Commission on the Future of the U.S. Aerospace Industry

The Honorable Robert S. Walker—<strong>Commission</strong> ChairmanChairman, Wexler & Walker PublicPublic Policy AssociatesThe Honorable F. Whitten Peters—<strong>Commission</strong> Vice-ChairmanPartner, Williams & Connolly LLPDr. Buzz AldrinPresidentStarcraft EnterprisesSharespaceStarbooster & StarcyclerMr. Edward M. BolenPresident & Chief Executive OfficerGeneral Aviation Manufacturers Association<strong>Commission</strong> on the Futureof the United StatesAerospace Industry<strong>Commission</strong>ersMr. R. Thomas BuffenbargerInternational PresidentInternational Association of Machinists & Aerospace WorkersThe Honorable John W. DouglassPresident, Chief Executive Officer and General ManagerAerospace Industries AssociationThe Honorable Tillie K. FowlerPartner, Holland & Knight LLPThe Honorable John J. HamrePresident & Chief Executive OfficerCenter for Strategic & International StudiesThe Honorable William Schneider, Jr.Chairman, Defense Science BoardPresident, International Planning Services, Inc.Mr. Robert J. StevensPresident and Chief Operating OfficerLockheed Martin CorporationDr. Neil deGrasse TysonAstrophysicist & Frederick P. Rose DirectorAmerican Museum of Natural HistoryMs. Heidi R. WoodExecutive Director, Senior Aerospace/Defense AnalystMorgan Stanley

FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRYAerospace <strong>Commission</strong>

Table of ContentsAppendicesAppendix A <strong>Commission</strong> Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1Appendix B <strong>Commission</strong> Interim Reports . . . . . . . . . . . . . . . . . . . . . . . . . . B-1Appendix C Aerospace Sector Budget Breakout (Office of Managementand Budget) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1Appendix D Scoping Aerospace (RAND) . . . . . . . . . . . . . . . . . . . . . . . . . . D-1Appendix E U.S. Aerospace and Aviation Industry: A State-by-State Analysis(Content First) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1Appendix F Federal Departments and Agencies with AerospaceResponsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1Appendix G Congressional Committees with Aerospace Responsibilities . . . . . G-1Appendix H Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1Appendix I Summary of <strong>Commission</strong> Activities and Contacts . . . . . . . . . . . I-1Appendix J Aerospace-related Websites—Partial List . . . . . . . . . . . . . . . . . J-1Appendix K Acknowledgements and <strong>Commission</strong> Staff. . . . . . . . . . . . . . . . . K-1iiiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Source: Mark Garfinkel/Boston Herald

Executive SummaryExecutive SummaryAerospace will be at the core of America’s leadershipand strength in the 21st century. The role of aerospacein establishing America’s global leadership wasincontrovertibly proved in the last century. Thisindustry opened up new frontiers to the world, suchas freedom of flight and access to space. It providedproducts that defended our nation, sustained oureconomic prosperity and safeguarded the very freedomswe commonly enjoy asAmericans. It has helped forgenew inroads in medicine andscience, and fathered the developmentof commercial productsthat have improved our qualityof life.Given a continued commitmentto pushing the edge of man’sengineering, scientific and manufacturingexpertise, there is thepromise of still more innovationsand new frontiers yet to bediscovered. It is imperative that the U.S. aerospaceindustry remains healthy to preserve the balance ofour leadership today and to ensure our continuedleadership tomorrow.Our Urgent PurposeThe contributions of aerospace to our global leadershiphave been so successful that it is assumed U.S.preeminence in aerospace remains assured. Yet theevidence would indicate this to be far from the case.The U.S. aerospace industry has consolidated to ahandful of players—from what was once over 70The <strong>Commission</strong>’s urgentpurpose is to call attentionto how the criticalunderpinnings of this nation’saerospace industry areshowing signs of faltering—and to raise the alarm.suppliers in 1980 down to 5 prime contractors today.Only one U.S. commercial prime aircraft manufacturerremains. Not all of these surviving companiesare in strong business health. The U.S. airlines thatrely upon aerospace products find their very existenceis threatened. They absorbed historical losses ofover $7 billion in 2001 and potentially more thisyear.The industry is confronted witha graying workforce in science,engineering and manufacturing,with an estimated 26 percentavailable for retirement withinthe next five years. New entrantsto the industry have droppedprecipitously to historical lows asthe number of layoffs in theindustry mount. Compoundingthe workforce crisis is the failureof the U.S. K-12 education systemto properly equip U.S. studentswith the math, science, and technological skillsneeded to advance the U.S. aerospace industry.The <strong>Commission</strong>’s urgent purpose is to call attentionto how the critical underpinnings of this nation’saerospace industry are showing signs of faltering—and to raise the alarm.This nation has generously reaped the benefits ofprior innovations in aerospace, but we have not beenattentive to its health or its future. During this yearof individual and collective research, the<strong>Commission</strong> has visited and spoken with aerospacevFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>design and approval of each particular piece ofhardware or software, the FAA should focus oncertifying that design organizations have safetybuilt into their processes for designing, testing,and assuring the performance of an overall system.• Solve the airborne equipage problem. The government,in partnership with industry, must be moreresponsible for airborne equipment developmentand continuous modernization. In addition to currentregulatory and operational incentives, thegovernment should consider additional options tomotivate a critical mass of early equippers, includingfull federal funding for system-critical airborneequipment, tax incentives or vouchers for partialfunding support, and competitively auctionedcredit vouchers.Streamline the Airport and Runway DevelopmentProcess. The FAA and other agencies shouldexpedite new runway and airport development as anational priority. Further, because aircraft noise andemissions constrain capacity growth, additional governmentinvestment in long-term research in thisarea is imperative.Act Now. The <strong>Commission</strong> sees compelling reasonsfor the Administration and Congress to take immediateaction. First, new homeland security anddefense requirements call for system capabilities notpreviously anticipated. Second, an entirely new levelof transportation efficiency and national mobilitycan be enabled by more flexible, scalable, higher precisionaviation operations. Third, inherently longlead times required for major aviation changesdemand preparation far ahead of anticipateddemand. And fourth, there could be no betterAmerican response after 9/11 than to rebuild theU.S. air transportation system dramatically betterthan it was before.As we approach the 100th anniversary of poweredflight, the <strong>Commission</strong> urges the President andCongress to recognize a pressing national need, andpowerful opportunity, and act now to create a 21stcentury air transportation system.Recommendation #2The <strong>Commission</strong> recommends transformation of theU.S. air transportation system as a national priority.This transformation requires:• Rapid deployment of a new, highly automated airtraffic management system, beyond the FederalAviation Administration’s Operational EvolutionPlan, so robust that it will efficiently, safely, andsecurely accommodate an evolving variety andgrowing number of aerospace vehicles and civiland military operations;• Accelerated introduction of new aerospace systemsby shifting from product to process certificationand providing implementation support; and• Streamlined new airport and runway development.Chapter 3—Space: Its SpecialSignificanceConclusionsThe <strong>Commission</strong> concludes that the nation will haveto be a space-faring nation in order to be the globalleader in the 21st century—our freedom, mobility,and quality of life will depend on it. America mustexploit and explore space to assure national and planetarysecurity, economic benefit and scientific discovery.At the same time, the United States mustovercome the obstacles that jeopardize its ability tosustain leadership in space.Achieve Breakthroughs in Propulsion and SpacePower. The ability to access space and travel throughthe solar system in weeks or months instead of yearswould help create the imperative to do so.Propulsion and power are the key technologies toenable this capability. Future progress in these areaswill result in new opportunities on Earth and openthe solar system to robotic and human explorationand eventual colonization. The nation would benefitfrom a joint effort by NASA and DoD to reduce significantlythe cost and time required to access andtravel through space.viiiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>will invigorate and sustain the U.S. aerospace industrialbase. The policy should address issues, such asmergers and acquisitions, procurement and budgetingpolicies, research and development investments,technology transition, international sales and workforcedevelopment.Sustain the Defense Industrial Base. Today’snational defense industrial base is indeed robust, butwithout constant vigilance and investment, vitalcapabilities will be lost.• DoD’s annual science and technology (6.1-6.3)funding must be sufficient and stable to create anddemonstrate the innovative technologies needed toaddress future national security threats. Anamount no less than three percent of TotalObligational Authority, “fenced” from budgetcuts, would be sufficient. The use of more jointtechnology development and acquisition programswould spread the funding burden and promoteinteroperability.• The federal government must remove unnecessarybarriers to international sales of defense products,and implement other initiatives that strengthentransnational partnerships to enhance nationalsecurity. To help reduce the high development andproduction costs of advanced military systems, theUnited States must also increase the number ofinternational joint programs (like the Joint StrikeFighter), and continue to foster internationalinteroperability of defense and commercial aerospacesystem-of-systems.• DoD acquisition policies should be revised toencourage greater use of commercial standards.DoD should impose government requirements byexception only, allow commercial entities to protectintellectual property, and remove other burdensomeregulations that deter providers of commercialproducts from doing business with thegovernment.• There are numerous government missions thatwould benefit from defense technology. For example,the U.S. military has developed capabilitiesin the areas of communications, navigation,surveillance, and reconnaissance. These technologiescould be adapted and transitioned into othergovernment applications that would significantlyenhance the capacity of our air traffic managementsystem and, hence, our national defense andhomeland security.• The federal government and the aerospace industrymust partner to enhance the operational readinessand capability of new and legacy militaryaerospace systems. The government should fundresearch and technology development programsto: reduce total ownership costs and environmentalimpacts; implement performance-based logisticssupport; create a structured, timely and adequatelyfunded technology insertion process; andreform its procurement practices accordingly.Increase Opportunities to Gain Experience inthe Workforce. The U.S. must continuouslydevelop new experimental systems, with or without arequirement for production, in order to sustain thecritical skills to conceive, develop, manufacture andmaintain advanced systems and potentially provideexpanded capability to the warfighter. Furthermore,the federal government and industry must developapproaches to retain and transfer intellectual capitalas the workforce retires in greater numbers in thenext few years.Maintain and Enhance Critical NationalInfrastructure. The federal government mustassume responsibility for sustaining, modernizing,and providing critical, often high-risk, defenserelatedtechnologies and infrastructure when it is inthe nation’s interest. This includes critical designcapabilities, solid rocket boosters, radiation hardening,space launch facilities, critical research, development,test and evaluation (RDT&E) infrastructure,Global Positioning System (GPS), and frequencyspectrum.Recommendation #4The <strong>Commission</strong> recommends that the nationadopt a policy that invigorates and sustains thexFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Executive Summaryaerospace industrial base. This policy mustinclude:• Procurement policies which include prototyping,spiral development, and other techniques whichallow the continuous exercise of design and productionskills;• Removing barriers to defense procurement of commercialproducts and services;• Propagating defense technology into the commercialsector, particularly in communications, navigationand surveillance;• Removing barriers to international sales of defenseproducts;• Sustaining critical technologies that are not likelyto be sustained by the commercial sector, e.g. spacelaunch, solid boosters, etc.; and• Stable funding for core capabilities, without whichthe best and brightest will not enter the defenseindustry.Chapter 5—Government: Prioritize andPromote AerospaceConclusionsThe <strong>Commission</strong> concludes that the governmentmust ensure that the nation has a healthy aerospaceindustry today and in the future, an industry thatcan not only meet the security and economic needsof the country but also can compete successfully inthe international market place. The governmentneeds to exert leadership and prioritize and promoteaerospace by managing its activities efficiently, effectivelyand as a sector to accomplish national objectives.It needs to create an environment that fostersinnovation in the U.S. aerospace industry, ensuringits competitiveness into the 21st century.Create a National Aerospace Consensus. The federalgovernment does not have a national aerospaceconsensus that supports broader national securityand economic policies, goals and objectives. Thiswill require Presidential and Congressional leadershipto develop a consensus of federal, state and localgovernment, industry, labor, academia and nongovernmentalorganizations to sustain a healthy U.S.aerospace sector.Reorient Government Organizational Structures.The federal government is dysfunctionalwhen addressing 21st century issues from a longterm,national and global perspective. Government isorganized vertically while national problems arebecoming more horizontal in nature requiring system-of-systemssolutions. Key government processes,such as planning and budgeting, are currently spreadacross multiple departments and agencies, with oversightby numerous Congressional committees. As aresult, none of these government groups has an integratedview of our national aerospace efforts.The executive and legislative branches need to bereoriented to provide a focus on national aerospaceneeds and priorities, government aerospace plans andbudgets, and government management of nationalaerospace initiatives.• Federal Departments and Agencies. Every federaldepartment and most federal agencies shouldcreate an Office of Aerospace Development toprioritize and promote aerospace activities withintheir organizations and with the public that theyserve;• Office of Management and Budget (OMB). OMBshould establish a Bureau of AerospaceManagement to develop and implement an aerospacestrategic plan, establish an acceptable categoricaldefinition of the aerospace sector, preparean annual aerospace sector budget as an addendumto the President’s Budget Request, and managemajor national aerospace initiatives; and,• White House. The White House should establishan aerospace policy coordinating council todevelop and implement national aerospace policyconsistent with national security and economicgoals and objectives.• Congress. In response to these executive branchchanges, the <strong>Commission</strong> encourages the legislativebranch to create a Joint Committee onxiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Aerospace to coordinate legislatively the multifacetedjurisdictional issues.Streamline and Integrate Key GovernmentProcesses. Government processes for policy, planning,and budgeting, and for developing and acquiringaerospace products and services are vestiges of theCold War. As a result, they tend to be ad hoc, complex,lengthy and inefficient. The Administrationand the Congress need to make a concerted effort tostreamline these key government processes to reflectthe new realities of a highly dynamic, competitiveand global marketplace. Specifically, they shouldwork together to create: an integrated federal planning,budgeting and program management process;an integrated government science, technology andacquisition process; and an environment that fostersrather than impedes innovation in the aerospacesector.Promote Private-public Partnerships. Partnershipsand interconnectedness are keys to competitivenessin the future. Government, industry, laborand academia play different, but important, rolesin developing and deploying new aerospace productsand services. They cannot perform these rolesseparately and in isolation. But today, cultural andinstitutional biases hinder their ability to partner andachieve national goals. We need to create an environmentand the incentives that will foster privatepublicpartnerships.Recommendation #5The <strong>Commission</strong> recommends that the federal governmentestablish a national aerospace policy andpromote aerospace by creating a government-widemanagement structure. This would include a WhiteHouse policy coordinating council, an aerospacemanagement office in the OMB, and a joint committeein Congress. The <strong>Commission</strong> further recommendsthe use of an annual aerospace sectoralbudget to establish presidential aerospace initiatives,assure coordinated funding for such initiatives, andreplace vertical decision-making with horizontallydetermined decisions in both authorizations andappropriations.Chapter 6—Global Markets: Open andFairConclusionsOpen global markets are critical to the continuedeconomic health of U.S. aerospace companies and toU.S. national security. In order to remain globalleaders, U.S. companies must remain at the forefrontof technology development. They must also haveaccess to global customers, suppliers and partners inorder to achieve economies of scale in productionneeded to integrate that technology into their productsand services.Government intervention continues to distort globalmarkets, from subsidies to anti-competitive restrictionson partnerships and collaboration to biasedstandards and regulations. U.S. companies frequentlyfind themselves competing against foreigncompetitors supported directly or indirectly by theirgovernments. We need to move to a different modelof business characterized by competition betweencompanies instead of between countries.Reform Export Controls and Defense ProcurementPolicies. U.S. national security and procurementpolicies represent some of the most burdensomerestrictions affecting U.S. industrycompetitiveness.We call for a fundamental shift away from theexisting transaction-based export-licensing regime toprocess-based licensing. Under this new system, thegovernment would rely on companies to safeguardagainst the sale of controlled technologies to unacceptableparties through internal company controlscertified by the government. The government thenwould monitor and audit those company operationsfor compliance. Such a process-based licensingregime would improve security, reduce licensingcosts and enable our companies to collaborate withinternational partners and sell to global customers.Additional reforms, including those outlined inInterim Report #2, are necessary to make this newsystem effective. As quickly as possible, thegovernment should revise the U.S. Munitions List,xiiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Executive Summaryremove barriers to global project licenses, expandwaivers for trading with friendly nations, andupdate country risk surveys to facilitate better policydecisions.U.S. procurement regulations currently are toorestrictive and must be modified to be supportive ofa global industrial base to meet military requirements,while maintaining U.S. industrial capacity incritical technologies and capabilities. We need toreform DoD procurement regulations to permitintegration of commercial components into militaryproducts even if they are provided by non-U.S. companiesor worked on by foreign nationals.Establish a Level International “Playing Field”.U.S. companies have lost market share to foreigncompanies supported by protectionist and marketdistorting policies. The U.S. government must takeimmediate action to neutralize these distortions andenable fair and open competition.We must continue to meet our responsibilities of settingnational goals and priorities for basic research,reverse declines in basic research and experimentationfunding and expand efforts to fund technologydiffusion through U.S. industry.We also must work bilaterally and multilaterally toget foreign governments out of the business of commercial“product launch.” In spite of inadequacies ofthe current World Trade Organizations (WTO) system,the U.S. government should work in the WTODoha round of negotiations to strengthen the existingWTO provisions restricting the use of subsidiesto distort the market. The U.S. government alsoshould work with other WTO members to adoptmore effective trade remedies that are usable andeffective in a market characterized by increased globalization.When countries do violate existing provisions,we should not shy away from taking action.We must ensure that U.S. companies are not disadvantagedby differences between U.S. and foreign taxpolicies as exemplified in the current WTO disputeover U.S. Foreign Sales Corporation/ExtraTerrritorial Income regulations. In the near term wemust seek to delay European trade sanctions whileboth parties negotiate a solution to this dispute. Weurge the Administration and Congress to authorizechanges to U.S. tax law that are WTO compliant butthat continue to offset the advantage enjoyed byEuropean companies. In the longer term, theAdministration should initiate changes in the WTOrules to remove the current inequity in the treatmentof direct and indirect taxes that caused the dispute inthe first place.Official export credit support for commercial andmilitary products is an essential tool to facilitate U.S.aerospace exports. In addition to continued fundingfor U.S. Export-Import Bank programs, we shouldseek to reduce international reliance on officialexport credits for export financing assistance, such asthrough ratification of the “Cape Town convention.”For military exports, the Defense Export LoanGuarantee should be modernized to permit the DoDto create an effective unsubsidized export creditorganization to facilitate the financing of defenseexports to U.S. allies and friendly nations abroad.The U.S. government should remove policy and regulatoryobstacles to increased commercial mergersand teaming within the U.S. and with internationalpartners. The U.S. government should assist indeveloping and policing international anti-trusttreaties relating to mergers and teaming betweencommercial entities to minimize divergence ofrequirements and the methods of assessment in antitrustreviews, presumably making reviews moreobjective. The U.S. government also must continueto work bilaterally with key countries to remove barriersto foreign investment.Global standards and regulations are critical to theefficient operation of the global aviation system andinternational markets. The U.S. government needsto step up its commitment to the development ofglobal standards in International Civil AviationOrganization (ICAO) and via other forums. Thiswill help to mitigate the efforts of other countriesseeking to provide a competitive advantage fortheir companies through biased domestic standardsor regulations.xiiiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Commit to Global Partnerships. Internationalpartnerships are essential to the creation of systemof-systemssolutions to global challenges.In order to meet our goal of transforming the way weuse airspace through the use of advanced technologyand improved procedures, we must act in concertwith other countries around the world. We mustcommit to developing common standards and recommendedpractices for satellite navigation inICAO, and ensure that global cooperative efforts arenot thwarted by disputes over radio spectrum allocation.We strongly urge U.S. officials to work bilaterallyand multilaterally to ensure that U.S. GPS andEuropean Galileo systems are compatible and complementaryin the event that Galileo becomes areality.U.S. policy makers should work toward global standardsfor safety certification as a way to prevent theuse of safety certification by some governments toenhance their domestic competitiveness. We alsocall for increased liberalization of air transportservices through negotiation of open skies agreementsin order to expand the demand for all countries’air transport services and alleviate undue congestionat the largest airports.The success or failure of our future activities in spaceis fundamentally linked to our ability to work effectivelywith international partners. It is in our country’sbest interest to work cooperatively with partnernations in space exploration and protection of ourplanet from the threat of near-earth objects.Recommendation #6The <strong>Commission</strong> recommends that U.S. and multilateralregulations and policies be reformed to enablethe movement of products and capital across internationalborders on a fully-competitive basis, andestablish a level playing field for U.S. industry in theglobal market place. U.S. export control regulationsmust be substantially overhauled, evolving fromcurrent restrictions on technologies through thereview of transactions to controls on key capabilitiesenforced through process controls. The U.S.government should neutralize foreign governmentmarket intervention in areas such as subsidies,tax policy, export financing and standards,either through strengthening multilateral disciplinesor providing similar support for U.S. industry asnecessary.Chapter 7—Business: A New Model forthe Aerospace SectorConclusionsThe <strong>Commission</strong> concludes that for our aerospaceindustry to be globally preeminent, now and in thefuture, it must be able to attract vitally needed capitalat a reasonable cost. We further conclude that thedefense and aerospace sector is viewed as a lowgrowth industry with low margins, unstable revenueand a capricious major customer, the government.Without a significant change in the business model,the future of the aerospace industry, so critical to ournational economic and homeland security, is uncertainand at risk.Provide Investment Opportunities. Predictability,stability and performance are critical to the healthand growth of a robust aerospace industry. The governmentmust stabilize program requirements andprotect adequate long-term investment funding,enact reforms that increase the financial flexibility ofindustry and the government, and improve programmanagement stability.Enable Industry to Attract and Retain High-Tech Partners and Suppliers. The future of theaerospace industry is intrinsically tied to the abilityof the sector to attract and retain high-tech partnersand suppliers throughout the supply chain. The governmentshould pursue near-term reforms to realignpurchasing processes to lower costs and gain access tonew