "access to space will require interagency partnerships to meet common needs." AIA strongly believes that the Committee can clarify our strategic roadmap for space exploration by creating and directing a new series of federal partnerships.

Human Capital

I noted at the beginning of my testimony, Mr. Chairman, the difficulties faced by the aerospace industry in recruiting and retaining skilled professionals. As the Aerospace Commission pointed out, the United States has lost more than 600,000 aerospace jobs in the last 13 years. Previewing future generations of workers, we find that the math and science testing performance of students in the U.S. relative to their European and Japanese counterparts gradually erodes to the 10th percentile or below by the end of high school. Yet in the awesome mix of platforms and technologies that characterize our industry, no resource is more valuable than human and intellectual capital.

AIA joins the Aerospace Commission, therefore, in urging Congress to empanel an interagency task force, with a formally designated lead agency or department, to build a strategy by mid-2004 for improving and expanding the math, science, engineering, and technical/vocational education of Americans. Congress should then sub-divide and revise the various elements of the strategy to incorporate them as mandatory mission planning objectives in the appropriate budget authorization bills.

NASA’s strategic human capital program, the subject of the second panel of today’s hearing, could serve as a model for an integrated federal workforce plan. AIA strongly supports this comprehensive initiative. The Education Enterprise of NASA will unite the Human Resources division with other critical units, such as the Technical Programs office, to design new scholarship and recruitment programs to narrow gaps in professional skills across the organization. This approach, by assigning responsibilities to all functional and program activities, makes the improvement of human capital a continuous agency mission.

National Security Programs

I want to draw the Committee’s attention to a few key programs from the FY04 defense budget that demonstrate the Pentagon’s evolving Total Force framework to deter or defeat the unpredictable adversaries of our age.

Naval Force Modernization
The oceans cover 70% of Earth’s surface, and the majority of the world’s population and industrial facilities reside within 250 miles of a coastline. If only for these reasons, the Navy’s surface and submarine fleets provide the United States with the forward military presence, free of dependence on foreign bases, to prevent or prevail in conflicts and to safeguard the global sea lanes of commerce. The Navy’s FY04 shipbuilding request of $12 billion deserves strong congressional support as the Service continues to execute a full-scale modernization and recapitalization program. The aircraft carriers, destroyers, cruisers, submarines and combat support ships of the future will magnify the power of ground forces with deep land attack, special operations, theater missile defense and reconnaissance capabilities. As a result of this strategy, Mr. Chairman, the Navy will assume an increasingly important role in meeting many of our national security objectives from the sea and along the shore.

Armored Programs
In their 2003 Posture Statement, Army Secretary White and Chief of Staff Shinseki describe their vision of an Objective Force that by 2010, will complete training for ground dominance, cyber-warfare and space exploitation operations. In addition, the current Stryker Brigade Combat Teams and the planned Future Combat System (FCS) provide soldiers with mobile air-ground units to project power and subdue adversaries in the most austere or heavily urban environments. Armored forces will therefore remain vital to our unchanging need for enemy territorial control as the end-state of victory, and the FY04 Army budget contains focused R&D and acquisition proposals to keep the Objective Force plan on schedule. Aerospace technologies will also provide a number of critical networked solutions to the fully-deployed FCS. The current heavy armored deployments to the Persian Gulf theatre only underscore the requirement to keep the FCS program on schedule since our soldiers will need state-of-the art battle space management and force protection equipment over the course of several years.

Today’s Stryker industrial base reflects the successful shift from a single product line to a flexible manufacturing process capable of building multiple combat vehicles in a variety of weight classes. What once functioned as a Cold War tank line now supports the production of the Stryker family of 10 different vehicles. This armored transformation would not have occurred without the resources, skills, vendors and investment by both government and contractors. During Operation Desert Storm, for example, a warm production line made it possible to supply over 22,000 spare components and major assemblies on short notice. As current and future ground threats arise, the existence of a modernized armored industrial base will prove critical in supporting the nation’s military response and deterrent objectives.

Tactical and Mobility Aircraft
Our combat experiences in Afghanistan, Southwest Asia and the Balkans illustrated the dramatic utility of air power as a wartime force multiplier. During the opening phases of conflict, precision air power destroyed or crippled enemy air defense, fighter-bomber and command-and-control networks, thereby depriving hostile forces of territorial defense and combat attack assets. At the same time, personnel and cargo transport aircraft enable the United States to introduce troops and firepower into a zone of conflict during a time when we lack fewer basing facilities overseas.

I subsequently urge Committee members and Congress to support FY04 Air Force and Navy budget requests that dedicate a combined $21.3 billion to seven tactical and mobility aircraft (the F/A-22 tactical fighter; the F/A-18E/F carrier-based strike fighter; Joint Strike Fighter development; C-17 Airlifter procurement; C-5 avionics upgrades; C-130 Transporter modernization; and V-22 Tiltroter procurement), supplemented by more than 45,000 precision-guided munitions, to expand the nation’s global force projection capabilities.

In addition to promoting the modernization of U.S. air-breathing military forces, Congress should ensure that the appropriate DOD components and Services sustain, as the Aerospace Commission advised, critical, high-risk defense-related technologies such as combat system design capabilities, solid rocket boosters and radiation hardening.

Conclusion

In closing, Mr. Chairman, I commend you, Congressman Hall, and the entire Committee for serving as the trustees of scientific innovation and programmatic accountability among your colleagues. Through this testimony on implementation alternatives regarding the report of the Aerospace Commission, I have tried to concentrate on legislative policy reforms to improve inter-agency cooperation, direct the development and fielding of new technologies for the civil aviation and space arenas, and begin the vital effort of workforce revitalization. These three assets – knowledge-sharing, modernization and people – will open new frontiers for the aerospace industry to serve our commercial and war fighting customers of tomorrow.