technology by eliminating, or at least lowering,barriers that make government business inefficientand unattractive to commercial firms. DoD shouldimplement changes to permit greater profitabilityand financial flexibility of industry working ongovernment efforts. A government-wide reviewof functions and services should be conducted toxivFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Executive Summaryidentify those functions that are not “core” to theeffective operation of government and those functionsthat could best be performed by the privatesector.Create a favorable Domestic and InternationalBusiness Climate. Certain U.S. tax and trade lawsand regulations that affect a wide variety of industriesweigh particularly heavily on defense and aerospace,both in competition with domestic commercialentities as well as in the international markets.The government should act promptly to replace burdensometax laws and outdated trade laws with lawsand regulations that remove unnecessary administrativeburdens from industry and recognize the uniquecontribution of defense and aerospace companies toour nation’s defense and economic security. In addition,the Administration and Congress should reviewand consider reducing user fees on the airlines andtheir customers.Ensure Long-Term Growth and FinancialHealth. Government and industry must recognizethat a healthy, competitive, and innovative industrymeeting security and aerospace needs must be closelyintegrated with the global commercial marketplace.Major challenges to this desired climate include theneed for dramatic personnel and training reform andrecognition of the dynamic interrelated global environment.Government and industry should worktogether to develop and implement training andexchange programs that would educate and exposetheir workforces to those challenges and responsibilities.All government officials with budget and programacquisition, management, or review responsibilities,both appointed and elected, should berequired to have a business or financial backgroundor training. Finally, government must develop andimplement a policy regarding international cooperationin defense and aerospace that recognizes theglobal industrial base. The Administration is urgedto undertake a review of the current policy regardingboth domestic and international business combinations,based on an analysis of the U.S. defense industrialbase, including the supplier industrial base.Recommendation #7The <strong>Commission</strong> recommends a new businessmodel, designed to promote a healthy and growingU.S. aerospace industry. This model is driven byincreased and sustained government investment andthe adoption of innovative government and industrypolicies that stimulate the flow of capital into newand established public and private companies.Chapter 8—Workforce: Launch theFutureConclusionsClearly, there is a major workforce crisis in the aerospaceindustry. Our nation has lost over 600,000 scientificand technical aerospace jobs in the past13 years. These layoffs initially began as a result ofreduced defense spending following the conclusionof the Cold War. This led to an industry shift fromreliance on defense sales to one dependent uponcommercial markets. Increasing foreign competitionin the commercial aerospace market has led to contractionsin the industry, resulting in mergers andacquisitions. Job losses from this consolidation havebeen compounded by the cyclical nature of theindustry.Due to these uncertainties, most of the workerswho have lost their jobs are unlikely to return to theindustry. These losses, coupled with pending retirements,represent a devastating loss of skill, experience,and intellectual capital to the industry.Reverse the Decline and Promote the Growthof Today’s Aerospace Workforce. The <strong>Commission</strong>was unable to agree to any immediate solutionsto help stem the loss of jobs within the industry. Ithopes that its recommendations for a high-level federalmanagement structure focused on establishing anational aerospace consensus (Chapter 5) and otheractions to promote the industry will have a positiveeffect in the future. What is clear is that industry,government, and labor must begin to work now torestore an aerospace industry that will be healthy, stable,and vibrant.xvFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>U.S. policy towards domestic aerospace employmentmust reaffirm the goal of stabilizing and increasingthe number of good and decent jobs in the industry.The Administration and the Congress should considerthe impact of domestic and international policieson U.S. aerospace employment.Address the Failure of the Math, Science, andTechnology Education. The aerospace industrymust have access to a scientifically and technologicallytrained workforce. In the long term, the<strong>Commission</strong> stresses that action must be taken toimprove mathematics and science instruction acrossthe entire education range—K-12 through graduateschool. These actions and investments shouldinclude scholarships and internship programs toencourage more U.S. students to study and work inmathematics, science, and engineering fields. Inaddition, investments should be made in vocationaleducation to develop a highly skilled workforce,including registered apprenticeship programs forskilled and technical occupations. Further, asrecommended in <strong>Commission</strong> Interim Report #3,targeted tax credits should be made available toemployers who invest in the skills and training programsneeded by the industry.In addition, the <strong>Commission</strong> concludes that emphasismust be placed on the concepts of “lifelong learning”and “individualized instruction” as key elementsof education reform. It is likely that individuals nowentering the workforce will hold five or more jobs intheir lifetime and the education system must beprepared to deliver training and education to meetthese changing skill requirements and meet labormarket needs. U.S. community colleges are adept atdesigning and delivering workforce training andindividualized instruction.Our policymakers need to acknowledge that thenation’s apathy toward developing a scientificallyand technologically trained workforce is the equivalentof intellectual and industrial disarmament and isa direct threat to our nation’s capability to continueas a world leader.Recommendation #8The <strong>Commission</strong> recommends the nation immediatelyreverse the decline in, and promote the growthof, a scientifically and technologically trained U.S.aerospace workforce. In addition, the nation mustaddress the failure of the math, science and technologyeducation of Americans. The breakdown ofAmerica’s intellectual and industrial capacity is athreat to national security and our capability to continueas a world leader. The Administration andCongress must therefore:• Create an interagency task force that develops anational strategy on the aerospace workforce toattract public attention to the importance andopportunities within the aerospace industry;• Establish lifelong learning and individualizedinstruction as key elements of educational reform;and• Make long-term investments in education andtraining with major emphasis in math and scienceso that the aerospace industry has access to a scientificallyand technologically trained workforce.Chapter 9—Research: EnableBreakthrough Aerospace CapabilitiesConclusionsThe United States must maintain its preeminence inaerospace research and innovation to be the globalaerospace leader in the 21st century. This can onlybe achieved through proactive government policiesand sustained public investments in long-termresearch and RDT&E infrastructure that will resultin new breakthrough aerospace capabilities.Over the last several decades, the U.S. aerospace sectorhas been living off the research investments madeprimarily for defense during the Cold War—intercontinentalballistic missiles, the Saturn V, spacebasedreconnaissance, the global positioning system,stealth and unmanned aerial vehicles. The challengesposed by our rapidly changing world—asymmetricthreats, international competition, environmentalxviFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Executive Summaryawareness, advances in technology—demand thatwe, like the Wright brothers 100 years ago, look atthe challenges as opportunities for aerospace andturn them into reality.Government policies and investments in long-termresearch have not kept pace with the changing world.Our nation does not have bold national aerospacetechnology goals to focus and sustain federal researchand related infrastructure investments. It lacks astreamlined innovation process to transform thoseinvestments rapidly into new aerospace products,processes and services.The United States has unlimited opportunities torevolutionize aerospace in the 21st century, openingup new markets and launching a new era of U.S.global aerospace leadership. The nation needs to capitalizeon these opportunities, and the federal governmentneeds to lead the effort. Specifically, it needsto invest in long-term enabling research and relatedRDT&E infrastructure, establish national aerospacetechnology demonstration goals, and create an environmentthat fosters innovation and provide theincentives necessary to encourage risk taking andrapid introduction of new products and services.Increase Public Funding for Long-TermResearch and RDT&E Infrastructure. TheAdministration and Congress should sustain significantand stable funding in order to achieve nationaltechnology demonstration goals, especially in thearea of long-term research and related RDT&Einfrastructure. Research areas that provide the potentialfor breakthroughs in aerospace capabilitiesinclude:• Information Technology;• Propulsion and Power;• Noise and Emissions;• Breakthrough Energy Sources;• Human Factors; and• Nanotechnology.Establish National Technology DemonstrationGoals. The Administration and Congress shouldadopt the following aerospace technologydemonstration goals for 2010 as a national priority.These goals, if achieved, could revolutionize aerospacein the next half century much like the developmentof the jet, radar, space launch, and satellitesdid over the last half-century.Air Transportation• Demonstrate an automated and integrated airtransportation capability that would triple capacityby 2025;• Reduce aviation noise and emissions by 90percent;• Reduce aviation fatal accident rate by 90 percent;and• Reduce transit time between any two points onearth by 50 percent.Space• Reduce cost and time to access space by 50percent;• Reduce transit time between two points in spaceby 50 percent; and• Demonstrate the capability to continuously monitorand surveil the earth, its atmosphere and spacefor a wide range of military, intelligence, civil andcommercial applications.Time to Market and Product Cycle Time• Reduce the transition time from technologydemonstration to operational capability from yearsand decades to weeks and months.Accelerate the Transition of GovernmentResearch to the Aerospace Sector. The U.S. aerospaceindustry must take the leadership role in transitioningresearch into products and services for thenation and the world. Government must assist byproviding them with insight into its long-termresearch programs. The industry must aggressivelydevelop business strategies that can incorporate thisresearch into new products and services. IndustryxviiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>also needs to provide input to government on itsresearch priorities. Together industry and governmentneed to create an environment that will acceleratethe transition of research into application. TheDepartments of Defense, Transportation, Commerceand Energy, NASA, and others need to work withindustry and academia to create new partnershipsand transform the way they do business.Recommendation #9The <strong>Commission</strong> recommends that the federal governmentsignificantly increase its investment in basicaerospace research, which enhances U.S. nationalsecurity, enables breakthrough capabilities, and fostersan efficient, secure and safe aerospace transportationsystem. The U.S. aerospace industryshould take a leading role in applying research toproduct development.Promise for the FutureThe aerospace industry has always been a reflectionof the spirit of America. It has been, and continuesto be, a sector of pioneers drawn to the challenge ofnew frontiers in science, air, space, and engineering.For this nation to maintain its present proud heritageand leadership in the global arena, we must remaindedicated to a strong and prosperous aerospaceindustry. A healthy and vigorous aerospace industryalso holds a promise for the future, by kindling a passionwithin our youth that beckons them to reach forthe stars and thereby assure our nation’s destiny.xviiiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Executive SummaryxixFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

PrefacePrefaceCongress established the <strong>Commission</strong> on the Futureof the United States Aerospace Industry in Section1092 of the fiscal year (FY) 2001 National DefenseAuthorization Act (P.L.106-398). The <strong>Commission</strong>was established as a Federal Advisory Committeeunder the Executive Office of the President, NationalScience and Technology Council. The purpose of the<strong>Commission</strong> is to “study the issues associated withthe future of the U.S. aerospace industry in theglobal economy, and the industry’s future importanceto the economic and national security of theUnited States.” The twelve commissioners,appointed by the President and the Congress, areexperts representing the breadth of aerospace issuesand stakeholders. The President designated theHonorable Robert S. Walker as Chairman.The <strong>Commission</strong> defines the U.S. aerospace sector asthe sum of those activities needed to develop, operate,and/or use aerospace capabilities, including theactivities of commercial enterprises and government—fromgeneral aviation to space exploration,and from civil transport to national security. Thehuman capital, national infrastructure and researchneeded to support these activities were also consideredto be key elements of the sector.From November 27, 2001, through November 18,2002, the <strong>Commission</strong> held six public meetings,received public testimony from over 60 witnesses,and issued three interim reports outlining its preliminaryfindings and recommendations. The<strong>Commission</strong> visited Europe and Asia to meet withleaders from their aerospace sectors and learn abouttheir issues and future plans.The <strong>Commission</strong> staff gathered information aboutthe aerospace sector from over one hundred government,industry, labor, university and non-governmentalorganizations. The <strong>Commission</strong> also createda website to share information about the <strong>Commission</strong>with the public. It received over 150,000inquiries during the life of the <strong>Commission</strong>.Opposite page top:<strong>Commission</strong>ers Walker, Tyson and Stevens inSoyuz Simulator, Star City, Russia.Opposite page bottom:<strong>Commission</strong> meeting May 14, 2002Department of Commerce AuditoriumxxiFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 1 – Anyone, Anything, Anywhere, AnytimeRECOMMENDATION #1: The integral role aerospace playsin our economy, our security, our mobility, and our valuesmakes global leadership in aviation and space a nationalimperative. Given the real and evolving challenges that confrontour nation, government must commit to increased andsustained investment and must facilitate private investment inour national aerospace sector. The <strong>Commission</strong> therefore recommendsthat the United States boldly pioneer new frontiersin aerospace technology, commerce, and exploration.Chapter 1Vision: Anyone, Anything,Anywhere, AnytimeThe 20th century was America’s century. Our nationthrived on previously unimagined advances inground, air and space transportation, rapidly becomingthe world’s leader in nearly every economic sectordriven by the progress of science and technology.What future does the 21st century hold for us andfor the world?The Congress gave our <strong>Commission</strong> a broad mandateto study the health of the aerospace industryand to identify actions that the United States needsto take to ensure its health in the future. The challengeof looking across military, civil and commercialaspects of aviation and space was an opportunity totake an integrated view of the aerospace sector – government,industry, labor and academia.The <strong>Commission</strong>ers represent a broad cross sectionof the stakeholders responsible for the health of theindustry and whose expertise represents the breadthand depth of aerospace issues. Drawing on theirextensive experience, and on the hundreds ofbriefings and public testimony, the <strong>Commission</strong> hasmade nine recommendations—one per chapter—that provide our guidance to the nation’s leaders onthe future of the U.S. aerospace industry. The sizeand scope of this report reflects an industry that iscomplex and interdependent.From the big picture we describe, the <strong>Commission</strong>encourages the reader to recognize the importance ofthe aerospace industry to America, and to build theconsensus we need for action.“It is scarcely possible that the twentieth century will witnessimprovements in transportation that will be as greatas were those in the nineteenth century.”Brooklyn Daily Eagle,December 30, 19001-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Aerospace is Vital to the United StatesOne hundred years ago, the slogan “Anyone,Anything, Anywhere, Anytime” would have meantleaving home when transportation permitted andthen allowing nearly a week to travel between widelyseparated American cities.Today, New York to London is a day trip. A packageof any size mailed tonight arrives tomorrow morninganywhere in the country. We fly across the world ona moment’s notice, at an altitude of 41,000 feet, onan airplane that holds 400 people, getting fed in ourseats, while watching feature-length movies, callinghome or checking our e-mail. When we arrive atour destination, our biggest complaint may be thedelays encountered getting to, from and through theairports.As America prepares to celebrate the 100th anniversaryof the Wright brothers’ historic achievement inaviation, our <strong>Commission</strong> was struck with how theU.S. aerospace industry has shaped the 20th centurynot only for America but also for the world. Indeed,U.S. leadership has been responsible for superiorachievement in many important industries, but aerospacehas been our crown jewel.Our national security, economic growth, quality oflife, and scientific achievements now depend on amyriad of aerospace products and services. Thesebenefits we enjoy as a nation are the direct result ofU.S. leadership in aerospace. Unfortunately, mostAmericans take the benefits of aerospace leadershipfor granted. Meanwhile, foreign nations clearly recognizethe potential benefits from aerospace and areattempting to wrest global leadership away from us.Nevertheless, where we have the national will, suchas in defense, we continue to be the world leader.Where we do not have the national will, such as incivil aviation and commercial space, our leadershipposition is at risk.National Security. Aerospace technologies form thestrategic and tactical backbone of U.S. military capabilities,providing global mobility, space-basedcommunications and intelligence, defense againstTHE AEROSPACE SECTOR MISSION• Develop, manufacture and/or operate systems used in theearth’s atmosphere and/or in space;• Provide services in and from the earth’s atmosphereand/or space; and• Provide the workforce and infrastructure and perform theresearch needed to develop and support the systems andservices.airborne threats, sea and aerospace control, longrangeprecision strike, and protection and tacticalmobility for ground forces. Aerospace capabilitiesprovide unique contributions to U.S. national securityas well as underwrite the capabilities of alliedcoalitions with whom we are involved in thevital work of maintaining international peace andsecurity.Economic Growth. The aerospace industry is a powerfulforce within the U.S. economy and one of thenation’s most competitive sectors in the global marketplace.It contributes over 15 percent to our GrossDomestic Product and supports over 15 million highquality American jobs. Aerospace products providethe largest trade surplus of any manufacturing sector.Last year, more than 600 million passengers relied onU.S. commercial air transportation and over 150million people were transported on general aviationaircraft. Over 40 percent of the value of U.S. freightis transported by air. Aerospace capabilities haveenabled e-commerce to flourish with overnight mailand parcel delivery, and just-in-time manufacturing.Quality of Life. Aerospace products and services areimportant contributors to both the business sectorand the quality of life of the American public. Airtravel is the fastest and safest form of personal andbusiness mobility. Personal travel now accounts formore than 50 percent of air transportation and isincreasingly accessible to all segments of Americansociety. The public continues to benefit immeasurablyfrom aerospace applications, includingimproved weather forecasting, cellular telephones,1-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 1 – Anyone, Anything, Anywhere, Anytimeprecision farming, new medical devices, and hundredsof other benefits.Scientific Achievement. Ongoing scientific discoverieshave not only enabled the preceding benefits buthave also provided fundamental knowledge of ourplanet, the universe, and the origins of life itself.Space-based observatories, such as the Hubble telescope,enable us to look back in time to the creationof the universe. The International Space Station isthe first step toward permanent international colonizationof outer space. Interpretation of climatechange, and new discoveries about the formation andevolution of our solar system now have practical relevanceand are essential elements of the nation’spolitical, cultural, and scientific agenda.Government, Industry, Labor andAcademia Each Play an Important RoleThere are four major stakeholder groups that playimportant roles in the aerospace sector—government(at all levels), industry, labor, and academia. In performingthese roles, they contribute to the threemajor segments of aerospace—national security(defense and intelligence), civil (other government)and commercial. Each segment has air, ground andspace components. All of the stakeholders need towork together in partnership to deliver quality aerospaceproducts and services to the American people.For example, in the area of air transportation, theFederal Aviation Administration (FAA) in the U.S.Department of Transportation(DOT) develops and operates thenation’s civil air traffic control systemfor military, civil and commercialaircraft operating in domesticand oceanic airspace. That systemdepends on the military’s GlobalPositioning System for navigationinformation and air- and spacebasedsensors for surveillanceinformation. It uses military, civil and commercialcommunications for ground-to-air and air-togroundcommunications. Local airport authoritiesbuild and operate the airports; while aircraft andUnfortunately, mostAmericans take thebenefits of aerospaceleadership for granted.SEGMENTS OF THE AEROSPACE SECTOR• National Security– Defense• Air (e.g., combat aircraft, airlift, unmanned aerialvehicles, guided missiles)• Space (e.g., space launch, communications, navigationand reconnaissance satellites)– Intelligence (e.g., air and space-based communications,reconnaissance)• Civil (other government)– Air (e.g., air traffic management system, safety regulation,accident investigation, environmental permitting,noise and emission standards)– Space (e.g., weather satellites, air- and space-basedearth monitoring, International Space Station, SpaceShuttle, Hubble Space Telescope, robotic missions to theplanets)• Commercial– Air (e.g., aircraft manufacturing, air carriers, generalaviation, airport operations)– Space (e.g., space launch, launch vehicles and satellitemanufacturing, telecommunications, remote sensing)airport security is provided by DOT’s TransportationSecurity Administration.The FAA also regulates and certifiescivil and commercial aircraft safetyand works with the Department ofDefense to provide the air trafficcontrollers that manage the nation’sair traffic control system. TheEnvironmental Protection Agencyregulates the environmental permittingof new runway construction.The Departments of State, Commerce andTransportation negotiate international aviationagreements, standards and regulations. The NationalAeronautics and Space Administration develops1-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>technology to improve aviation safety and reduceenvironmental impacts as well as develop tools forimproving the air traffic control system. It alsoinvests in long-term aerospace research and developmentfor the commercial aerospace industry.The commercial sector develops and manufacturesthe equipment used in the aircraft as well as theground, air and space systems used in the air transportationmanagement system. The commercial sectoralso manufactures the aircraft and operates theairlines that transport the public, business passengersand goods—both domestically and abroad.As this example illustrates, a vast array of organizationsmake up the aerospace sector, including: federal,state and local government organizations;multi-national corporations, suppliers and smallbusinesses; labor unions and trade schools; collegesand universities; professional associations and societies;and non-governmental organizations. The government(military and civil) and the commercial sectorneed to work together to provide the nation withsafe and secure air transportation anywhere in theworld.In addition, the aerospace sector generates a widerange of jobs across the fabric of the American economy.This includes jobs in: runway and airport construction;ground transportation; retail stores andrestaurants at airports; and agricultural, urban planningand weather services.The World is Changing RapidlyThe <strong>Commission</strong> has identified a number of forcesthat are changing the world and the aerospace sector.Among these changes are significant shifts in theglobal threat, mobility and environmental awareness,economic growth, governance, and technology.Understanding these changes is critical if the UnitedStates is to move forward in the second hundredyears of human flight and sustain its global aerospaceleadership position.Looking ahead, U.S. dependence on new aerospacecapabilities and technologies will only continue toFORCES OF CHANGE ON AEROSPACEHISTORICSuper Power ThreatExplosivesVehicle CentricForeign AdversariesHub and SpokeAirlinesHuman ControlSystem-by-SystemPrescriptiveSpecificationsLocal & RegionalU.S. CompaniesPredominantly WhiteMale WorkforceLarge PhysicalInfrastructureMass ProductionEMERGINGTerrorism ThreatCyber, Chemical, BioNetwork CentricInternational Partners &CompetitorsPoint-to-PointRange of Air VehiclesHuman OversightSystem-of-SystemsPerformance-basedSolutions and RegulationsNational & Global MarketsMulti-national CorporationsDiverse WorkforceVirtual & FlexibleCustom Built Atom-by-Atomgrow. Military priorities include defense against ballisticmissiles, more rapid global power projection,and more emphasis on aerospace-based communications,intelligence, surveillance, and reconnaissance,among others. Civil priorities include more effectiveand efficient air traffic management, advanced navigationaids, and other infrastructure needs. Spacewill open up new opportunities for expandinghuman presence in the solar system and enrichinglife on earth through its exploitation in such areas asenergy and materials.How the United States addresses these military, civiland commercial priorities will significantly impactthe American economy as well as our national securityposture.1-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 1 – Anyone, Anything, Anywhere, AnytimeU.S. Aerospace Global Leadership is inJeopardyOur <strong>Commission</strong> has met with many organizations—bothforeign and domestic—over the pastyear. We have gathered information on the healthand future of the aerospace industry,at home and abroad. Based on this,we believe that U.S. aerospace leadershipis in jeopardy. Here is whatwe see:At Home. The U.S. aerospace sector,most notably the commercial airsector, is seen increasingly as amature industry lacking in capital investment, innovation,and capacity for growth. Aerospace sectormarket capitalization, research and developmentinvestments and return on investments/assets aredown and consolidations are up. The U.S. is losingglobal market share and its positive balance of tradein aerospace manufacturing is eroding. Jobs aregoing overseas.The U.S. economic downturn, coupled with theadditional security costs resulting from theSeptember 11 terrorist attacks, is crippling theairlines and causing massive layoffs. Meanwhile,today’s air transportation system—based on 1960stechnology and operational concepts—is reachingcapacity, resulting in increasing delays and costs forboth passengers and shippers.We believe that U.S.aerospace leadershipis in jeopardy.Abroad. Around the world, foreign competitors areaggressively implementing policies to take globalaerospace leadership away from the United States.The European Union has a stated policy objective ofbeing the world’s leader in aerospace by 2020. Asiannations are aggressively trying to capture the U.S.systems engineering and integrationexpertise needed to develop stateof-the-artaerospace systems. Theinternational competition continuesto gain global market share incommercial aviation. Often desirable,but ever-tightening environmentalrequirements on noise andemissions are limiting worldwide flight operationsand creating international conflict. And, in spite ofexcess capacity and low demand for space launchcapabilities, foreign governments continue to subsidizetheir commercial space launch industry.The <strong>Commission</strong> finds this situation unacceptable.A Vision for AmericaWhat could “Anyone, Anything, Anywhere,Anytime” mean a century from now? A one-hoursub-orbital trip from the United States to Japan? Alunar vacation? A Martian hiking expedition?Whatever our future holds, the aerospace sector willbe at its foundation, providing our nation and theworld with the ability to move people, goods, servicesand ideas whenever they are needed and whereverthey are wanted.At the same time, government investments in longtermcivil aerospace research are static, if not decliningin real terms. The lack of sustained, long-terminvestment is stifling innovation and preventing theestablishment of new economic growth curves for airtransportation and space. While the military hasrecently received significant increases, both inresearch and development and in procurementaccounts, those increases focus on near-termcounter-terrorism and homeland security problemsand may be short-lived. The aerospace workforceand infrastructure are aging, and there is a lack ofcompelling vision or robust financial outlook todraw our youth into this important business sector.Unfortunately, the nation has not articulated a compellingaerospace vision for over forty years—notsince 1961, when President Kennedy challenged thenation to put humans on the Moon and to bringthem back safely before the end of the decade.Although spurred by the Cold War and early successesby the Soviet Union in space, the Apollo programtransformed America into a space-faringnation, while establishing us as the global aerospaceleader. The human space flight program, with eachmission more ambitious than the last, further motivatedan entire generation of the nation’s best andbrightest students to pursue careers in science andengineering.1-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 1 – Anyone, Anything, Anywhere, Anytimegoals—goals that would help to focus both publicand private sector investments and rekindle theflame of innovation and determination that oncedrove the U.S. to develop the interstate highway systemand to leave American footprints on the surfaceof the moon.ConclusionsTo achieve our vision for aerospace, the <strong>Commission</strong>concludes that:• The nation needs a national aerospace policy;• There needs to be a government-wide frameworkthat implements this policy;• The Administration and Congress need to removeprohibitive legal and regulatory barriers thatimpede this sector’s growth and continually seek tolevel the international playing field; andRECOMMENDATION #1The integral role aerospace plays in our economy,our security, our mobility, and our values makesglobal leadership in aviation and space a nationalimperative. Given the real and evolving challengesthat confront our nation, government mustcommit to increased and sustained investmentand must facilitate private investment in ournational aerospace sector. The <strong>Commission</strong> thereforerecommends that the United States boldlypioneer new frontiers in aerospace technology,commerce, and exploration.• Global U.S. aerospace leadership can only beachieved through investments in our future,including our industrial base, workforce, longtermresearch and national infrastructure.1-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility AdvantageRECOMMENDATION #2: The <strong>Commission</strong> recommends transformation ofthe U.S. air transportation system as a national priority. The transformationrequires:• Rapid deployment of a new, highly automated Air Traffic Management system,beyond the Federal Aviation Administration’s Operational EvolutionPlan, so robust that it will efficiently, safely, and securely accommodate anevolving variety and growing number of aerospace vehicles and civil andmilitary operations;• Accelerated introduction of new aerospace systems by shifting from productto process certification and providing implementation support; and• Streamlined new airport and runway development.Chapter 2Air Transportation: ExploitAviation’s Mobility AdvantageWhether aviation’s mobility advantage is used foreconomic productivity, military strength, or greaterpersonal quality of life, it is clearly in the U.S.national interest to increase both the efficiency andthe use of air transportation.Efficient air transportation is a tremendous nationalasset. U.S. airlines carry more than 600 million passengersper year. 1 General aviation aircraft carry anadditional 150 million passengers per year. 2 Cargoairlines have made overnight shipping a consumerand business utility. Airports are regional economicpowerhouses, and more than 11 million Americanjobs and $900 billion in U.S. economic activityderive from aviation’s pervasive reach. 3 Productivitygrowth and our Gross Domestic Product are directlyrelated to an efficient and growing air transportationsystem (Figure 2-1).Even before the events of September 11th, the U.S.faced serious aviation challenges.• Commercial air transport had become unpredictable,with frustrating and expensive delays.Our air traffic system—based on 1960s technologyand operating concepts—was approachinggridlock.• Economic problems of major U.S. airlines werebecoming evident.“The Wright Brothers created the single greatest culturalforce since the invention of writing. The airplanebecame the first World Wide Web, bringing people,language, ideas, and values together.”— Bill Gates,Founder, Microsoft Corporation2-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Index (1978 = 100)Figure 2-1 Demand for Air TransportationOutpaces Economic Growth400375350325300275250225200175150125100RPMs (Revenue Passenger Miles Flown)FTMs (Freight & Express Ton Miles Flown)GDP - $1996 (Real Gross Domestic Product)1978 1983 1988 1993 1998 2003Note: FedEx incorporated into DOT data in 1986Source: ATA Annual Reports and U.S. Department of Commerce(Bureau of Economic Analysis) via www.bea.gov/bea/dn/gdplev.xls• Environmental limits on noise and emissions wereimpacting worldwide flightoperations and creating internationaldisputes.• Our aerospace market leadershipwas being challenged asan explicit goal of foreigncompetitors.FTMRPMGDP• And, our country’s investmentsin long-term aeronautics research and developmentwere insufficient.The repercussions of September 11 have compoundedmost of these problems. Decreases in thedemand for commercial air travel, caused in part bysecurity concerns, additional security costs, and passengerinconvenience are crippling many airlines andcausing massive layoffs. U.S. airline losses in 2001totaled over $7 billion and are expected to grow to$9 billion in 2002. 4 Several airlines have filed forbankruptcy and more may follow, with ripple effectson the health of the entire aerospace manufacturingsector.The United States needsa 21st century global airtransportation system.As this report is written, the economic health ofAmerica’s airlines continues to decline. The<strong>Commission</strong>’s concern over these ongoing events isdeepened by the lack of consensus among the stakeholdersin the industry, the Administration, andCongress regarding the near-term solutions thatcould or should be employed to return the industryto a profitable status. There is consensus, however,that the solutions to this situation are complex andmust involve cooperation among government,industry, and labor. The airline industry is currentlysubject to a myriad of charges and fees that add upto a significant percentage of a ticket’s total cost. Infact, the airlines are subject to more federal taxes andfees than even the alcohol or tobacco industries,which have been specifically targeted for “sin taxes.” 5A healthy airline industry is a national resource thatshould be enabled and allowed to prosper.Any one of these challenges would be cause for seriousconcern. Taken together—and we do not havethe choice to ignore any ofthem—they call for immediateand bold action.The nation’s aviation system mustbe the best in the world—and wemust ensure that the disruptionof transportation and servicesthat followed the events ofSeptember 11 never occurs again.The United States needs a 21st century global airtransportation system that provides safe, secure, efficientand affordable transportation of people andThe U.S. economic downturn coupled with additionalsecurity costs resulting from the September 11 terrorist attackare crippling many airlines and causing massive layoffs.2-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility Advantagegoods in peacetime and wartime. We need a systemthat:• Enhances national security, strengthens homelanddefense, and enables civil and U.S. military aircraftto operate without undue restrictions;• Increases U.S. economic competitiveness with amore efficient, higher capacity air transportationsystem; and• Improves the quality of life of all Americans byenabling them to go where they want, when theywant.It is now clear that for too long, we have delayedthe development of policies, systems and technologiesneeded to solve our air transportation problems.For too long, we have lacked the national will necessaryto make the required investments and guidethem through to application and implementation.We should wait no longer.Objective: Delivering People and GoodsQuickly and Affordably—When andWhere NeededWe envision a future in which anywhere, anytimemobility will enable dramatic improvements in theproductivity of U.S. companies, military capabilities,and the lives of our citizens.We believe that air mobility can provide the fastest,safest, most secure, most reliable, and most affordabledoorstep-to-destination travel. Business travelersBoth point-to-point and hub-and-spokeoperations will continue to grow.should be able to plan an important 8:45 a.m. airportmeeting in any community and be sure that theflight scheduled to arrive at 8:25 a.m. will be ontime, regardless of weather, visibility, or air trafficconditions. No longer should extra hours, or even aday-before arrival, be required. Fast, safe, and securepoint-to-point transportation should be available notjust between major hub airports, but also betweenconvenient local airports via low-cost, jet air-taxis.A whole new generation of unpiloted vehicles shouldsupport our homeland security and enable revolutionarycommercial applications. Supersonic businessjets could rapidly connect growing transoceanicpartnerships. Rotorcraft should be used to efficientlyshuttle an increasing amount of passengers andgoods to locations beyond traditional airports.Lighter-than-air vehicles should provide heavy lift,security patrols, and high-altitude platforms for sensorsand communications. Orders placed on theInternet in the morning could arrive at your home orbusiness that afternoon. Our military should becapable of operating more freely in domestic airspace.Aircraft should be so quiet and produce so fewemissions that airports will become welcomed assetsin all communities.A new generation of small jets may enablelow-cost, high-speed air taxi service.2-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility Advantage(INAS) operations and to any significant developmentor certification cost efficiencies for the associatedproducts and systems; and• Current methods, policies and practices do notsupport the types of operations necessary for efficientuse of the INAS by the aviation community.To transform our air transportation system, governmentand industry must work in partnership toenable certification regulations and processes thatkeep pace with advancing technical innovations. Wemust be able to efficiently certify the airborne informationtechnologies, integrated systems, and communicationslinks that will comprise our futuresystem.The FAA is already starting to move in this directionfor certification of operators in its Air TransportationOversight System (ATOS). European regulators haveadopted a similar approach to bring advanced newaviation technologies to the marketplace rapidly. Weshould learn from the European experience andapply such concepts to FAA certification of aircraftand equipment.Even when certified for use, airborne equipment thatwould enhance the overall capacity and safety of theaviation system faces a major implementation hurdle.Because significant system benefits do not resultuntil a large number of aircraft become similarlyequipped, operators have strong disincentives to beamong the first to upgrade their aircraft. This problemmust be resolved before the nation’s air transportationsystem can be effectively modernized.We also recognize that simply moving aircraftthrough the airspace more efficiently will not beenough to accommodate America’s need for mobility.We need to be able to land at destinations wherepeople want and need to go. New runways at a handfulof key locations around the country couldincrease the capacity of our air transportation systemsignificantly. Unfortunately, the current regulatoryapproval process for runway construction is soByzantine and unpredictable that it currently takes10 to 15 years to lay just two miles of concrete at oneof our nation’s airports. 8Runways need to be developed in a timely mannerwithout lowering our environmental standards orrunning roughshod over local community concerns.Environmental studies need to be performedconcurrently rather than sequentially. They also mustfollow a timely review process to adjudicate disputes.These three key barriers—the air traffic managementinfrastructure, certification and equipage processes,and new runway and airport development—are discussedin more detail below.U.S. Air Traffic Management Infrastructure:Not Scalable and Vulnerable. Air transportation’sinherent speed advantage is being limited by airtraffic infrastructure and operating concepts notdesigned for high-volume hub and spoke operations.Steadily increasing delays in the 1990’s are evidenceof a system operating very near its capacitylimits. On-time flights fell from 81.5 percentin 1994 to 72.6 percent in 2000, despite increasesin scheduled flight times. 9 Aviation’s speed advantageis now nearly lost over shorter distances. Fortrips less than 500 miles, doorstep to destinationtravel time is between 35 and 80 miles per hour. 10Estimates of the cost of aviation delays to theU.S. economy range from $9 billion in 2000 to over$30 billion annually by 2015. 11 Without improvement,the combined economic cost of delays overWithout improvement, the combined economiccost of delays over the period 2000 to 2012 willbe an estimated $170 billion.2-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Figure 2-3 The decline in air travel and system delaysfollowing 9/11 is providing temporary capacity marginsthat should not be misinterpreted as permanent.Revenue Passenger Enplanements (Millions)*1,2001,1001,000900800700600500FAA Forecast FYO1 1,010FAA Forecast FYO2400 1990 1993 1996 1999 2002 2005 2007 2010 2013*Scheduled Revenue Passenger Enplanements (Millions), Certificated U.S. CarriersSource: FAA Aerospace Forecasts, Based on DOT Forms 41 and 298-Cthe period 2000 to 2012 will total an estimated$170 billion. 12Business globalization, economic growth, populationgrowth, and the inherent value of more efficientmobility will continually increase air travel demandand exacerbate capacity shortfalls. The decline in airtravel and system delays following the terrorist attackof September 11, 2001 is providing temporarycapacity margins that should not be misinterpretedas permanent. Growing demand will return andexpose a huge underlying problem.A typical air traffic controller can maintainawareness of 4 to 7 aircraft at a time.In addition, new air transportation services areemerging that will add even greater capacity challenges.Point-to-point, low cost airlines (Southwest,Jet Blue, and others) are growing rapidly even in themidst of currently depressed demand. The Internetand the pace of global business will continue toaccelerate airborne cargo delivery demand. Demandfor fractional ownership of small private aircraft willcontinue to increase business aviation growth. Pointto-pointair taxi services are in development by entrepreneursseeking to capitalize on new, low cost, smalljet aircraft designs. And an extraordinary variety ofunpiloted air vehicles, rotorcraft and lighter-thanairplatforms are emerging to meet a growingnumber of military—and perhaps eventually civil—applications.Just as important, the nation has new securityrequirements for the air transportation system.Surveillance systems monitoring aircraft flightpathsneed full continental coverage at all altitudes—asevere challenge for ground-based radar, even withadditional sites. New communications requirementsfor voice, data, and ultimately video connections toin-flight aircraft need to be made secure and continuouslyavailable. Commercial and private pilots needinformation about restricted airspace and protectedground sites displayed in their cockpits to avoid accidentalintrusions and potentially dangerous securityresponses. None of these capabilities are currentlyoperational.The FAA’s OEP is the only current national developmenteffort targeted to address the projected capacityshortfall. It should be fully funded. While theOEP is an evolving plan, it falls short of meeting thenation’s long-term needs. Even if all of the projects inthe OEP were completed on schedule, flight delaysin 2012 would be at least as great as they were in2000. 13 In addition, the OEP strategy and resourcesdo not accommodate the surveillance and communicationsrequirements that have emerged since 9/11.The nation’s civil aviation infrastructure is at a similarjuncture as the nation’s highway infrastructurewas in the 1950s. At that time, the nation soughtdramatically improved ground mobility for bothcivil and military needs. More country roads,2-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility AdvantageVoiceData Link• Position• Intent• WeatherFuture air traffic management operations will likely exploit a network of ground,airborne, and space-based systems to safely seperate a growing number of aircraft.more intersections and more stoplights were notacceptable solutions. The answer was to build anentirely new concept designedfor the future. The introductionof the interstate highwaysystem was a bold change andinvestment that has helpedspur the country’s growth andeconomic success for the last50 years.Today’s air traffic managementsystem for civil aviationis not much different fromthat used in the 1960’s. It isstill fundamentally based onradar tracking, reliance onanalog voice radios and theguidance of air traffic controllers. Although the systemis safe, reliable, and still largely capable of handlingtoday’s traffic flow, greater use must be made ofsatellite and other new technologies for the systemto keep pace with the projected demands of aviation.The Capstone program in Alaska, the datalinkdemonstration in Miami, and the early introductionof Required Navigation Performance (RNP)are already demonstrating the potential benefits ofThe nation needs a new, highlyautomated “Interstate SkywaySystem” that is safe, secure andefficient and accommodates thevolume and variety of civil andmilitary air transportation thatwill be demanded by the nationin the coming decades.satellites and other new technologies. In addition,new automation and display technologies, such asthe Standard Terminal Automation ReplacementSystem (STARS) and theDisplay System Replacement(DSR), provide technologyplatforms for integrating neartermsafety and capacity features.However, the aviationcommunity must also lookpast the near horizon anddevelop a future concept ofoperations and a detailed transitionplan to an air trafficmanagement system that willrequire far greater flexibilityand capacity.The nation needs a new, highly automated“Interstate Skyway System” that is safe, secure andefficient and accommodates the volume and varietyof civil and military air transportation that will bedemanded by the nation in the coming decades.The <strong>Commission</strong> sees a powerful opportunity todevelop a common advanced technology infrastructurethat forms the foundation of this new system2-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>and simultaneously enhance civil aviation, homelandsecurity and national defense. Key technologiesbeing developed by the Department of Defense(DoD), National Aeronautics and Space Administration(NASA), FAA, National Oceanic andAtmospheric Administration (NOAA) and privateindustry should be brought together to establish thatinfrastructure, including:• Secure, high bandwidth digital communicationsystems replacing today’s analog voice radios.• Precision navigation reducing position errors forall aircraft to within a few meters.• Precision surveillance systems accurately locatingall aircraft, and automatically detecting any deviationsfrom an approved path within seconds.• High-resolution weather forecasts creating4-dimensional (space and time) profiles, accuratefor up to 6 hours for all atmospheric conditionsaffecting aviation, including wake vortices.• Highly accurate digital data bases depicting terrain,obstacle, and airport information no matterwhat visibility conditions exist.All of this information should be readily accessibleand shared among all intended users through a commoninformation system. In short, the nation needsan air traffic system of “networked precision.”With the notable exception of accurate short-termweather prediction and wake vortex forecasting,WHAT WILL THE “NEW” AIRLINE OPERATIONS LOOK LIKE IN10 YEARS?The answer is… no one knows. Hub and spoke airlines maybecome more cost efficient. Low cost carriers may dominate. Newsmall aircraft markets may open up. Or maybe not.We need a system so robust and adaptable that we don’t need toguess at what the future will look like.many of the basic technologies for these capabilitiesexist. The DoD, in particular, has developed andused such systems for many years. This investmentand experience should be aggressively exploited bythe civil sector and supported by the DoD.Each of the above capabilities would improve aviation.It is their integrated application, however, thatwould enable a revolution in air mobility. Conflictfreepathways for the most efficient and weather-saferoutes could be automatically defined and approved.Closer—and safer—traffic spacing would use availableairspace and parallel runways much moreefficiently. Slot departure and arrival scheduleaccuracy could be reduced to less than30 seconds. Small unpiloted vehicles could safelymix with piloted traffic. Poor visibility could beeliminated as a capacity or safety restriction at anypublic airport. Air traffic controllers would manageBUT ISN’T OUR ATTENTION FOCUSED ON FIGHTING A WAR ONTERRORISM?It is—and aerospace will help win that war.But, the <strong>Commission</strong> also notes—even in the midst of tremendousnational crises—strong U.S. leaders have always been able to seethe long-term picture and invest in the future.Future air traffic control concepts can be exploredthrough computer simulation.In 1863, at the height of the Civil War, Abraham Lincoln charteredthe construction of the first transcontinental railroad.2-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility Advantageoverall traffic flows in a highly automated systemrather than direct the movement of every flight.The design, development, and implementation ofthis next-generation ATM system will be an exceedinglycomplex challenge. While the basic systemcomponents can be readily identified, their integrationwith new air traffic operating concepts and procedureswill require extremely careful development,test, and evaluation. Major long-term investmentsand commitment will be required from theAdministration and Congress. Government andindustry, civil and military leadership, need to worktogether to overcome not only technology issues butalso disagreements among aviation’s many interestgroups.A federal inter-departmental group, working collaborativelywith industry, labor, and other stakeholdersshould be formed to plan this new, highly automatedair traffic management system. The new systemoperational concept should provide operational benefits,harmonize with the international community,and exploit aircraft performance capabilities. Thenew system should not merely be an extension of thetraditional concepts based on ground navigation systems.The plan should take an integrated systemsapproach to achieving improved operational performanceand should address needed changes ineverything from policies, procedures, and airspacedesign to the procurement of hardware and software.Initial implementation efforts should focuson changing those federal policies and proceduresthat will provide early and significant operationalbenefits with little or no added out-of-pocket investments.The FAA should clearly define requirementsand timelines for Required Navigation Performanceand standardize precision instrument approachprocedures. Additionally, it should focus on operationallyexploiting available technologies likeAutomatic Dependent Surveillance-Broadcast (ADS-B)—a data link that provides situation and intentinformation to all pilots and controllers in a geographicarea—as well as capitalize on DoD researchand development investments that have already producedapplicable system capabilities.Certification Process and Airborne Equipage:Innovation NeededCertification Process. FAA certification is the gatethrough which all new aircraft technologies mustpass before entering the national airspace system.The bulk of certification regulations and processeswere written and developed in an era whose time haspassed and have not kept pace with new technologies.The reality of today is that systems are moreintegrated and rely more heavily on software thancurrent regulations and certification processes canadequately handle. FAA regulations and standardsare mostly designed for components, boxes, and subsystems,not for integrated aviation systems.As a result, an applicant for a new design that incorporatesnew technologies may have to design andbuild a system and propose its certification basisprior to an FAA determination as to whether such anapproach is viable. Certification for new technologieshas, therefore, become highly uncertain in time,cost, regulatory baseline, and varying FAA regionaloffice interpretations. Innovations are slowed furtherif, because of the uncertainties, manufacturers and2-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>airlines hesitate to proceed with innovative technologyor operational developments that are not alreadycovered by existing certification rules. The regulatoryprocess needs to be streamlined to enable timelydevelopment of regulations needed to address newtechnologies.Just as certification regulations and processes havefailed to keep pace with the state of technology,so too have procedural regulations. Forexample, over sixty years ago, a margin of safetyfor landing distances was applied to commercialairplanes. The procedural regulation required anaircraft to be able to land on sixty percent of theavailable runway. Sixty percent was picked because,at the time the regulation was developed, little wasknown about runways, or rubber, or braking systemperformance. No standardized braking tests or manufacturingprocesses existed. For all these reasons, thesafety cushion was made very large. Today, despitethe fact that much more is known about system andlanding performance, the 60percent rule has not changed. 14As a result, aviation’s operationalprocedures are not takingfull advantage of progress in theknown performance of aviationsystems.The <strong>Commission</strong> thereforebelieves that a new approach tocertification is needed to fosterinnovations that will takeadvantage of a constantly improving knowledge baseand new technologies that make aviation safer, moresecure, and more efficient.Current certification processes ensure bit by bit thata design complies with specific regulations coveringeach piece of hardware or software. Instead, the FAAshould focus on certifying that manufacturingorganizations have internal design, simulation, testing,and quality assurance processes for assuring theirproducts comply with all applicable regulations andare delivered in a condition for safe operation. Suchan approach would allow FAA personnel to moreeffectively focus on the most critical safety aspects ofA fundamental barrier toprogress is the cost and lackof operator incentivesfor implementing systeminnovations.an overall system and safety oversight. Regulationscould also better keep up with technological progressby becoming less design-specific and more safetyprocessfocused. The FAA’s ATOS, mentioned earlieras a model for flight standards inspections, is a goodexample of such an approach. These principlesshould be examined for extensionand application to hardwareand software certification.The Equipage Problem. Asnoted previously, many of thetechnical capabilities to create anext generation air traffic controlsystem already exist, suchas digital data links, GlobalPositioning System (GPS),ADS-B, advanced flight deckdisplays and digital surface mapping. In fact, thesecapabilities have existed for many years, some evendecades. But, the civil aviation system has not beenable to incorporate such information-age innovationsinto its system infrastructure.One reason for the extremely slow evolution is thecertification process and the inherent cautiousness ingovernment and industry over introducing unforeseenrisks into a system where safety is a prime concern.Another reason is a challenging labor environmentwithin the FAA air traffic organization, wheresystem modifications can become entangled withunion negotiations. While these issues are quite real,2-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility Advantagethe move to a new air traffic management infrastructureis widely seen as a national necessity by nearly allparties. Yet, system progress comes at a glacial pace.Another, more fundamental barrier to progress is thelack of operator incentives for implementing systeminnovations.Traditionally, the federal government purchases,operates, and maintains ground and space-basedcommunication, navigation, and surveillancesystems. Municipalities, with support from federaland state governments, develop and operate airports.Airlines and general aviation operators, however,must purchase and maintain all their aircraft equipmentwith no federal support.Thus, the FAA can design, purchase, and install onlythe non-airborne portion of a system-wide modernization.Airports can do the same only for the groundportion of local improvements. However, the futureair traffic architecture must be an interconnected systemof information exchanges and distributed decisionmaking among all parts of the network, includingevery aircraft. Aircraft operators must equip withcompatible hardware and systems in order for amodernized air traffic network to succeed.Unfortunately, individual airlines and general aviationoperators who are expected to pay for aircraftequipage have neither the incentives nor the moneyto do so. Voluntary airline equipage for air trafficcontrol modernization has always been a problem.From an operator’s view, the reason is simple: economicsand risk. “Early equippers” of upgraded airtraffic systems technologies take on a number ofadditional risks because:• The system may not work as needed;• Early devices and installations are more expensive;• Proposed standards or requirements may change;and• Better technology may overtake early systems.Most important, “early equippers” generally receivefew operating efficiency benefits until a critical massof similarly equipped aircraft make air traffic operationalchanges and system efficiencies practical.Unilaterally equipping a few aircraft with digital datalinks, GPS position reporting, and/or reduced wakevortex designs provides no significant individualoperator benefits even though they would providemajor capacity and safety benefits if installed systemwide.“Late equippers,” on the other hand, face few of theearly system development, design standard, cost, orinstallation risks. And, if the critical mass has alreadyformed to create air traffic efficiency changes, lateequippers accrue immediate operational benefits.The results of this situation are disastrous for modernization.Individual airlines and operators clearlyfind it in their best interests to delay equipage, especiallygiven their current weak financial situation. Asa result, system developments are continuouslydeferred. Just as damaging, avionics suppliers do notaggressively develop innovative products for networkimprovements when there are no reliable customers.The circle is vicious and quite real.The FAA currently has two regulatory levers it canuse to address the equipage problem:• Establish a rule mandating equipage. While rulemakingcan be very effective, it has not beenaggressively employed for operational as opposedto safety improvements. Rulemaking is typicallyused only when a broad new capability is clearlyready and development risks are low. It is subjectto a legal process that can take significant time,and is subject to “least common denominator”2-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>pressure to accommodate weaker or more reluctantparticipants. Rulemaking is also generally not “targetable,”and seeks to cover a broad range of usersin a single action. As a result, if a significant numberof users strenuously object, the rule may not beissued or its deadline for implementation isdelayed.• Offer equippers various levels of operational benefits.These incentives could include preferred airspace,routings, runway access, or others. Operationalbenefits are limited to those aircraft or operatorsthat can clearly exploit the advantage. Importantly,the payback for a given operational advantage istypically best seen from a total system perspective,not an individual operator perspective.Operational benefits do not typically save enoughfuel or time for an individual operator that theyquickly pay for themselves. Equipage proposalswith such multi-year paybacks are generallyrejected by a typical airline. It is also not reasonableto expect that a small aircraft operator would equipwith avionics that exceed the cost of his or her aircraft.These two levers are insufficient to motivate theaggressive operator investments in airborne equipmentneeded for system-wide infrastructureimprovements. The <strong>Commission</strong> sees the need formore direct government action and support to overcomethe equipage problem.THE “EARLY IMPLEMENTER” CHALLENGE IS NOT UNIQUE TOAVIATIONCities and towns that desire real estate development in an area notserved by existing roads, sewers, electrical, and water utilities recognizethat the first builder in an area will not pay for common infrastructureif subsequent builders do not also share the cost.Otherwise, all developers would wait for someone else to build first.Municipalities often overcome this problem by overseeing the reimbursementof the developer who first installs the required infrastructurewith fees collected from subsequent builders.The <strong>Commission</strong> believes that airborne equipmentneeded for safe, secure, and efficient system-wideoperations should be deemed part of the nationalaviation infrastructure. The FAA should be encouragedto also utilize a third incentive lever to supportand motivate operator equipage. The form of thatsupport could be any of the following:• Full federal funding for system-critical airborneequipment. Even if the government fully financedthe communication, navigation, and otherairborne equipment required for a next-generationATM network, the total cost would be well belowthe costs of system delays and inefficiencies to thenational economy. In addition, it might cost lessand provide additional security to equip the civilfleet with modified military technology thanit would to retrofit military aircraft with civilsystems.• Partial equipage funding. At less cost to the governmentthan full funding, a defined credit in theform of a voucher or tax incentives could partiallyoffset the initial cost of equipage. The governmentwould need to estimate the voucher value necessaryto motivate early adaptation by a critical massof aircraft operators.• Auctioned investment credits. The governmentcould motivate a limited number of installationswith a credit voucher whose value is determined byan auction process. Airlines or operators couldcompetitively bid on the offered support level untila pre-determined number of users committed toearly equipage. Thus market forces would determinethe minimum level of federal funding supportneeded to overcome the “early equipage”problem.The <strong>Commission</strong> believes that the equipage problemis real, critical to future increases in the nation’s airtraffic capacity and must not be ignored. It makes nosense for federal and local governments to invest billionsof dollars in modernizing the air traffic systeminfrastructure if a required piece of that infrastructureis left for voluntary funding by private entitiesthat have little or no incentive to invest.2-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility AdvantageNew Runway and Airport Development: TakesToo Long. Meeting the nation’s demand for airtransportation, and fully exploiting its benefits willalso require a ground infrastructure that accommodatessignificant traffic increases. The airport infrastructureis a national asset that needs system-levelattention. Many of the nation’s major airports arecurrently operating near or at their capacity limitsduring large portions of the day (Figure 2-4). Moresignificantly, airport delays begin to grow rapidlywhen the demand/capacity ratio reaches just 60 percent.15 Although U.S. air passenger traffic hasincreased 40 percent since 1991, only 7 new majorairport runways (an approximately 5 percent increasein the number of runways at the top 50 airports) anda single new major airport were constructed duringthat time. The Air Transport Association has notedthat during that same time, 47 sports stadiums wereconstructed in those cities with the top 30 mostdelay-prone airports.The environmental approval process, and in particular,objections to aircraft noise and emissions are theprimary barriers to building new airports or addingnew runways at existing airports.The Approval Process. While many airports aroundthe country have realized the need to add capacity,construction projects had been held up due to a lackof financial investment by the federal governmentand an inefficient approval process. With the passageof the Aviation Investment and Reform Act for the21st century (AIR-21) in 2000, airports now have anincreased and dependable funding stream. Butlengthy and duplicative environmental reviews ofFigure 2-4 An Increasing Number of MajorAirports Are Nearing Capacity Limits.AirportLAXATLSTLORDSEAMSPLGASFOPHLEWRIADDTWDFWCLTPITJFKBWIDENAirportDelays BecomeDisruptive0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2Demand/Capacity RatioSource: FAA/George L. Donohue, Aviation Systems Engineeringproposed projects remain. As stated earlier, evenwithout opposition, a review for a proposed airportconstruction project can take 10 years. In manycases, the reviews take 15 to 20 years, and some casesgo on for over 20 years.Given the importance of air mobility to the nationalinterest and the integral role that major airportsplay in providing that mobility, this review timeframeis simply unacceptable. It can and should besignificantly shortened through federal legislationthat includes the following considerations:• The federal government should recognize thatmajor airports are an instrumental part of thenational air transportation infrastructure. A balanceof national need with valid local prioritiesmust be maintained.Figure 2-5 Large Hub Airports Opened Since 1990 Figure 2-6 Major New Runways Built Since 1990New Airports Opened3210Denver (DEN)*91 92 93 94 95 96 97 98 99 00 01New Runways at Large Hubs3210LAS DTW SLC DFW MEM* PHL PHX91 92 93 94 95 96 97 98 99 00 01Note: Replaced Stapleton Airport; features five runwaysSource: FAA / Air Transport Association*MEM is a medium hub, but has a substantial cargo operationSource: FAA / Air Transport Association2-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>• The FAA should assume a lead agency role fordeveloping and implementing a coordinated airportcapacity project review process across the government.Working with aviation stakeholders, aninter-agency group should be established todevelop a national plan for airport improvementsthat would identify critical airport capacity projects.The FAA and other federal agencies shouldexpedite their environmental reviews as a nationalpriority for these critical airport capacity projects.Analyses, permits, licenses, and approvals shouldbe conducted concurrently to the maximum extentpossible.• Under current law, the FAA and other agenciesmust study whether a reasonable alternative existsto a proposed capacity project. At major airportswhere delays are significant and affect the functioningof the entire national airspace system, itshould be clear that no alternative other thananother capacity project at that same airport is areasonable solution. The FAA Administratorshould be able to declare an “alternatives analysis”unnecessary for projects at designated criticalairports.• Existing environmental laws and regulationsshould not be weakened or changed. Argumentsfor or against a particular project should be consideredcarefully and publicly, but unending delaysthrough court challenges should be minimized.Reasonable judicial review should be conducted inthe U.S. Court of Appeals or higher courts.The <strong>Commission</strong> believes the President has taken asignificant step toward implementing these actionswith an Executive Order signed on September 18,2002. The <strong>Commission</strong> believes Congressionalaction to support streamlined airport and runwaydevelopment should now follow.Aircraft Noise and Emissions. Aircraft noise remainsthe single most significant local objection to airportconstruction. Although airplanes are much quietertoday than they were in the past, objectionable noiselevels still depress local real estate values and impactthe quality of life in localities receiving the economicbenefits of air transport.Aviation is a truly global enterprise. Recognizingthis, the United Nations established the InternationalCivil Aviation Organization (ICAO) todevelop international aviation standards and recommendedpractices.ICAO standards, a vital element of a balancedapproach to environmental management, are set onthe basis of “best available” aircraft noise and emissionstechnology. The steady progress in setting morestringent environmental standards reflects thetremendous community benefits achieved by the aviationindustry through reduced aircraft noise andemissions. But, these accomplishments have onlybeen possible because of historically well-fundedpublic-private NASA/industry research and developmentpartnerships responsible for the developmentof advanced technologies. Today, these vital programsare threatened by critical under-funding.The substantial reduction in local noise resultingfrom the phase-out and conversion of noisier Stage 2aircraft is a significant accomplishment for thenation. Of the 7.5 million people affected by unacceptable(greater than 65 dB Day-Night Level(DNL)) noise levels in 1975, less than 400,000 areaffected today. 16 Airlines spent over $4 billion toachieve this end. 17 But, more remains to be done.Figure 2-7 Computer Model Contours of NoiseBoundaries Around Chicago’s O’Hare Airport ShowProjected Impact of Reducing Aircraft NoiseSource: NASABaseline(55 dB DNL)-10db-20dbAirport Boundary2-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility AdvantageWith adequate research, major noise reductionbreakthroughs may be possible. NASA’s recentlyreleased Aeronautics Blueprint highlights a combinationof engine, aerodynamics, materials, flight systems,and other technologies that offer the hope ofreducing noise by 90 percent (10 dB). 18Yet, despite continued existence of noise problemsand the possibility of significant improvements, thefederal government invests only $20 million per yearin basic, pre-competitive research to reduce engineand airframe noise. 19 Current funding levels are inadequateto achieve the long-term FAA goal of reducingcommunity noise exposure to the confines of theairport, a goal dependent on NASA research anddevelopment, the seed corn of a viable U.S. commercialaviation industry.Emissions problems are similar to the noise problem,and the two are very interrelated. The local communityeffect from oxides of nitrogen (NOx) and highaltitude effect from carbon dioxide are becominglimiting factors to aviation’s growth. Solutions toreduce noise and carbon dioxide often cause the productionof nitrogen oxides to increase, creating a significantchallenge to reducing noise and emissionssimultaneously. In addition, carbon monoxide,unburned hydrocarbons and particulate matter,water vapor, sulfur oxides, and aromatics must alsobe reduced, but face similar trade-off challenges.NASA research and development programs aim toovercome these severe challenges.Power, propulsion, and fuel design breakthroughs areachievable. However, the national research anddevelopment effort is exceedingly small compared tothe magnitude of the problem and the payoff for itsmitigation. The <strong>Commission</strong> believes that additionalgovernment investment in long-term research isimperative to solve the serious challenges of aircraftnoise and emissions. Chapter 9 of this report furtherdescribes these needs.ConclusionsThe <strong>Commission</strong> concludes that superior mobilityafforded by air transportation is a huge national assetand competitive advantage for the United States.Because of the tremendous benefits derived from ahighly mobile citizenry and rapid cargo transport,the United States must make consistent and significantimprovements to our nation’s air transportationsystem a top national priority.Transform the U.S. Air Transportation System asa National Priority. We need national leadershipto develop an air transportation system that simultaneouslymeets our civil aviation, national defenseand homeland security needs. Today, leadership andresponsibility are dispersed among many federal,state and local organizations that impact the aviationcommunity. In the federal government, this includesthe Department of Transportation’s Federal AviationAdministration, NASA, Environmental ProtectionAgency, and the Departments of Defense, Commerce,and State.Often these departments and agencies deal with aviation-relatedissues independently, without adequatecoordination, and sometimes at cross-purposes. Allhave separate authorizing and appropriating Congressionalcommittees. State and local governmentsalso play important aviation development roles andprivate industry has numerous near-term competingforces that often delay longer-term solutions. Onlystrong federal leadership, aimed at a national objective,can sustain a transformational effort.2-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Deploy a New, Highly Automated Air TrafficManagement System. The core of an integrated21st century transportation system will be a commonadvanced communications, navigation and surveillance(CNS) infrastructure and modern operationalprocedures. The system needs to allow allclasses of aircraft, from airlines to unpiloted vehicles,to operate safely, securely, and efficiently from thousandsof communities based on market size anddemand. It also needs to be able to operate within anational air defense system and enable military andcommercial aircraft to operate around the world inpeacetime and in war.As a first step, the <strong>Commission</strong> recommended in itssecond Interim Report “the Administration shouldimmediately create a multi-agency task force withthe leadership to develop an integrated plan to transformour air transportation system.” This task forceshould be immediately assigned the leadership roleto establish a Next Generation Air TransportationSystem Joint Program Office that brings togetherneeded participation from the FAA, NASA, DoD,Office of Homeland Security, NationalOceanographic and Atmospheric Administration,and other government organizations. Within a year,the Joint Program Office should present a plan to theAdministration and the Congress outlining the overallstrategy, schedule, and resources needed todevelop and deploy the nation’s next generation airtransportation system.As this transformational plan is developed, the FAAmust continue to implement the OperationalEvolution Plan. FAA and NASA must also continueto perform critical long-term research. The<strong>Commission</strong> also recommended in Interim Report#2 “the Administration and Congress should fullyfund air traffic control modernization efforts in fiscalyear 2003 and beyond, and prioritize FAA andNASA research and development efforts that are thecritical building blocks for the future.”Provide Certification Process and AirborneEquipage Innovation. The <strong>Commission</strong> calls for anew approach to the regulation and certification ofaircraft technology, processes and procedures. Thegovernment also needs new mechanisms to acceleratethe equipage of aircraft in order for the nation torealize broader system benefits. Airborne equipmentneeded for safe, secure, and efficient system-wideoperations should be deemed to be part of thenational aviation infrastructure.• Shift from product to process certification. Instead ofa focus on rules and regulations that dictate thedesign and approval of each particular piece ofhardware or software, the FAA should focus oncertifying that design organizations have safetybuilt into their processes for designing, testing,and assuring the performance of an overall system.• Solve the airborne equipage problem. The government,in partnership with industry, must be moreresponsible for airborne equipment developmentand continuous modernization. In addition to currentregulatory and operational incentives, thegovernment should consider options to motivate acritical mass of early equippers, including full federalfunding for system-critical airborne equipment,tax incentives or vouchers for partial fundingsupport, and competitively auctioned creditvouchers.Streamline Airport and Runway Development.The FAA and other agencies should expedite newrunway and airport development as a national priority.Further, because aircraft noise and emissions constraincapacity growth, additional governmentinvestment in long-term research in this area isimperative.2-16FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 2 – Air Transportation: Exploit Aviation’s Mobility AdvantageAct Now. The <strong>Commission</strong> sees compelling reasonsfor the Administration and Congress to take immediateaction. First, new homeland security anddefense requirements call for system capabilities notpreviously anticipated. Second, an entirely new levelof transportation efficiency and national mobilitycan be enabled by more flexible, scalable, higher precisionaviation operations. Third, inherently longlead times required for major aviation changesdemand preparation far ahead of anticipateddemand. And fourth, there could be no betterAmerican response after 9/11 than to rebuild theU.S. air transportation system dramatically betterthan it was before.As we approach the 100th anniversary of poweredflight, the <strong>Commission</strong> urges the President andCongress to recognize a pressing national need, andpowerful opportunity, and act now to create a 21stcentury air transportation system.RECOMMENDATION #2: The <strong>Commission</strong> recommendstransformation of the U.S. air transportationsystem as a national priority. The transformationrequires:• Rapid deployment of a new, highly automatedAir Traffic Management system, beyond theFederal Aviation Administration’s OperationalEvolution Plan, so robust that it will efficiently,safely, and securely accommodate an evolvingvariety and growing number of aerospace vehiclesand civil and military operations;• Accelerated introduction of new aerospace systems,by shifting from product to process certificationand providing implementation support;and• Streamlined new airport and runway development.2-17FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special SignificanceRECOMMENDATION #3: The <strong>Commission</strong> recommends that theUnited States create a space imperative. The Department of Defense,the National Aeronautics and Space Administration and industry mustpartner in innovative aerospace technologies, especially in the areasof propulsion and power. These innovations will enhance our nationalsecurity, provide major spin-offs to our economy, accelerate theexploration of the near and distant universe with both human androbotic missions, and open up new opportunities for public spacetravel and commercial space endeavors in the 21st century.Chapter 3Space: Its SpecialSignificanceNations aspiring to global leadership in the 21st centurymust be space-faring. Freedom, mobility, qualityof life and the ability to do the difficult thingsthat define leadership will be enhanced and discoveredon the space frontier. For the vision and thecommitment that leadership requires, space is animperative.The United States should recognize the space imperativefrom its own history. The global legacy weachieved in the latter half of the 20th century was inlarge part tied to space successes. Humans on themoon, orbiting in space laboratories, space sciencediscoveries and profound new military capabilitiesall played a role in showing the world our technologicalprowess and helped us succeed in Cold Warcompetition.program. Yet Japan, China, Russia, India andFrance, to name a few, see space as a strategicand economic frontier that should be aggressivelypursued.So should we.Objective: The Ability to Do Great ThingsThe challenge we face on the space frontier is tobuild from dreams and concepts, to new technologiesand destinations, to the political will to moveforward. For nearly two decades, we have been satisfiedto limit our dreams, rely upon proven technologiesand invest little in building public or politicalsupport for space initiatives. But the potential to dogreat new things has never been clearer.Today, however, a sense of lethargy has infected thespace industry and community. Instead of the excitementand exuberance that dominated our earlyventures into space, we at times seem almost apologeticabout our continued investments in the spaceThe truth is that the limitations to space progress arereal: significant expense to get to orbit, a hostile andhighly limited environment once on-orbit and a lackof strong public advocacy for moving ahead. Wemust overcome these limitations and move forward.3-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>IssuesAccess to Space: Cost to Orbit is HighClear consensus exists in the space community thatreducing the cost to orbit is an essential ingredientfor progress. The expense per pound of liftinghumans, cargo and satellites into orbit has effectivelylimited us to utilizing space for only the most criticalnational missions. The result has been a narrowing,rather than a broadening, of our space ambitions.Decreasing launch costs has been a fundamental goalfor the space launch industry. However, littleprogress has been made to date. A heavy liftExpendable Launch Vehicle (ELV) costs approximately$10,000 per pound to orbit. The SpaceShuttle, although originally designed to reduce costsper pound to orbit from $10,000 to $1,000, neverachieved its promised cost savings. 1Survey data indicate that launch demand has significantlydecreased. We would expect that significantlylowering the cost to orbit might reverse this trend. AISSUES• Access to Space• Propulsion for the Solar System and Beyond• Power for Space Operations• National Security• Space Launch Infrastructure• Commercial Space• Sciencesecond or third generation launch vehicle based onnew, advanced technology could phase out today’sexpensive ELV and Space Shuttle operations andopen new commercial markets. Associated technologycould also: improve control center operationsand operational security; reduce environmental concerns;and mitigate launch, flight and recovery operationaland environmental constraints. The operationalmodel for a next generation space launchvehicle needs to move incrementally closer to theturnaround capabilities of today’s passenger airlineoperations.Figure 3-1 NASA Derived Cost Estimate per Pound to OrbitAVERAGE / MEDIAN US LAUNCH COSTS PER POUNDVehicle LEO (lb) GTO (lb) Cost Median ($M) Avg. LEO Cost/lb Avg. GTO Cost/lbPegasus XLMinotaurAthena ISSLV TaurusTaurus 2X10Titan IIAthena IIDelta II 73XXDelta II 74XXDelta II 79XXDelta II 79XX HeavyAtlas IIADelta IIIDelta IV MAtlas IIASAtlas IIIAAtlas IIIBAtlas V 400Delta IV M+Atlas V 500Titan IVBDelta IV HAverage Cost/lbMedian Cost/lb9751,4061,8042,9043,0364,1804,5436,1517,04211,22413,51716,09518,23818,92018,96019,00823,58027,50029,92044,11047,69656,760N/AN/AN/A880986N/A1,2981,9602,5083,4834,8076,7458,3828,5808,1828,8819,84911,00013,46418,04019,00027,280$25$13$17$19$34$35$24$56$56$63$70$80$85$97$98$95$95$99$97$114$400$155$25,652$8,892$9,146$6,543$11,199$8,373$5,283$9,023$7,881$5,613$5,142$4,970$4,661$5,127$5,143$4,972$4,008$3,582$3,242$2,584$8,386$2,731$6,916$5,213N/AN/AN/A$21,591$34,497N/A$18,490$28,313$22,129$18,090$14,458$11,860$10,141$11,305$11,917$10,640$9,594$8,955$7,204$6,319$21,053$5,682$15,124$11,888LEO: Low Earth OrbitGTO: Geostationary Transfer Orbit3-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special SignificanceReducing the cost to orbit could change the economiccalculus of space. The use of revolutionaryreusable launch vehicles (RLV) is well within ourgrasp in this decade. Developing the next generationof RLVs (in low, medium and heavy lift configurations)could dramatically improve both the affordabilityand reliability of access to space. The NationalAeronautics and Space Administration (NASA) andDepartment of Defense (DoD) have begun discussionsto achieve this goal.Space ShuttleLaunch from theKennedy SpaceCenter, Florida.NASA’s Space Launch Initiative (SLI) is a fundeddevelopment effort intended to look at more reliable,cheaper and more frequent access to space throughthe development of a second generation reusablelaunch system. However, to date, NASA’s SLI programdoes not include funding for demonstrationflights.Whereas the National Aerospace Initiative (NAI), ajoint DoD and NASA program, is focused onexploiting and developing new and innovative technologicalcapabilities in the areas of highspeed/hypersonics,access-to-space and space technology.The NAI will develop and demonstrate aportfolio of critical technologies that will enable theachievement of many common DoD and NASAgoals such as: supersonic/hypersonic capabilities;safe, affordable, launch on demand space access; andPrototype of a NASA X-38 Crew Return Vehicle.responsive payloads for quick deployment andemployment of space capabilities.Integrating the SLI and NAI initiatives couldprovide the nation with RLV technologies needed toenable the development of revolutionary air andspace systems. The DoD could contribute significantlyto air-breathing propulsion technologies, servingair mission needs and simultaneously providing afirst stage platform for an RLV. NASA is workingtoward a next generation spacecraft that could providea powered crew vehicle as a second stage of atwo-stage RLV.“Attempts at developing breakthrough spacetransportation systems have proved illusory.”<strong>Commission</strong>er Buzz Aldrin3-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The <strong>Commission</strong> believes that the nation wouldbenefit from a joint effort by NASA and DoD to significantlyreduce the cost and time required to accessspace by integrating NAI and SLI. Such an effortwould not only build on the capabilities of bothorganizations but also provide the “critical mass” offunding needed to create the necessary breakthroughsin propulsion.Plasma propulsionwill helpreduce transittimes throughthe solar system.Propulsion for the Solar System and Beyond: InNeed of BreakthroughTo date, all spacecraft that have left Earth have simplycoasted to their destination on ballistic trajectories.After they leave low-Earth orbit, their enginesgenerally do not turn on again until it is time to slowdown at the destination. In some cases the spacecraftgain additional energy along trajectories that “slingshot” them past other planets. Transit times will besignificantly reduced if fuel were burned along theway, vastly increasing the craft’s speed.Over the longer term, investment in the developmentof more advanced propulsion systems (e.g.,nuclear—by splitting or fusing atoms—to producehot plasmas, matter/anti-matter annihilation reactions)will lead to faster transit times, improve operationalflexibility and reduce the radiation impactsfor long duration human exploration missions.Nuclear energy could produce a high-temperatureplasma that would potentially reduce the transit timefor a manned mission to Mars from seven or eightmonths to about twelve weeks. Since powered flightwould be much less dependent on orbital mechanics,the crew would also benefit from having the flexibilityto return to Earth on their own schedule. A successfulplasma design would reduce transit times andalso result in a tremendous advantage for spacecraftpayloads since less weight would have to be allottedFigure 3-2 Example Transit Times toMars for Different Propulsion TypesDestinationMarsMarsMarsPropulsionChemical / Gravity AssistNuclear / PlasmaAntimatterTransit Time - One Way28 - 32 weeks12 weeks6 weeksfor fuel. NASA and the Department of Energy(DOE) currently conducts antimatter research.Although matter/antimatter reactions as a source ofpropulsion are far from being reality, the initialresearch results are encouraging. See Chapter 9 foradditional information on propulsion.The <strong>Commission</strong> believes that, once the time toexplore many parts of the solar system has beenreduced to reasonable durations—months instead ofyears—the political imperative to do so will follow.Power for Space Operations: A Limiting FactorWhat limits the performance of most spacecraft,including the International Space Station (ISS), isthe amount of power that can be generated fromsolar energy. Increasing available power, both onorbit and beyond orbit, could expand opportunitiesin military, civil, and commercial space applications.The <strong>Commission</strong> believes thatthe nation would benefit from ajoint effort by NASA and DoD tosignificantly reduce the cost andtime required to access space.Source: NASA3-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special SignificanceNational Security: Not Capitalizing on Space-BasedOpportunitiesThe U.S. military continues to benefit from a generationof satellites that were built during the ColdWar. Advanced technologies, however, will open upopportunities for a new generation of space capabilities,such as laser communications, space-basedradar and on-demand access to space. These wouldtransform military operations while simultaneouslyaddressing other national needs, such as homelanddefense and air transportation.International Space Station, October 16, 2002.The concept of using solar power satellites to beampower to Earth has been a distant dream. But, theuse of such satellites as a “refueling station,” to collectsolar energy and beam it to on-orbit assets isworth exploring.Solar or nuclear power stations capable of supplyingon-orbit power could also have commercial potential.Selling power as a space utility is the kind ofbusiness arrangement that the space community haslong needed. The enhanced power would prove to bea huge benefit to ISS. It could provide sufficientenergy to conduct commercial activities notnow possible within the station’s limited powercapabilities.Military Use of Space. The military will increasinglyrely on space-based communications, navigation,surveillance and reconnaissance systems for:moving its forces around the world; conductingglobal, precision power projection operations; anddefending the homeland. The military and intelligencecommunity will also use global reconnaissanceand surveillance systems to continuously monitorthe intentions and actions of terrorists, rogue nationsand emerging world powers. The civil aviation systemshould use these same capabilities to improvedramatically the safety, security and capacity of thenation’s air transportation system.The Titan IVB isthe largestunmanned spacebooster used by theAir Force.In addition, others looking to commercial use ofspace could design their own free-flyer modulesequipped with an antenna to receive power, thusneeding little more than an emergency backup capabilityon board. See Chapter 9 for additional informationon power.The <strong>Commission</strong> believes that once there is affordable,abundant power in orbit, public and privateinvestments in space systems and exploration willfollow.3-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Planetary Defense. Near-Earth Objects (NEOs)pose a potentially serious threat for humankind.Scientists are now certain that a major asteroid orcomet was responsible for the mass extinction of thedinosaurs.The U.S. Air Force (USAF) is currently conductingconcept exploration studies for a constellation ofsatellites designed to detect and track man-madesatellites in Earth’s orbit. 2 The <strong>Commission</strong> believesthat these studies should be broadened to includedetection of asteroids. U.S. Strategic Command officialsare also reviewing a concept for a clearinghousethat gathers and analyzes data on potential Earthimpacts from asteroids. In addition, the NationalSecurity Space Architect is currently, as part of theSpace Situational Awareness Architecture, integratingthe use of space and ground-based surveillancesystems. Given these actions, planetary defenseshould be assigned to DoD in cooperation withNASA.The <strong>Commission</strong> believes that the nation needs ajoint civil and military initiative to develop a corespace infrastructure that will address emergingnational needs for military use and planetary defense.Space Launch Infrastructure: AgingThe current replacement value (CRV) of infrastructureat NASA’s Kennedy Space Center (KSC) is estimatedto be $3.9 billion; and $3.0 billion at DoD’sCape Canaveral Air Force Station (CCAFS). Currentmaintenance funding at KSC is below the NationalResearch Council’s recommended minimum of 2 to4 percent of CRV. NASA’s investment has beenabout 1.5 percent of CRV.As a result, at NASA’s KSC: 3• The cable plant has 275 miles of tar-paper ductsthat are collapsing; the air pressurized cable jacketsare failing to keep water out thus producing shorts;and cable insulation in the plant is deterioratingleaving bare wire exposed.• The Vehicle Assembly Building has sustained sidingand bolt failures due to hurricanes and seasonalhigh winds. Its 35 year-old roof requires frequentexternal patching, and platforms and nets havebeen installed below the roof deck to catch fallingdebris. Overall, the structure is badly deterioratedand severely corroded.• Ten miles of 4-inch high-pressure gaseous nitrogenand helium pipelines to the Space Shuttle launchArtist’s concept of a catastrophic asteroid impact with the Earth. Lifenear the impact would be instantly wiped out from the effects of hightemperatures and pressures.The Crawler/Transporters, used to move theassembled Space Shuttle system to thelaunch pad, are over 30 years old.3-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special Significancecomplexes are also 35 years old and severelycorroded.• The Crawler/Transporters, used to move theassembled Space Shuttle system to the launch pad,are over 30 years old, reaching the end of their usefullife, and many subsystems are unsupportabledue to age.• The checkout, control and monitoring subsystemdeveloped in the 1970s for shuttle testing andlaunch is so old that there aren’t enough spare partsfor 10 percent of its components. NASA began toupgrade this subsystem in 1996, but it will not becompleted until 2007.DoD support infrastructure at CCAFS has similarproblems: 4• Many systems have numerous components thathave exceeded their life expectancy. This includeselectrical distribution; water distribution; wastewater system; heating, ventilation and air conditioning;and fire protection systems; as well as theairfield.• Some supporting infrastructure systems are 45 to55 years old.• Multiple components have no replacementparts due to either obsolete technology or nomanufacturer.• A corrosive environment leads to unplannedfailures.The <strong>Commission</strong> believes that clearly a new structurefor operation and management structure forthese space facilities would be desirable. Such a structurewould have to take into account the differentmissions of the USAF and NASA while at the sametime assuring timely and consistent upgrades of vitalinfrastructure. Therefore, the USAF and NASAshould explore privatization and “municipalization”options to deal with their space infrastructure problems.NASA should also consider encouraging additionalpublic and private investment in its field centersby turning over day-to-day managementresponsibilities to state government, universitiesand/or companies. This could also help deal with theproblem of operational costs.Commercial Space: A Capacity and DemandMismatchIn the future, the civil and commercial sectors willlook to space for new products and services that willcreate new markets, much as they did for telecommunicationsand commercial remote sensing. Thescientific community will have the opportunity toexplore the universe and gain access to informationabout our planet, its atmosphere and the solar system.The public will benefit by having the opportunitysome day to live, work, and vacation in space.But the reality is that today we are not even close toachieving those opportunities and dreams. Domesticlaunch vehicle capacity and satellite manufacturingcapabilities far exceed both domestic and internationallaunch market demand. The U.S. commercialspace industry continues to lose access to markets asdemand decreases and international competitionincreases. This industry segment will not overcomethese obstacles without government support. Newregulations and incentives will be necessary to bolsterthis important market until there is a turnaround indemand, not unlike what was done in the early railand airline industries. Additionally, if governmentexpects industry to be a partner in developing theKennedy Space Center’sVehicle Assembly Building.3-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>tremendous expensive supporting infrastructure,then there must be an expectation that these investmentswill result in a strong business case. Data fromthe Federal Aviation Administration (FAA) showsa decline in launch activity since 1967. See Figure3–3.$178 million, Sea Launch earned approximately$170 million, and U.S. commercial launch revenueswere about $167 million. Launch revenues areattributed to the country in which the primary vehiclemanufacturer is based, with the exception of SeaLaunch, which is a multinational company. 5The launch activity forecast shows that most organizationsexpect launch service demand to continue todecrease. While the ability to forecast launchdemand is not an exact science, the agencies andorganizations providing this information all agree onthe declining trend.Both launch activity and theirassociated revenues are declining.Overall, the FAA recorded16 worldwide commercialorbital launches in calendaryear 2001. (See Figure 3-3.)This number is significantlyless than in prior years. There were 39 in 1999 and35 in 2000. Arianespace captured 50 percent of theworld market during 2001. In that year, the UnitedStates and Russia each had 19 percent, while the SeaLaunch Company had 12 percent. Revenues fromthe 16 commercial launch events in 2001 were anestimated $1.5 billion, a 44 percent decrease fromthe 2000 total of approximately $2.7 billion.European revenues were estimated at about$948 million, while Russian revenues were aboutLaunch demand trends holdlittle promise for resurgence inthe U.S. space launch industry.The FAA continues to scale back its forecast of commerciallaunch activity over the next decade. Itexpects that 268 commercial launches will take placeduring the next decade—a figure that is 16.5 percentlower than the agency’s forecast in 2001. 6The Teal Group, a national research organization,publishes an annual forecast of“proposed payloads” for launch.While this is a slightly differentapproach to the FAA model,the data show a correspondingdecrease for the next decade ofabout 18.4 percent for thesefour worldwide categories ofpayloads: commercial, military, civil, and university/other.The Teal Group outlook for just the commercialsector shows a “23 percent decline comparedto last year , and a 47 percent drop compared to our2000 model.” 7Space Tourism and Launch Markets. To understandfuture dynamics for launch markets, NASAcommissioned the ASCENT Study as part of theFigure 3-3 Historical Commercial and Government Launches (1957-2001)160140CommercialGovernmentNumber of Launches1201008060402001957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001Source: FAA3-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special SignificanceSLI. This study concluded that the only space launchsector with growth potential over the next twodecades is passenger space travel. All other sectors—both commercial and governmental—have flat-lineoutlooks.Throughout the period 2002 through 2020, theforecast for launches is, in essence, constant atbetween 60 to 80 launches per year. The figure belowprovides a forecast for public space travel over thatperiod. The forecast assumed a cost of $20 millionper seat for an orbital flight and was based on ahighly credible survey of public space travel, where astatistically valid sample of high net worth individualswas interviewed. Seven percent of the sampleindicated that they would be willing to pay$20 million for an orbital flight, if available.Respondents to the ASCENT Study survey wereaware that it would be necessary to go to Russia fora six-month training period and would be a riskyventure. To arrive at projected launch forecasts, thesurvey responses were discounted for a number ofconsiderations, such as health, and in order to allowa build-up curve for this new industry to becomeestablished. Even with these caveats, there is a potentialdemand for 50 passengers a year at currentprices. Most of the respondents, however, indicated apreference for training and flying from the UnitedStates. The survey results also showed that demandfor a 15-minute sub-orbital flight costing $100,000could produce a market for up to 500 passengers perday by 2020. 8While today there is an extremely limited number ofpeople in the world who can afford a $20 millionvacation, we should marvel not at the price but at thefact that the demand exists at all. Given what peopledo spend on vacations and amusement park ridesand adventure travel, we have no reason to doubtthat the demand will rise without limit as the pricedrops.The <strong>Commission</strong> believes that there are opportunitiesto help alleviate the capacity and demand mismatchin the commercial launch market. Spacetourism markets may be key to help fund the launchindustry through the current market slump by providingincreased launch demand and thus helping todrive launch costs down.Science: Untapped OpportunitiesThe quest for knowledge, which has universalappeal, brings with it the need for attendant technologicaland engineering feats that make discoverypossible.These feats will afford the scientific community theopportunity to explore the universe and gain accessto information about the planet, its atmosphere andthe solar system. Basic science can produce more andFigure 3-4 Public Space Travel Forecasts (Orbital)6050PassengersDedicated LaunchesSoyuz ISS FlightsGlobal Launches403020100Source: NASA2002 2005 2008 2011 2014 2017 20203-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>more insights about our relationship to the universethrough increasingly sophisticated astronomical missions.Science can help us find laboratory solutionsto high-end technologies, such as anti-matter andanti-gravity propulsion concepts. Science can use onorbitassets to develop consumer products in pharmaceuticalsand materials. The frontiers of scienceare extended significantly by expanding our reachinto new environments and shrinking the boundariesof the unknown. What follows is a short list ofwhat could be done.Access to space allows us to answer some of the basicquestions about our universe and ourselves. With thediscovery of sub-surface water on Mars and billionyear-oldoceans beneath frozen ice sheets on Jupiter’smoon Europa, the prospect of finding life in placesother than Earth are higher than ever. If life oncethrived on Mars but is now extinct, planetary geologistswill need the services of paleontologists.Why did the running water once on the surface ofMars disappear? What atmospheric instabilitydestroyed its ecosystem, leading to this catastrophe?Why does the planet Venus, often called Earth’s twinSpace tourism could create a demand for a commercialspaceliner, like this artist concept.for its similarity in size and mass, have a runawaygreenhouse effect? What went wrong there? Howwill the answers to these questions help us protectthe stability of our own atmosphere?Asteroids are remarkable resources of minerals andheavy metals. While not all of their material is economicallyfeasible to mine and return to Earth, itmay be possible to extract materials for delivery toother planets, where expeditions are underway. Inany case, we will want to learn how to land on asteroidsand analyze their makeup. The day will arrivewhen an asteroid is discovered on a collision coursewith Earth. The more we know about their orbit andstructure, the more effective we can be in attemptingto deflect it from harm’s way.Space also provides science with the opportunity tolook at the origins and future of the universe. Earth’ssurface is one of the worst places to build a telescope.Our atmosphere is largely opaque to gamma rays, x-rays, and ultraviolet light, and wreaks havoc with theinfrared spectrum. Furthermore, our turbulentatmosphere, and the radio and light emanations ofcivilization are incompatible with high-quality observationaldata. Earth orbit, such as where we operatethe Hubble Space Telescope, provides a much betterenvironment for such research. But other orbits arealso possible, such as the stable Lagrangian points ofeither the Earth-Moon or the Sun-Earth systems.Another location for telescopes is the far side of theMoon, which is completely shielded from Earth’scacophony of radio signals. This radio-quiet zonewould enable astrophysicists to observe all windowsto the universe, pollution-free, and continue acentury of cosmic discovery unmatched in recordedhistory.The <strong>Commission</strong> believes that this search for cosmicknowledge will not only answer fundamental questions,but also inspire our children and provide asource of future products and services. This willrequire that the U.S. government sustain its longstandingcommitment to science and space technologyand continue to focus on internationally cooperativeefforts in the future.3-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special SignificanceDevelop a Next Generation Communication,Navigation, Surveillance and ReconnaissanceCapability. The nation needs real-time, globalspace-based communications, navigation, surveillanceand reconnaissance systems for a wide range ofapplications. These capabilities will provide the militarywith the ability to move its forces around theworld, conduct global precision strike operations,defend the homeland, and provide for planetarydefense. The civil and commercial sectors will alsobenefit from these capabilities for air transportationmanagement, monitoring global climate change,weather forecasting and other applications. The federalgovernment needs a joint civil and military initiativeto develop this core infrastructure.Mining the moon for ores and isotopes might make soundcommerical business opportunities in the future.ConclusionsThe <strong>Commission</strong> concludes that the nation will haveto be a space-faring nation to be the global leader inthe 21st century—our freedom, mobility, and qualityof life will depend on it. America must exploreand exploit space to assure national and planetarysecurity, economic benefit and scientific discovery.At the same time, the United States must overcomethe obstacles that jeopardize its ability to sustainleadership in space.Revitalize the U.S. Space Launch Infrastructure.NASA and DoD must maintain andmodernize their space launch and support infrastructureto bring them up to industry standards. Theyshould implement our recommendations containedin Interim Report #3 concerning federal spaceports,enhanced leasing authority, and utility privatizationand “municipalization.” We recommended thatDoD and NASA should:• Investigate the feasibility of establishing a nationalspaceport structure at KSC and CCAFS under asingle management system; andA logistics depot in space for human exploration of thesolar system.Achieve Breakthroughs in Propulsion and SpacePower. The ability to access space and travel throughthe solar system in weeks or months instead of yearswould help create the imperative to do so.Propulsion and power are the key technologies toenable this capability. Future progress in these areaswill result in new opportunities on Earth and openthe solar system to robotic and human exploration—and eventual colonization. The nation would benefitfrom a joint effort by NASA and DoD to reduce significantlythe cost and time required to access andtravel through space.3-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>• Seek Congressional approval for– Enhanced leasing authority that allows them tolease real property at fair market value and retainlease proceeds to cover the total costs incurred atKSC and CCAFS; and– Privatization of NASA utilities at KSC andCCAFS to overcome the budget burdens associatedwith capital improvements to outdatedinfrastructure.In addition, NASA and DoD need to make theinvestments necessary for developing and supportingfuture launch capabilities. To deal with the problemof operating costs, NASA should also consider turningover day-to-day management responsibilities forits field centers to state governments, universities, orcompanies.RECOMMENDATION #3The <strong>Commission</strong> recommends that the UnitedStates create a space imperative. The Departmentof Defense, the National Aeronautics and SpaceAdministration and industry must partner in innovativeaerospace technologies, especially in theareas of propulsion and power. These innovationswill enhance our national security, provide majorspin-offs to our economy, accelerate the explorationof the near and distant universe with bothhuman and robotic missions, and open up newopportunities for public space travel and commercialspace endeavors in the 21st century.Provide Incentives to Commercial Space.Government and the investment community mustbecome more sensitive to commercial opportunitiesand problems in space. Public space travel may constitutea viable marketplace in the future. It holds thepotential for increasing launch demand andimprovements in space launch reliability andreusability. Moreover, it could lead to a market thatwould ultimately support a robust space transportationindustry with “airline-like operations.” Thegovernment could help encourage this by allowingNASA to fly private citizens on the Space Shuttle.Sustain Commitment to Science and Space. TheU.S. government should continue its long-standingcommitment to science missions in space and focuson internationally cooperative efforts in the future.3-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 3 – Space: Its Special Significance3-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project PowerChapter 4National Security: DefendAmerica and Project PowerFor at least the next quarter century or more, theeffectiveness of the American defense posture will bea crucial determinant of world peace, prosperity, andstability. The relationship between advanced technologyand national security is a metaphor for themanner in which our society will grow and prosperin the 21st century. 1 It is essential that the publicpolicy environment in the 21st century reflect anappreciation of these circumstances.During the 20th century, the development ofadvanced technology for national security applicationsstimulated the introduction and diffusion ofsuch technology to the world. The policy and institutionalsetting of the 20th century will not work forthe 21st. In the 21st century, the sources of theenabling technologies for vital military capabilitieswill be in both the commercial and the defense sectors.The co-dependence of the commercial and militarysectors for advanced technology developmentand applications requires new approaches to the policyenvironment that sustains the defense componentof the aerospace sector.RECOMMENDATION #4: The <strong>Commission</strong> recommends that the nation adopt apolicy that invigorates and sustains the U.S. aerospace industrial base. This policymust include:• Procurement policies which include prototyping, spiral development, and othertechniques which allow the continuous exercise of design and production skills;• Stable funding for core capabilities, without which the best and brightest will notenter the defense industry;• Removing barriers to international sales of defense products;• Removing barriers to defense procurement of commercial products and services;• Propagating defense technology into the civil sector, particularly in communication,navigation and surveillance; and• Sustaining critical technologies that are not likely to be sustained by the commercialsector, e.g., space launch, solid rocket boosters, etc.The core competencies of the U.S. defense industrialsector—systems engineering and system(s) integration—arethe decisive enabling skills that must transformwidely accessible technologies into superiormilitary capabilities. The transformation of the U.S.defense posture, from one dependent on industrialBefore the war in Afghanistan, that area was low on the list of majorplanning contingencies. Yet, in a very short time, we had to operateacross the length and breadth of that remote nation, using everybranch of the armed forces. We must prepare for more such deploymentsby developing assets such as advanced remote sensing, longrangeprecision strike capabilities, and transformed maneuver andexpeditionary forces. This broad portfolio of military capabilities mustalso include the ability to defend the homeland, conduct informationoperations, ensure U.S. access to distant theaters, and protect criticalU.S. infrastructure and assets in outer space.National Security Strategy, September 20, 20024-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>age technology to one led by the technologies ofinformation and decision superiority, will require themodernization of existing policies, institutions, andpublic resource allocation.The Contribution of Aerospace toNational SecurityDefending our nation against its enemies is the firstand fundamental commitment of the federal government.2 This translates into two broad missions—Defend America and Project Power—when andwhere needed.In order to defend America and project power, thenation needs the ability to move manpower,materiel, intelligence information and precisionweaponry swiftly to any point around the globe,when needed. This has been, and will continue to be,a mainstay of our national security strategy.The events of September 11, 2001 dramaticallydemonstrated the extent of our national reliance onaerospace capabilities and related military contributionsto homeland security. Combat air patrols sweptthe skies; satellites supported real-time communicationsfor emergency responders, imagery for recovery,and intelligence on terrorist activities; and thesecurity and protection of key government officialswas enabled by timely air transport.As recent events in Afghanistan and Kosovo show,the power generated by our nation’s aerospace capabilitiesis an—and perhaps the—essential ingredientin force projection and expeditionary operations. Inboth places, at the outset of the crisis, satellites andreconnaissance aircraft, some unmanned, providedcritical strategic and tactical intelligence to ournational leadership. Space-borne intelligence, command,control and communications assets permittedthe rapid targeting of key enemy positions and facilities.Airlifters and tankers brought personnel,materiel, and aircraft to critical locations. And aerialbombardment, with precision weapons and cruisemissiles, often aided by the Global PositioningSystem (GPS) and the Predator unmanned vehicle,destroyed enemy forces. Aircraft carriers and theiraircraft also played key roles in both conflicts.Today’s military aerospace capabilities are indeedrobust, but at significant risk. They rely on platformsand an industrial base—measured in both humancapital and physical facilities—that are aging andincreasingly inadequate. Consider just a few of theissues:• Much of our capability to defend America andproject power depends on satellites. Assured reliableaccess to space is a critical enabler of this capability.As recently as 1998, the key to near- andmid-term space access was the Evolved ExpendableLaunch Vehicle (EELV), a development project ofBoeing, Lockheed Martin and the U. S. Air Force.EELV drew primarily on commercial demand toclose the business case for two new launchers, withthe U.S. government essentially buying launches atthe margin. In this model, each company partnermade significant investments of corporate funds invehicle development and infrastructure, reducingthe overall need for government investment.Today, however, worldwide demand for commercialsatellite launch has dropped essentially tonothing—and is not expected to rise for a decadeor more—while the number of available launchplatforms worldwide has proliferated. Today,therefore, the business case for EELV simply doesnot close, and reliance on the economics of a commercially-drivenmarket is unsustainable. A newstrategy for assured access to space must be found.Today, thebusiness case forEELV simply doesnot close andreliance on theeconomics of acommerciallydrivenmarket isunsustainable.4-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project Power• The U.S. needs unrestricted access to space forcivil, commercial, and military applications. Oursatellite systems will become increasingly importantto military operations as today’s informationrevolution, the so-called “revolution in militaryaffairs,” continues, while at the same time satelliteswill become increasingly vulnerable to attack as thecentury proceeds. To preserve critical satellite networks,the nation will almost certainly need thecapability to launch replacement satellites quicklyafter an attack. One of the key enablers for “launchon demand” is reusable space launch, and yetwithin the last year all work has been stopped onthe X-33 and X-34 reusable launch programs• The challenge for the defense industrial base is tohave the capability to build the base force structure,support contingency-related surges, provideproduction capacity that can increase faster thanany new emerging global threat can build up itscapacity, and provide an “appropriate” return toshareholders. But the motivation of governmentand industry are different. This is a prime detractionfor wanting to form government-industrypartnerships. Industry prioritizes investmentstoward near-term, high-return, and high-dollarprograms that make for a sound business case forthem. Government, on the other hand, wants toprioritize investment to ensure a continuing capabilityto meet any new threat to the nation. Thisneed is cyclical and difficult for businesses to sustainduring periods of government inactivity.Based on the cyclic nature of demand, theincreasing cost/complexity of new systems, and theslow pace of defense modernization, aerospaceOne of the key enablers for “launch on demand” is reusablespace launch, and yet within the last year all work has beenstopped on the X-33 and X-34 reusable launch programs.“Our goal is not to bring war into space, but rather to defendagainst those who would. Protecting U.S. military and commercialassets in space from attack from foreign aggressors mustbe a priority in the 21st century.”Defense Secretary Donald Rumsfeld 3companies are losing market advantages and thesector is contracting. Twenty-two years ago, today’s“Big 5” in aerospace were 75 separate companies,as depicted by the historical chart of industry consolidationshown in Chapter 7.• Tactical combat aircraft have been a key componentof America’s air forces. Today, three tacticalaircraft programs continue: the F/A-18E/F (inproduction), the F/A-22 (in a late stage of test andevaluation), and the F-35 Joint Strike Fighter (justmoving into system design and development).Because of the recentness of these programs, thereare robust design teams in existence. But all of theinitial design work on all three programs will becompleted by 2008. If the nation were to conclude,as it very well may, that a new manned tacticalaircraft needs to be fielded in the middle ofthis century, where will we find the experienceddesign teams required to design and build it, if thedesign process is in fact gapped for 20 years ormore?• More than half of the aerospace workforce is overthe age of 40 4 , and the average age of aerospacedefense workers is over 50. 5 Inside the Departmentof Defense (DoD), a large percent of all scientistsand engineers will be retirement eligible by 2005.Given these demographics, there will be an exodusof “corporate knowledge” in the next decade thatwill be difficult and costly to rebuild once it is lost.There will be a critical need for new engineers, butlittle new work to mature their practical skill overthe next several decades. Further, enrollment inaerospace engineering programs has dropped by 47percent in the past nine years 6 , and the interest andnational skills in mathematics and science aredown. Defense spending on cutting-edge work isat best stable, and commercial aircraft programs4-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>are struggling and laying workers off. As the DoD’srecent Space Research and Development (R&D)Industrial Base Study 7 concluded, “[s]ustaining atalented workforce of sufficient size and experienceremains a long-term issue and is likely to getworse.” In short, the nation needs a plan to attract,train and maintain a skilled, world-class aerospaceworkforce, but none currently exists.• The current U.S. research, development, test andevaluation (RDT&E) infrastructure has a legacydating back to either World War II or the expansionduring the Space Age in the 1960s. It is nowsuffering significantly from a lack of resourcesrequired for modernization. In some cases, ournation’s capabilities have atrophied and we havelost the lead, as with our outdated wind tunnels,where European facilities are now more modernand efficient. In the current climate, there is inadequatefunding to modernize aging governmentinfrastructure or build facilities that would supportthe development of new transformational capabilities,such as wind tunnels needed to design andtest new hypersonic vehicles. The aerospace industrymust have access to appropriate, modern facilitiesto develop, test and evaluate new systems.Throughout this dynamic and challenging environment,one message remains clear: a healthy U.S.aerospace industry is more than a hedge against anuncertain future. It is one of the primary nationalinstruments through which DoD will develop andobtain the superior technologies and capabilitiesessential to the on-going transformation of thearmed forces, thus maintaining our position as theworld’s preeminent military power.Objective: A Safe and Secure WorldThe U.S. aerospace industry’s future contribution tonational security is captured in the <strong>Commission</strong>’soverall vision of “Anyone, Anything, Anywhere,Anytime”. For national security, this provides theability to:• Rapidly, safely, and securely send and receiveinformation;• Move troops, equipment, and supplies to anywhereon the globe or into space, at anytime; and• Prosecute effects-based warfare.National security organizations must be able to monitor,detect, neutralize and/or defeat future conventionaland asymmetric threats anywhere in the worldby applying new technologies and operational capabilitiesto implement our national security strategyand address our national security needs.Included in these capabilities are a better understandingof space situational awareness and moreserious attention to the threat to global securityposed by space debris and by Near-Earth Objects,such as asteroids. Space- and ground-based surveillancesystems can provide time-critical detection ofthese threats, making a valuable contribution to thisemerging and very demanding national securityrequirement. The issue of planetary defense is alsodiscussed in Chapters 3 and 6.To deliver the required capabilities and to addressany national security needs quickly and affordably,the U.S. must possess an aerospace industry that is‘right-sized’, healthy, highly flexible, and responsiveto its customers. The government can help byremoving unnecessary paperwork and oversight ongovernment programs and eliminating restrictionson contractor-developed intellectual property. It canalso help by continuing to increase investment inDoD TRANSFORMATION GOALS 8• Defend the U.S. homeland and other bases of operation, anddefeat nuclear, biological and chemical weapons and their meansof delivery• Deny enemies sanctuary—anytime, anywhere• Project and sustain forces in distant theaters in the face of accessdenial threats• Conduct effective operations in space• Assure information security and conduct effective informationoperations• Provide a common operational picture for joint forces4-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project Powernext-generation aerospace capabilities. Increasedinvestment will have the dual effect of improvingdefense capabilities and attracting the “best andbrightest” workforce to the aerospace sector.IssuesEnhancement and, indeed, the preservation of ourcurrent military capabilities in air and space requirea comprehensive, cross-cutting national industrialbase policy. Many elements of such a policy are discussedin this report.The <strong>Commission</strong> believes that the key to any policyis maintaining the manufacturing capacity andhuman capital required to build, integrate and maintainaerospace systems. There are three key elementsof such a policy: (1) sustaining the defense industrialbase; (2) building experience in the workforce; and(3) maintaining our critical national infrastructure.The Defense Industrial Base: Consolidations andUnstable DemandIn the past, the DoD had the luxury of drawing on alarge workforce employed in a large number of U.S.aerospace companies that, as a whole, dominatedworld markets. That is not the case today. The numberof U.S. aerospace companies has significantlyreduced over the past 22 years. The total U.S. aerospaceworkforce has shrunk by approximately700,000 in the last decade. 9 There is significantover-capacity and limited international demand inboth satellite production and space launch, which islikely to lead to further consolidations and additionallay-offs in the near-term.The <strong>Commission</strong>, in its Interim Report #3,requested the Secretary of Defense to task theDefense Science Board (DSB) to review and recommendoverall DoD policy toward future militaryindustrial base consolidation, including its policiestoward mergers and acquisitions. In particular, aspart of this review, the DSB should:• Address the aerospace industry consolidation andworkforce challenges resulting from today’s diminishingnumber of system design programs;ISSUES• The Defense Industrial Base– Funding– Transnational Partnerships and International Sales– Defense Procurement of Commercial Products and Services– Transition of Defense Technologies to Civil Applications– Technology Insertion and Operational Support for DefenseSystems• Experience in the Workforce– Opportunities to Learn– Skills Transfer to the Next Generation– Intellectual Capital• Critical National Infrastructure– Facilities– Capabilities• Assess approaches for aligning consolidation policieswith procurement and budgeting policies;• Consider specific measures (metrics) on the healthof defense contractors, such as magnitude andlongevity of a contractor’s production base andproduct development work; and• Assess the long-term sustainability of the nation’shigh-performance aircraft and solid rocket boosterdesign and development capabilities, including thepotential of increasing/initiating high payoff technologydevelopment programs and/or continuinglow-rate production of strategic systems to bridgeindustry capabilities to a succeeding generation.Unstable demand for air and space systems has beena major contributor to an age imbalance in bothindustry and government aerospace workforces.Younger workers have been laid off first and havemore readily taken voluntary separations. At thesame time, students do not see a bright future in theaerospace industry and seek other professions. To getout of this trap, government policy must focus onboth the demand and supply sides of the aerospace4-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>labor market, particularly since defense spendingcould be one of the few sources of stable demand inthe U.S. aerospace sector.On the demand side, government must increase andthen stabilize funding for research and developmentand for the prototyping, spiral development, andproduction of new systems. In addition, governmentshould reduce barriers that inhibit demand for theaerospace products and services needed for nationalsecurity.The barriers that inhibit demand could be reducedby the following actions. First, as discussed inChapter 6, government must remove unneeded government-imposedbarriers on the export of defenseproducts. Second, since thecivil and military aerospaceworkforces are highly integrated,DoD can improve itsaccess to trained workers byremoving the remaining barriersto its use of commercialproducts and services and,more importantly, by buyingcommercial products andservices on a priority basiswhen appropriate. Third,government should move military aerospace productsinto the commercial sector in areas such as airto-airand satellite-to-air communications, whereDoD has significant technology that could meetcivilian needs, and integration could capitalize onPrototype unmanned combat air vehicle.Our overall national securitydepends on the efforts ofmultiple government departmentsand agencies, working aspartners, with stable andsufficient budget lines.“The Wright Brothers Institute in Dayton, Ohio is building collaborativepartnerships … of government, industry, and academia…to expand the base of science, technology, engineering, and designintegration available for air and space applications.”General Lester L. Lyles, testimony submitted to the Aerospace<strong>Commission</strong>, August 22, 2002international demand for modernized aerospacesystems.If stabilization of demand through increased fundingfor cutting edge research and development/prototypingprograms is insufficient to develop a sufficientsupply of talented engineeringand factory workers, aprogram of targeted grants,loans or tax credits forapprenticeship and graduateeducation programs mightalso be considered.Funding. Our overallnational security depends onthe efforts of multiple governmentdepartments andagencies, working as partners, with stable and sufficientbudget lines. However, all departments andagencies suffer from conflicting priorities and annualcongressional authorization and appropriation processes,which may lead to unstable funding overtime.The inability to fund all the competing demandswithin the defense budget often leads to unrealisticinitial cost estimates, a mismatch of programrequirements and budget, service-imposed “taxes”,and insufficient management reserves to addressmajor unforeseen events. In addition, the large operationsand support costs associated with legacy systems,and the need to support ongoing militaryoperations, drain funding away from R&D, infrastructuremodernization, and force transformation.The Secretary of Defense has expressed concernabout the impact of unstable funding in the defense4-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project PowerFigure 4-1 FY 1987 – FY 2007 DoD Budget Authority130120ProcurementRDT&E1101009080Billions $7060504030201001987 1988 1989 1986 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2001 2002 2003 2004 2005 2006 2007Source: National Defense Budget Estimate for FY03, Office of the USD (Comptroller)Actual YearsProjected Yearssector. See Figure 4-1. He has specifically recommendedthat defense in the 21st century be seen asone where the military forces cannot be optimizedagainst a specific threat. Instead, he suggests thatdefense spending be understood to be closer to aninvestment that is subject to a stable fraction ofnational income, suggesting 3-3.5 percent perannum—about one third of the Cold War peak in1962. 10 This could be considered a constructive alternativeconcept to address the subject of how “stablefunding” might be achieved.The <strong>Commission</strong>’s recommendations to enhanceDoD budget stability and flexibility in InterimReport #3 addressed these issues, in part. Further,the <strong>Commission</strong> supports DoD’s Fiscal Year (FY) 04Legislative Priority #9, “Streamline DoD Processes,”to shorten the Planning, Programming, andBudgeting System and the acquisition cycle time. 11Refer to Chapter 5 for actions the Congress can taketo improve their authorization and appropriationprocess for aerospace.Further, the <strong>Commission</strong> believes that DoD’s annualscience and technology (6.1-6.3) funding must besufficient and stable to create and demonstrate theinnovative technologies needed to address futurenational security threats. An amount no less thanthree percent of DoD Total Obligational Authority,“fenced” from budget cuts, would be sufficient. Theuse of more joint technology development andacquisition programs would also help to spread thefunding burden and promote interoperability.4-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>To help reduce the high development and productioncosts of advanced military systems, the U.S. must alsoincrease the number of international joint programs,such as the Joint Strike Fighter.Transnational Partnerships and InternationalSales. DoD and the U.S.aerospace industry share along history of formingglobal partnerships and conductingjoint operations withour allies. However, the currentregulatory environment,especially in the area of exportcontrols, provides too littlesecurity, restricts Americancompanies from marketingtheir products, and preventseffective international technologycollaboration. In additionto increasing internationalcommercial tradetensions, today’s regulatory environment hinders thedevelopment of national security partnerships andsales of U.S. defense equipment to our friends andallies.The <strong>Commission</strong> believes that the federal governmentmust remove unnecessary barriers to internationalsales of defense products, and implementother initiatives that strengthen global partnershipsto enhance national security. To help reduce the highdevelopment and production costs of advanced militarysystems, the U.S. must also increase the numberof international joint programs, such as the JointThe <strong>Commission</strong> believes thatthe federal government mustremove unnecessary barriers tointernational sales of defenseproducts, and implement otherinitiatives that strengthenglobal partnerships to enhancenational security.Strike Fighter, and continue to foster internationalinteroperability of defense and commercial aerospacesystems-of-systems. At the same time, we must alsoensure that our truly militarily critical technologiesare protected in the international marketplace, andcompliance must be strictly enforced. These issuesare discussed in more detail in Chapter 6.Defense Procurement of Commercial Productsand Services. DoD procurement policies must bemodernized in a manner that will allow the DoD toaccess the full range of modern technology. Accessingthis technology—most of which will originate as“commercial” technology—will allow the specializeddefense industrial base to transform them into productsand services that create superior military capabilities.The manner in which DoD procurement iscurrently structured preventsthe DoD and its industrialbase from doing so. As a consequence,defense technologyis falling behind the pace ofdevelopment in the civil sectorrather than leading it.Unfortunately, many commercialcompanies are electingto avoid government workdue to onerous paperworkand the risk of losing intellectualproperty. This hinders the4-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project Powerapplication of the latest technology to military products.The government must revise policies andprocesses to encourage commercial vendors to providetheir products and services for national defenseapplications. Use of commercialtechnology is critical tointegrated national securitysystems of the future.The <strong>Commission</strong> believesDoD acquisition policiesshould encourage greater useof commercial standards,impose government requirementsby exception only,allow commercial entities toprotect intellectual property,and remove other burdensomeregulations that deter providers of commercialpro-ducts from doing business with the government.Transition of Defense Technologies into CivilApplications. There are numerous other governmentmissions that would benefit from defense technologyand capabilities, such as in the areas of communications,navigation, surveillance, and reconnaissance.The <strong>Commission</strong> believes that these technologiescould be adapted and transitioned intoother government applications, such as those thatwould significantly enhance the capacity of our airtraffic management system and simultaneouslyenhance our national defense and homeland security.These topics are also discussed in Chapters 2 and 3.Figure 4-2 Military Aircraft Age Trend3025Air Force Navy ArmyAs the military transforms withnew aerospace systems to meetfuture threats, the operationalreadiness and capabilities ofdefense platforms will need tobe sustained and upgraded.Technology Insertion and Operational Supportfor Defense Systems. Aging aerospace systemsand infrastructure create a large and growing operationsand support cost burden that adverselyimpacts warfighter readiness,morale and retention. Manyaerospace systems, like the B-52, are on the path to an operationallife of 50-75 years,though their original designlife was only 20-30 years. SeeFigure 4-2. These aging systemsface inadequate sparessupport, increased inspectionsand maintenance costs. Insome cases, these aging systemspose flight safety risks.The high cost to develop and procure new systems isone cause for legacy systems to be retained in service.New operational concepts are also causing legacy systemsto be used much differently than originallyintended. The high cost to retrofit legacy platformswith improvements to enhance their operationalreadiness and capability is equally problematic.As the military transforms with new aerospace systemsto meet future threats, the operational readinessand capabilities of defense platforms will need to besustained and upgraded:• Extending aircraft mission range would reduce theneed to forward stage fuel and supplies, resultingAverage Age (Years)201510501992 1994 1996 1998 2000 2002 2004 2006 2008 2010Source: Joint Aeronautical Commanders Group4-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>practice. Technology insertion is highly desirableand, in principle, should emerge from evolutionary“spiral” development practices. A well-structured“spiral” development program, that is adequatelyfunded to create and field new military capabilities,can facilitate technology insertion into legacyplatforms as the threat and the availability of appropriatetechnology requires and/or justifies.Many aerospace systems, like the B-52, are on the path to an operationallife of 50-75 years though their original design life was only 20-30 years.in potentially enormous cost and operationalbenefits.• Investments to improve reliability, maintainabilityand safety in legacy systems would increasemateriel readiness, reduce maintenance andinspections, reduce maintainer workload, and raisemorale and retention.• Reducing the noise and emissions of legacy andnew high-performance military aircraft would alleviatecurrent basing issues, community lawsuits,the need to pay for soundproofing homes, as wellas potential U.S. and foreign flight-path issues inthe future.• Use of advanced information technologies, such asmodeling and simulation, would reduce development,acquisition and support costs of new andlegacy systems.• Adopting commercial build standards, contractoror shared government-industry logistics support,and performance-based logistics incentives wouldaccelerate technology insertion into new andlegacy systems, reducing the cost and improvingthe logistics support.Technology insertion in the defense establishment isexpensive, in part, because of the procurement andbudgeting systems. These systems cause the unnecessarilyexpensive practice of upgrading ancient computers(e.g., 80286-based microprocessors) ratherthan throwing them away, as is done in commercialIn sum, the <strong>Commission</strong> believes that the federalgovernment and the aerospace industry must partnerto sustain and enhance the operational readiness andcapability of our military aerospace systems. Thegovernment should fund research and technologydevelopment programs to reduce total ownershipcosts and environmental impacts; implement performance-basedlogistics support; create a structured,timely and adequately funded technology insertionprocess; and reform its procurement practices as recommendedin Chapter 7.Experience in the Workforce: Few Opportunitiesand Limited Skills TransferAt the end of World War II, a typical manager of amilitary aircraft development program had workedon the development of 15 programs. By the end ofthe 1990’s, that number had fallen to one. See Figure4-3. What this statistic reflects is the loss of “corporateknowledge” in our design teams, a loss with parallelsin the skilled workforce that builds our aerospacesystems. There is already evidence that lossof “corporate knowledge” has been costly. A 1999study of rocket launch failures found that inadequateThe current success of the Predator program shows the militaryvalue of moving leap-ahead demonstrators into thehands of warfighters at a very early stage of development.4-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project PowerFigure 4-3 Declining Experience Levels in Military Aircraft Programs(Vertical Bars: Military Aircraft Program Starts, Horizontal Bars: Typical 40 Year Career Span)XP-5Y XF-YA-2D F-8UXC-120 F-6M1F-4D U-2F-3H SY-3B-52 F-105A-3D X-13X-3 C-133S-2F F-107X-2 B-58F-10F F-106F-2Y F-5DF-100 X-14B-57 C-140F-102 T-2R-3Y1 F-4F-104 A-5A4D T-39B-66 T-38F-11F AQ-1C-130 X-15F-101 F-5AT-37 X-1B40 Year Career Span RetiredA-6B-52SR-71SC-4AX-21X-19C-141B-70XC-142F-111A-7OV-10X-22X-26BX-5AX-24F-14S-8YA-9A-10F-15F-18YF-17B-1YC-15YC-14AV-8BF/A-18Experience: 6+ ProgramsF-117F-20X-29T-46T-45B-2V-22F-22 EMDYF-22YF-23JSF X-36JSF X-37C-17RetiredExperience: 1-2 ProgramsExperience: 1 ProgramJSF EMDUCAVRetiringMid CareerVery Few“We believe that a decliningexperience level has been acontributing factor to theproblems we observe in manyrecent aircraft programs.”RAND1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s 2030sYearSource: RAND Study (Chart by Northrop Grumman, Aerospace Industries AssociationB-Xengineering experience was a major contributingcause. More recently, the Secretary of the Air Forcehas pointed to the decline in systems engineeringskills as a major contributor to cost overruns in militaryspace programs.Opportunities to Learn. To rebuild the U.S.knowledge base and to keep it “up-to-date,” a core ofdesign and production teams must be continuouslyexercised, even in periods when the country does notwant to fund extensive production programs. Thisrequires DoD to continuously fund prototyping programsand, where possible, move to spiral developmentof major systems. Such a policy would stronglysupport current DoD efforts on experimentationand transformation by providing a small supply of“leap-ahead” systems for use in the field. The currentsuccess of the Predator program—itself a technologydemonstrator—shows the military value of movingleap-ahead demonstrators into the hands of warfightersat a very early stage of development. At the sametime, programs providing opportunities for cuttingedge work should create additional incentives for the“best and brightest” to come to aerospace.The <strong>Commission</strong> believes that the United Statesmust continuously develop new experimentalsystems, with or without a requirement for production,in order to sustain the critical skills to conceive,develop, manufacture and maintain advanced systemsand potentially provide expanded capability tothe warfighter.Skills Transfer to the Next Generation. Theultimate goal of government policy must be to createan extremely high quality workforce in the aerospacesector, a workforce that continuously transfersknowledge and experience from one generation tothe next in all areas that may be needed by futuremilitary systems. A continuous transfer of skills is abyproduct of stabilized funding.4-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>There is a need for a joint government and industryplanning function to ensure that attention is paidto areas where skill sets would disappear if government/DoDdid not support a segment of the aerospaceindustry. Areas like radiation-hardenedcomputer chips and solid rocket booster motors arelikely to become extinct, if DoD does not maintainthem. While obsolete technologies should be allowedto disappear if no longer needed, government/DoDshould have a planning process in place to ensurethat skills do not disappear before the need is trulygone.Intellectual Capital. An aerospace worker’s intellectualcapital includes technical knowledge, processknowledge and network knowledge—what to do,how to do it, and who can help. All of these are necessaryto get the job done. With an aging workforceabout to leave, the intellectual capital must be passedon to the continuing workforce to avoid losing the“corporate knowledge.” A concerted effort by bothindustry and government must be initiated to understandthe impact of this loss of knowledge and howto transfer it to the workforce of the future.Critical National Infrastructure: In JeopardyMaintaining the nation’s critical infrastructure is ajoint responsibility between industry and government.The critical national infrastructure includesboth facilities and capabilities.Facilities. The aerospace industry lacks an adequatebusiness case in several areas critical to national security.This includes solid rocket boosters and radiationhardening capabilities. In addition, there is inadequatefunding to support and modernize aging governmentRDT&E infrastructure, such as existingspace launch facilities and new facilities that wouldsupport the development of transformational capabilities,such as wind tunnels for new hypersonicvehicles. The aerospace industry needs these facilitiesto test and evaluate new systems. Compounding thefunding shortfalls, political pressures also make itdifficult to consolidate or realign infrastructure inways that could eliminate inefficiencies and/orunnecessary duplication. The result is that higheroperating costs are being passed to the user.European sources in many cases offer better alternativesfor testing new capabilities. For example, U.S.companies are using foreign wind tunnels for testingbecause they are less costly and more capable. TheU.S. must retain world-class infrastructure for testand evaluation of future technologies.The <strong>Commission</strong> believes the federal governmentmust assume responsibility for sustaining, modernizing,and providing critical, often high-risk, defenserelatedtechnologies and infrastructure when it is inthe national interest. Chapter 3 contains specific recommendationsaddressing our space launch infrastructure.As political circumstances permit, the governmentmust also address the broader issue ofRDT&E infrastructure as part of future facility consolidationsand realignments.Capabilities. The government uses the term “ubiquitous”to describe capabilities that are critical to thenational security and economic prosperity of theUnited States and the world. GPS and frequencyspectrum are two of these ubiquitous capabilitiesand, as such, must be protected as critical nationalinfrastructure.Global Positioning System. GPS provides global positioning,navigation and timing information for awide range of military, commercial, and civil applications.It enables the military to place precisionmunitions on target. Its timing enables the financialmarkets, power grids, and the Internet to synchronizetheir operations around the world. Thenation’s air transportation system is becoming moredependent upon GPS for global navigation andprecision landings. GPS is becoming more embeddedthroughout national and internationalinfrastructures and operations.Though it is managed by the U.S. governmentthrough an interagency process, GPS is fundamentallypaid for and operated by the DoD. Its criticalcontributions to national security and to theglobal economy require that senior leadership in4-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project Powerboth the executive and legislative branches of thegovernment be conscious of its role, take the necessarysteps to ensure its continuous robust availability,and expedite its improvement. In addition,our global leadership in space-based positioning,navigation, and timing will be lost if we do not continueto focus resources and attention on this asset.As part of the national imperative for protection ofcritical national infrastructure, the <strong>Commission</strong>believes the federal government should identify andprotect funding that enables the DoD to acceleratethe launch of the next generation of GPS satellitesfor the enhancement of anti-jam capabilities and creationof worldwide dedicated civil signals.Frequency Spectrum. Rapidly changing and emerginginformation and communications technologies areplacing significant strains on the finite radio frequencyspectrum and on the management processesthat control how it is allocated and used. Globally,the radio frequency spectrum is an extremely valuableresource essential to national and internationalsecurity and commerce.The <strong>Commission</strong> believes that the U.S. should createa national spectrum strategy to preserve and protectaccess to radio frequency bands that are dedicated topublic safety and scientific applications, whileenabling the U.S. to remain in the forefront of globalelectronic commerce.ConclusionsThe <strong>Commission</strong> concludes that aerospace capabilitiesand the supporting defense industrial base arefundamental to U.S. economic and national security.While the nation’s defense industrial base is strongtoday, the nation is at risk in the future if the UnitedStates continues to proceed without a policy thatsupports essential aerospace capabilities.Develop a U.S. Military Industrial Base Policy.The Department of Defense should task the DefenseScience Board to develop a national policy thatwill invigorate and sustain the U.S. aerospace industrialbase. The policy should address issues, such asmergers and acquisitions, procurement and budgetingpolicies, research and development investments,technology transition, international sales and workforcedevelopment.Sustain the Defense Industrial Base. Today’snational defense industrial base is robust, but withoutconstant vigilance and investment, vital capabilitieswill be lost.• DoD’s annual science and technology (6.1-6.3)funding must be sufficient and stable to create anddemonstrate the innovative technologies needed toaddress future national security threats. Anamount no less than three percent of TotalObligational Authority, “fenced” from budgetcuts, would be sufficient. The use of more jointtechnology development and acquisition programswould spread the funding burden and promoteinteroperability.• The federal government must remove unnecessarybarriers to international sales of defense products,and implement other initiatives that strengthentransnational partnerships to enhance nationalsecurity. To help reduce the high development andproduction costs of advanced military systems, theUnited States must also increase the number ofinternational joint programs (like the Joint StrikeFighter), and continue to foster internationalinteroperability of defense and commercial aerospacesystem-of-systems.• DoD acquisition policies should be revised toencourage greater use of commercial standards.DoD should impose government requirements byexception only, allow commercial entities to protectintellectual property, and remove other burdensomeregulations that deter providers of commercialproducts from doing business with thegovernment.• There are numerous government missions thatwould benefit from defense technology. For example,the U.S. military has developed capabilities inthe areas of communications, navigation, surveillance,and reconnaissance. These technologiescould be adapted and transitioned into other4-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>government applications that would significantlyenhance the capacity of our air traffic managementsystem and, hence, our national defense andhomeland security.• The federal government and the aerospace industrymust partner to enhance the operational readinessand capability of new and legacy militaryaerospace systems. The government should: fundresearch and technology development programsto, reduce total ownership costs and environmentalimpacts; implement performance-based logisticssupport; create a structured, timely and adequatelyfunded technology insertion process; andreform its procurement practices accordingly.Increase Opportunities to Gain Experience inthe Workforce. The U.S. must continuouslydevelop new experimental systems, with or without arequirement for production, in order to sustain thecritical skills to conceive, develop, manufacture andmaintain advanced systems and potentially provideexpanded capability to the warfighter. Furthermore,the federal government and industry must developapproaches to retain and transfer intellectual capitalas the workforce retires in greater numbers in thenext few years.Maintain and Enhance Critical NationalInfrastructure. The federal government mustassume responsibility for sustaining, modernizing,and providing critical, often high-risk, defenserelatedtechnologies and infrastructure when it is inthe nation’s interest. This includes critical designcapabilities, solid rocket boosters, radiation hardening,space launch facilities, critical RDT&E infrastructure,GPS, and frequency spectrum.RECOMMENDATION #4The <strong>Commission</strong> recommends that the nationadopt a policy that invigorates and sustains theU.S. aerospace industrial base. This policy mustinclude:• Procurement policies which include prototyping,spiral development, and other techniques whichallow the continuous exercise of design andproduction skills;• Stable funding for core capabilities, withoutwhich the best and brightest will not enter thedefense industry;• Removing barriers to international sales ofdefense products;• Removing barriers to defense procurement ofcommercial products and services;• Propagating defense technology into the civilsector, particularly in communication, navigationand surveillance; and• Sustaining critical technologies that are notlikely to be sustained by the commercial sector,e.g., space launch, solid rocket boosters, etc.4-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 4 – National Security: Defend America and Project Power4-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote AerospaceThe federal government plays a key role in promotingthe health of the U.S. aerospace industry.Maintaining global aerospace leadership to ensureAmerica’s military preeminence, guarantee homelandsecurity, and assure economic growth and a superiorquality of life for our citizens in the 21st centuryrequires government activism. Aerospace providesthe fastest, safest, most flexible and often the onlymeans of travel and security. A coherent and integratednational aerospace consensus is critical tomove the country forward, drive government action,and preserve U.S. global aerospace leadership.The federal government hascalled on the aerospace industryin time of crisis in the past.The aerospace industry hasalways responded when called.Today, the U.S. aerospaceindustry is in jeopardy and islooking to the federal governmentto respond. The<strong>Commission</strong> is not asking forRECOMMENDATION #5Chapter 5Government: Prioritizeand Promote AerospaceThe <strong>Commission</strong> recommends that the federal government establish anational aerospace policy and promote aerospace by creating a government-widemanagement structure. This would include a WhiteHouse policy coordinating council, an aerospace management office inthe Office of Management and Budget, and a joint committee inCongress. The <strong>Commission</strong> further recommends the use of an annualaerospace sectoral budget to establish presidential aerospace initiatives,assure coordinated funding for such initiatives, and replace verticaldecision-making with horizontally determined decisions in bothauthorizations and appropriations.The health of the aerospaceindustry, today and in thefuture, is inextricably linked tothe leadership of the federalgovernment.the federal government to create industrial policy, topick winners and losers, or to subsidize the developmentof commercial aerospace products and services.But, the federal government must recognize that itsinteractions with industry are key to its strength andlong-term survival and, ultimately, to the securityand economic prosperity of America.Objective: Government—Flexible,Responsive and Oriented TowardsDecision MakingThe health of the aerospaceindustry, today and in thefuture, is inextricably linked tothe leadership of the federalgovernment. Its interactionwith the U.S. aerospace industryis vast, complex, andmulti-dimensional. In therapidly changing global economy,government leadershipmust be increasingly flexible,5-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>responsive and oriented toward decisionmaking atmacro-levels. It must prioritize and promote aerospaceboth within the government and in its interaction’swith the industry in order to realize the fullestpotential of aerospace to the nation.• As a leader, the government must provide thenational policies and investments needed for theindustry to be competitive, to be innovative and toserve the public good both in the short and longterm.• As a customer and operator, the government mustbuy, use and provide the finest aerospace productsand services for the public good, such as fornational defense, homeland security, air transportationand science.• As a facilitator, the government must create a levelinternational playing field so that the U.S. aerospaceindustry can competeopenly and fairly around theworld.• As an enabler, the governmentmust look to and enablethe future by investing inworkforce development, publicinfrastructure, and longtermresearch critical to thenation’s future.In sum, the health and future ofthe aerospace industry dependson the federal government performing these functionsefficiently and effectively in order to preserveour national security, economic prosperity and thequality of life of all Americans.IssuesThe development andimplementation of federalaerospace policy is currentlyspread across multiplegovernment departmentsand agencies.legislative branch has an integrated view of the healthand future of the aerospace sector.Air transportation policy is but one example of anaerospace issue that crosses many federal departmentsand agencies.• The Department of Transportation (DOT) developsdomestic and international aviation policy.• The Federal Aviation Administration (FAA) regulatesand certifies aircraft safety; develops, acquiresand maintains the air traffic control facilities andequipment at commercial airports; and providesthe air traffic controllers and operates the air trafficmanagement system.• The Department of Defense (DoD) acquires andmaintains the air traffic systems for its airfields;trains military air controllers; and develops andoperates air and space surveillancesystems, secure communicationsand the Global PositioningSystem (GPS) thatsupport its national securitymission. It also conductsresearch and fields technologiesthat are used to manage itsforces globally in combat, suchas JTIDS/Link 16, high-bandwidthdigital communications,battle management systems,and digital terrain and elevationdata. Many of these technologies could be used bythe civil aviation system but are not.• The proposed Department of Homeland Securitywill be responsible for the security of commercialand general aviation and airports, among otherNational Aerospace Consensus: NeededThe development and implementation of federalaerospace policy is currently spread across multiplegovernment departments and agencies, with oversightby numerous and different Congressional committees.(See Appendices F and G.) Therefore, noorganization in either the executive branch or theISSUES• National Aerospace Consensus• Government Organizational Structure• Key Government Processes• Private-public Partnerships5-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote Aerospacethings. Currently, some 22 departments and agenciesshare responsibility for homeland security.• The Department of State, working with the otherfederal departments and agencies, deals with internationaltreaties, agreements and standards developmentdealing with aviation.• The Department of Commerce and, in particular,its National Oceanic and AtmosphericAdministration (NOAA), develops and maintainsthe National Weather System, including the airandspace-based systems, that provides meteorologicaland weather forecasting data used by thenation’s air transportation system.• The Environmental Protection Agency (EPA)provides regulations for vehicle noise and emissionsand environmental permitsfor airport and runwayconstruction.• The National Aeronauticsand Space Administration(NASA) develops prototypealgorithms for the currentcivil air traffic control system,new models and simulationsto improve air traffic managementand technology to improve safety.The federal government does not have a process tobring the appropriate departments and agenciestogether to reach a consensus on national aerospacepolicy. Complicating matters further, there is noprocess that brings all of the stakeholders together toaddress the factors that influence the health and thefuture of the aerospace sector. (See Figure 5-1.)Figure 5-1 Factors Influencing the Health andFuture of the Aerospace SectorPoliticalMarketsTechnologySocial,CulturalandInstitutionalOperationalU.S. global aerospaceleadership will requirePresidential andCongressional leadershipand a unified national team.EnvironmentalLegal &Regulatory5-3The <strong>Commission</strong> believes that sustaining U.S. globalaerospace leadership will require Presidential andCongressional leadership and a unified nationalteam—state and local government, industry, labor,academia and non-governmental organizations—committed to sustaining a healthy U.S. aerospacesector.Government Organizational Structure: NotIntegrated and ResponsiveThe government is not organized to define nationalaerospace priorities, develop federal aerospace sectorplans and budgets, manage programs that cross multipledepartments and agencies, or foster a healthyaerospace sector in a global economy. As describedearlier, no single federal organization is responsiblefor identifying the appropriaterole of aerospace in the contextof the nation’s transportationsystem and other national needs,including homeland and internationalsecurity, air transportation,and space exploitation andexploration. No organization isresponsible for defining nationalaerospace priorities or addressingall of the factors that willinfluence national aerospace policy across all stakeholdersand all dimensions—international, nationaland governmental.The federal government is organized vertically whilenational aerospace challenges are becoming morehorizontal in nature. Legacy structures and processes,which were effective in the past, are fundamentallyincapable of addressing the system-of-systems levelchallenges facing the nation today. These structuresand processes simply must be modified and/orreplaced by integrated, crosscutting structures toachieve our goals.The ability of the United States to compete bothmilitarily and economically requires a governmentthat speaks coherently, can focus its collective capabilitieson national issues, such as terrorism and airtransportation, and can respond quickly and flexiblyto rapidly changing global trends. It requires aFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Figure 5-2 A National Global System-of-Systems Architecturegovernment that is structured and has the appropriateincentives to provide system-of-systems solutionsto problems that transcend all levels of government,industry, labor and academia and national and internationalboundaries.National challenges now will increasingly require system-of-systemssolutions that involve government,industry, labor, academia and non-governmentalorganizations and, in most cases,international involvement. Thenation’s air transportation system,for example, requires all stakeholdersbe involved in the solutionto ensure that:• The nation’s air transportationsystem can move people andcargo safely and securely whenand where they need to go domestically or abroadin peacetime and in wartime;The federal government isorganized verticallywhile national aerospacechallenges are becomingmore horizontal in nature.• Aerospace manufacturers build safe, clean andquiet aircraft that meet international standards andare appropriately equipped;• Airplanes operate safely and have well trainedpilots and crews; and,• Airports have runways and terminals that can handleaircraft of all sizes and capabilities andhave facilities that can move peopleand goods quickly to and fromconnecting modes of transportationwithout sacrificing safety andsecurity.Without integration, nationalaerospace policy occurs either bydefault or piecemeal. Governmentaerospace sector resources oftenare not efficiently focused on national problems,such as air transportation, or new breakthroughopportunities, such as in propulsion and power.5-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote AerospaceThe <strong>Commission</strong> believes that the U.S. governmentcan only ensure U.S. aerospace global leadership byleading itself. To do this, both the executive and legislativebranches need to be reoriented to betteraddress national aerospace issues. Both branchesneed to provide a focus on national aerospace needsand priorities, government aerospace sector plansand budgets, and government management ofnational aerospace initiatives. The <strong>Commission</strong>believes that the following executive and legislativebranch organizational changes are necessary.Executive BranchFederal Departments and Agencies—Offices ofAerospace Development. Most federal departmentsand agencies spend publicfunds to develop, operateand use aerospace-relatedproducts and services toadvance public policy and toperform their missions. Thisincludes departments andagencies typically not identifiedwith aerospace, forexample:• The Department of Agriculture promotes the useof remote sensing for monitoring the nations agricultural,rangeland and forestry resources, and theGlobal Positioning System for improving farmingtechniques, such as precision farming.• The Department of Health and Human Servicespromotes the use of space-based communicationsfor distance medicine and for space-based researchon new medicines and drugs.• The Department of Interior uses aerospace derivedgeodetic information for fish and wildlife preservation,mining reclamation and enforcement, andnational park surveys.• The DOT promotes the use of space-based communicationsand navigation for air, highway, transit,rail and maritime applications, including lawenforcement. It also licenses commercial spacelaunches.The <strong>Commission</strong> believes thateach federal department andmany agencies should have anOffice of Aerospace Development.Appendix F provides a more comprehensive list ofdepartments and agencies that spend public funds onaerospace-related products and/or services. The listhighlights the fact that almost every federal departmentand agency contributes to or benefits from theaerospace industry in performing its mission.Most federal departments and agencies, however, donot have an organization that helps them to: promoteand implement national aerospace policies;define aerospace requirements in support of theirmission; coordinate aerospace policies, plans andprograms within their department or agency; prioritizeaerospace budgets and spending; and leveragebroader aerospace capabilities in the government andthe private sector to achievetheir mission more efficientlyand effectively.The <strong>Commission</strong> believesthat each federal departmentand many agenciesshould have an Office ofAerospace Development toperform these functions better.The Office should report directly to the Office ofthe Secretary or Agency Head and be led by a fulltimesenior executive.Office of Management and Budget—Bureau ofAerospace Management. The federal government isnot organized to deal with issues that are more horizontalthan vertical in nature (i.e., system-of-systemsissues), whether it is developing national aerospacepolicy, defining national priorities, or planning andbudgeting aerospace resources. It does not have anorganization and process that looks at governmentwideplans and budgets with the health and future ofthe aerospace sector in mind. Further, it does nothave an organization that manages initiatives that area national priority, span multiple departments andagencies and require system-of-systems solutions.Development of a next generation air transportationsystem is a good example.To manage its aerospace investments efficiently,effectively and as a sector, the federal government5-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>and the aerospace sector need a standardized set ofterms and definitions in order to get a clear and accuratepicture of government aerospace budgets. Astandard set of terms and definitions will also help toimprove communications, standardize proceduresand processes, and simplify government business andadministrative practices.As the DoD has found over the last several decades,a system-of-systems level solution requires a singleorganization to plan, budget and manage it efficientlyand effectively. As a result, DoD has createdjoint programs that report either directly to theOffice of the Secretary, such as the Missile DefenseAgency and Defense Advanced Research ProjectsAgency (DARPA), or to alead service, such as the U.S.Air Force for the Joint StrikeFighter. The success of thesejoint programs can, in part,be attributed to the DoD’sdecision for a single programmanagement structure.The formation of theDepartment of HomelandSecurity is one of the firstattempts to create an organizationat the interagency levelto provide focused and integrated management ofprograms across the federal government from a systemsperspective. The <strong>Commission</strong> is not proposingthe creation of a new Department of Aerospace. Theexecutive branch, however, needs an organizationthat performs this function for major national aerospaceinitiatives that, through necessity, cross multiplefederal departments and agencies.The <strong>Commission</strong> believes the White House Office ofManagement and Budget (OMB) should performthis function. It should assume a new and proactiverole as horizontal integrator for the government’saerospace sector plans, programs and budgets.Within its organization, OMB should create aBureau of Aerospace Management that would translatethe national aerospace policy into annual planningand budget guidance to the appropriate federaldepartments and agencies. It would also produce anThe Office of Management andBudget should assume a newand proactive role as horizontalintegrator for the government’saerospace sector plans,programs and budgets.5-6annual assessment, plan and budget for governmentaerospace activities.The Bureau should take responsibility for thosemajor aerospace initiatives that cross multipledepartments and/or agencies and are deemed in thenational interest. They should assign a lead organizationto manage the interdepartmental effort. The<strong>Commission</strong>’s approach of developing aerospacecompetency and prioritizing aerospace throughoutthe government will make this role even moreimportant.Critical national aerospace initiatives, especiallythose that require a system-of-systems approach(e.g., modernizing the nation’s air transportation system),require focused andstreamlined management, anational plan that provides awell-defined system architectureand performance measures,and program budgetauthority with clear lines ofresponsibility among participatingdepartments and agencies.OMB seems particularlywell positioned to carry outthis vital management role.White House—Aerospace Policy Coordinating Council.All federal departments and agencies need to beinvolved in developing and implementing nationalaerospace policy. Today, there is no organization orprocess in the executive branch that does this.Because of the importance of aerospace to nationalsecurity, homeland defense and the economy, thispolicy function should be assigned jointly to theNational Security Council and the NationalEconomic Council. They should establish anAerospace Policy Coordinating Council (PCC) todevelop and implement an integrated means offormulating national aerospace policy. This builds on<strong>Commission</strong> deliberations that have identifieda wide range of aerospace policy issues that cutacross the federal government, such as spectrumavailability, GPS civil frequencies, air transportation,space launch infrastructure, workforce and researchpriorities.FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote AerospaceThe Aerospace PCC should include the direct participationof the Office of Vice President, DomesticPolicy Council, OMB, Office of Science andTechnology Policy and Office of Homeland Security.A senior executive should beassigned full time to performthis function.The Aerospace PCC shouldprovide an annual report tothe President with an assessmentof the health of theaerospace sector, including the impact of governmentfiscal and monetary policy, U.S. statutes andregulations (e.g., export controls), internationaltreaties and agreements, and public funding in theaerospace sector.Legislative BranchJoint Committee on Aerospace. The legislative impactof our recommendation to create Offices ofAerospace Development throughout the federal governmentwill be to extend aerospace jurisdiction tomost, if not all, committees on Capitol Hill.A prudent response fromCongress would be to organize aJoint Committee on Aerospace.Therefore, a prudent response from Congress shouldbe to organize a Joint Committee on Aerospace thatwould have the obligation to coordinate legislativelythe multi-faceted jurisdiction issues.Like the former JointCommittee on AtomicEnergy, the Joint Committeeon Aerospace would beempowered to hold hearings,initiate legislation and provideoverarching and integratedguidance and direction to the appropriateCongressional authorization and appropriationscommittees.Key Government Processes: Neither StreamlinedNor IntegratedGovernment processes tend to be complex, lengthyand inefficient. As a result, aerospace products andservices developed and used by the government, suchas military weapon systems and civil space missions,are more costly for the taxpayer and take longer toFigure 5-3 Notional Federal Responsibilities for Coordination and Oversight of Aerospace MattersExecutive BranchLegislative BranchWhiteHouseOffice ofManagementand BudgetOmBFederalDepartmentsand AgenciesHouse andSenateCongressionalBudget OfficeAerospacePolicyCoordinatingCouncilBureau ofAerospaceManagementOffices ofAerospaceDeploymentJointCommitteeOn AerospacePolicyNational Vision, Goals and PrioritiesFinancial PolicyPerformance-Based, Flexible laws and RegsInternational Treaties and AgreementsMaintenance of Nation's Industrial BaseLead Participate ParticipateOversightAuthorityManagement and BudgetCommon Definitions/Currency/PolicyMajor Aerospace Sector BudgetOversightInput Lead Participate AnalysisAuthorityProgram Acquisition and ProcurementMulti-Year Funding, Life-Cycle Cost/ ManagementCivil and Military NeedsSimpler, Shorter, More EfficientBest Practices From Private SectorIncentives For Risk TakingInputLead(DesignateLead)Lead(As Assigned)OversightAuthorityAnalysis5-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>acquire. Also, aerospace products and services developedby industry for sale in the commercial marketplacetake longer and cost more because of extensivegovernment legal and regulatory barriers, resulting inlost market share and diminished profitability.Integrated Government Aerospace SectorPlanning, Budgeting and Program Management.The Government Performance and Results Act of1993 has mandated strategic planning and programmanagement within individual federal departmentsand agencies. The DoD, for example, has a very welldefined strategic management process including:• National strategy and policy development (e.g.,National Security Strategy, Quadrennial DefenseReview);• Requirements definition in the Joint Chiefs ofStaff (e.g., Joint Vision 2020);• Planning and budgeting across the Services andDefense organizations (e.g., DoD Strategic Plan,Defense Guidance); and• Management of joint and individual service programs(e.g., Missile Defense Agency, Joint StrikeFighter, GPS, DARPA).The Government Performance and Results Act,however, does not adequately address strategic planning,budgeting and program management acrossfederal departments and agencies, especially whenthe issues cross military, civilian and commerciallines.Aerospace Sector Budget. The federal governmentspends public funds for aerospace products and servicesin performing its missions. This includes: thedevelopment, procurement and operation of militaryweapon systems and the nation’s civil air trafficcontrol system; the conduct of long-term civil aeronauticsresearch; and the procurement and use of aircraftfor monitoring our borders and for fighting forestfires. It also invests in maintaining the nation’scritical manufacturing capacity, workforce development,national aerospace infrastructure, such asspace launch, and long-term research that directlyAEROSPACE SECTOR CATEGORIZATION• Systems*– Air (e.g., aircraft (fixed, rotary wing), airships,unmanned vehicles)– Missiles (e.g., cruise, guided, ballistic, rockets)– Space (e.g., spacecraft, space transportation)• Services– Air transportation– Telecommunications– Navigation– Earth Monitoring– Others• Infrastructure (e.g., facilities and equipment)– Airports/airfields– Spaceports– Air traffic control– Research, development, test and evaluation facilities– Manufacturing and maintenance facilities– Other launch and support facilities and equipment (e.g.,telemetry, tracking and control)• Research– Government– Industry– Academia• Workforce (e.g., personnel)* Note: Subcategories include: system research, development, test andevaluation; flight systems (production); and operations (including maintenanceand decommissioning).and positively impact the nation’s security, economyand job creation.As the <strong>Commission</strong> noted in Interim Report #1, thefederal government aerospace sector spending, however,is currently spread across multiple governmentagency budgets, with oversight by numerous and differentCongressional committees. As a result, noneof these government groups has an integrated viewof our national aerospace efforts. As was stated5-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote Aerospacepreviously, the government’s organizational structureand planning and budgeting process lack the necessaryoverall insight and accountability to develop andimplement a coherent national strategy and program.This makes it difficult, if not impossible, toprovide overall national aerospace leadership andoversight.As a result, the <strong>Commission</strong> asked the OMB to workwith the <strong>Commission</strong> staff to develop an acceptablecategorical definition of the aerospace sector and toprepare an aerospace sector budget breakout to besubmitted with the President’s annual budgetrequest, by category. Appendix C provides the firstattempt by OMB to provide an aerospace sectorbudget using the categorization depicted in theaccompanying insert.Ultimately, OMB and the Congressional BudgetOffice should agree to a categorization and provideaerospace sector budget data and analysis on anannual basis. The <strong>Commission</strong> believes that thesetwo steps are important, if the executive and legislativebranches are to have insight into the government’saerospace investments.Since this categorization is new and much morecomprehensive than what has been used by the governmentin the past, the <strong>Commission</strong> was not able toassess completely the adequacy, balance and trends inthe government aerospace sector budgets. However,based on existing historical data, the <strong>Commission</strong>has the following observations.• Aeronautics Research and Development. Based onthe data contained in the annual publication of“Aeronautics and Space Report of the President”for the fiscal years 1980 to 2000, the federal aeronauticsbudget more than tripled between 1980and 1993, reaching a peak of $11,359 million in1993. From 1993 to 1999, the budgets declinedby approximately 20 percent to a low of $8,997million before heading upward again with levelsnow approaching those in the early 1990’s. SeeFigure 5-4. Most of this budgetary increase hasbeen in the DoD and DOT. Of concern, however,is the continued decrease in NASA’s civil aeronauticsbudget. This is unacceptable given the hugeopportunities to improve the nation’s air transportationsystem as discussed in Chapter 2.Figure 5-4 Federal Aeronautics Budget (in millions of dollars)FYa b c,dDoD NASA DOT TOTAL1199311994119951199611997119981199920002001200220031,27,5826,8487,1966,7926,3236,2565,5326,46036,58736,14936,8081,2451,5461,3101,3151,2521,3271,1941,06098599798542,5322,3092,2122,0522,1462,0992,2712,2012,8383,2033,10733311,35910,70310,71810,1599,7219,6828,9979,72110,41010,34910,900Notes:aResearch, Development, Testing, and Evaluation of Aircraft and Related Equipment.bResearch, Development, Construction of Facilities, Research and Program Management.cFederal Aviation Administration: Research, Engineering, and Development; Facilities, Engineering, and Development.dDOT's R,E&D Presidential budget for 2003 is $126 million. This does not reflect aviation security R&D that has been movedfrom FAA to the Transportation Security Administration (TSA).eDepartment of Energy (DOE) has an annual budget of approximately $70 million for aircraft and systems research anddevelopment.1Budget numbers are from the "Aeronautics and Space Report of the President" for years 1993-2000.2The budget figures for the year 2000 are estimates.3Budget numbers from Office of Management and Budget.4Presidential Budget for FY 20035-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>• Space. The “Aeronautics and Space Report ofthe President, Fiscal Year (FY) 2000 Activities”shows that annual government budgets for civiland military space (in equivalent FY 1999dollars) have essentially been flat at approximately$26 billion per year since 1995 after reaching apeak of $37 billion in 1989. During the periodfrom 1989 to 1995, the DoD saw a decrease ofover 50 percent from $23.8 billion in FY 1988 to$11.6 billion in FY 1995. This downward trendhas now been reversed and investments areapproaching the levels of the early 1990s. Over thelast decade, NOAA saw itsbudgets increase from approximately$300 million in FY1990 to $571 million in FY2000.On the other hand, from FY1991 to FY 2000, NASA’sspace budget authoritydeclined by almost 20 percentfrom $15.8 billion to $12.5 billion. Given theextreme importance of civil space to the nation,the <strong>Commission</strong> finds this alarming.The federal budget, however, only provides a partialpicture of government investments in the aerospacesector. The federal budget is a policy document anddoes not explain in detail how the budget authorityThe federal budget onlyprovides a partial pictureof government investmentsin the aerospace sector.is spent. To understand more about specific spending,the <strong>Commission</strong> contracted with the RANDCorporation to determine federal procurementspending in the aerospace sector. Figure 5-5 providesa summary of this data from 1993 through 2001.Additional information can be found in AppendixD. The data show the following:• Procurement. The direct link between the U.S. governmentand the nation’s aerospace industry is thefederal procurement system through which federalagencies purchase air, missiles and space systemsand their related infrastructurefrom the private sector companiesthat comprise the aerospaceindustry. The past decade haswitnessed a steady decline in federalprocurement spending in allof these areas. Specifically, itshows that between FY 1993 andFY 2001, federal procurementspending dropped 35 percent onair systems, 50 percent on missile systems, and 46percent on space systems in absolute dollars. Atthe same time that the U.S. government was buyingfewer and fewer aerospace systems, federaldepartments and agencies were also investingfewer dollars in R&D efforts of private industry toadvance and improve existing aerospace systems.The combined spending of all federal departmentsFigure 5-5 Federal Aerospace Procurement andR&D Expenditures FY 1993 – FY 20016050Obligations ($ Billions)403020100Air SystemsResearch and Development(Conduct Only)1993 1994 1995 1996 1997 1998 1999 2000 2001Fiscal YearMissile Systems(Including Ballistic Missiles)Space Systems5-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote Aerospaceand agencies on extramural aerospace-relatedR&D dropped by 46 percent in absolute dollars.In the past decade, federal support for major segmentsof the aerospace industry has declined significantlyas evidenced by direct purchases.• Personnel. The U.S. Air Force, NASA and FAA arethe three lead agencies for aerospace. Figure 5-6shows that during the same years in which federalsupport to the aerospace industry was declining,U.S. Air Force, NASA and FAA spending on theirown internal workforces (i.e., personnel) increasedby 25 percent in absolute dollars even thoughoverall federal support to the industry was declining.This suggests, that in the past decade, theoperating costs of those three organizations beganto “encroach upon” activities in other areas (i.e.,procurement and R&D).• Government Users of Aerospace Systems. DoD,DOT/FAA and NASA are the major federaldepartments and agencies involved in aerospace,accounting for over 99 percent of federal procurementspending. There are others departments andagencies that are major users of aerospace productsand services and have spent more than $100 millionin at least one fiscal year between 1996 and2000. These include the General ServicesAdministration and the Departments of Energy,State and Justice.Even though the <strong>Commission</strong> was not able to assesscompletely the adequacy, balance and trends in thegovernment aerospace sector budgets using the newaerospace sector categorization used by OMB, it wasable to get some insight into important trends ingovernment aerospace sector procurement and personnelcosts. This information has not been availableto decision makers in the past but needs to be in thefuture.The <strong>Commission</strong> believes, therefore, that both theexecutive and legislative branches of governmentneed better insight into aerospace sector budgets andprocurement and personnel costs over time. Toachieve this, both branches should adopt the aerospacesector categorization definition developed bythe <strong>Commission</strong> with OMB. Further, OMB shouldprepare a budget and spending breakout, by category,as an addendum to the President’s AnnualBudget Request. The Department of Commerceshould compile and present baseline statistics on theeconomic performance and investment expendituresof the aerospace sector for the purpose of comparingfederal outlays. And, the Congressional BudgetOffice should provide an annual sectoral budgetbreakdown that parallels the President’s AnnualBudget Request, using the same aerospace sector categorization.Figure 5-6 Air Force, NASA, and FAA Personnel ExpendituresFY 1993 – FY 20013530Expenditures ($ Billions)25201510501993 1994 1995 1996 1997 1998 1999 2000 2001Fiscal Year5-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Integrated Government Science, Technologyand Acquisition Process. In the future, governmentmust think and act on the same time scalesas industry—weeks and months as opposed toyears and decades. This will require a much simpler,better-integrated and more streamlined governmentscience and technology (S&T) and acquisitionprocess.The government’s current S&T and acquisitionprocess is rooted in the nation’s science policy thatwas articulated by President Roosevelt’s Director ofthe Office of Scientific Research and Development,Vannevar Bush, in 1945. The science policy suggestedthat basic researchleads to applied research,then to technology developmentand, ultimately toproduct development andsales. This linear model hasresulted in segmentation asopposed to integration ofS&T and acquisition notonly within and among governmentorganizations butalso across government, industry and academia.Today, the government’s S&T and acquisitionprocess:• Is complex, fragmented, and lengthy;• Has a one-year planning, budgeting and executiontime horizon;• Varies from department to department and agencyto agency and, hence, is a maze of differentprocesses, practices and procedures for governmentcustomers and stakeholders to figure out and use;• Does not use best business practices and performance-basedcontracting, standards and certificationprocesses; and• Provides few incentives for risk taking, privateinvestment, cost sharing and cost and timesavings.Global competition dictates that the U.S. aerospacesector must transition from the fragmented, linearand functional-oriented S&T and acquisitionGlobal competition dictatesthat the United States aerospacesector’s product-developmentprocess be dramatically simpler,integrated, and streamlined.process to a dramatically simpler, integrated, andstreamlined product-development process—anational innovation process. The sector needs aprocess that enables it to transform the best domesticand international ideas available into new andbetter products and services faster than our competitors.It needs a process that has dramatically shortercycle times and provides a much higher rate of returnon the nation’s investments and natural resources.To meet this challenges, the aerospace industry hasstarted to: reengineer its major business and manufacturingprocesses; integrate its research and developmentwith its manufacturing processes; createpartnerships with governmentand industry to leveragenational research investments;automate theseprocesses using tools such ascomputer-aided design,development and manufacturing;and adopte internationalquality standards.The federal government isunder similar pressures fromthe public and its internal customers to deliver betterproducts and services faster and cheaper for the taxpayer.As with industry, it also needs to integrate,streamline and speed up its product-developmentprocess.In summary, the <strong>Commission</strong> believes that boththe executive and legislative branches should worktogether to:• Create a common set of terms and definitions(e.g., aerospace sector, aerospace sectoral budgetcategorization), currency (e.g., not different “colors”and kinds of funds) and administrative andbusiness policies, practices and procedures acrossthe government;• Reengineer its strategic planning and budgetprocess to look at government aerospace policesand investments as a sector and from a long-termperspective (e.g., multi-year funding, life-cyclecosting and management);5-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote Aerospace• Create a single S&T and acquisition process—aproduct-development or innovation process—thatis simpler, shorter and more efficient, uses privatepublicpartnerships and addresses both civil andmilitary needs;• Emulate best private sector business practices,including the use of performance-based contractingand process (not product) certification; and• Provide incentives for risk taking, capital formation,cost and risk sharing, and time and costsavings.Public-Private Partnerships: Difficult to BuildGovernment, industry, labor and academia mustwork together—as partners—to transform the waythey do business, allowing the nation to capitalize onthe best ideas available and apply them rapidly tonew aerospace products, processes and services. Eachplay different, but important, roles. They cannotperform these roles separately or in isolation. Eachmust understand its role and work together to createan environment that fosters innovation in aerospacesector. Collectively, they need shared goals, objectivesand incentives to share the risks, costs and benefits ofdoing business.• Government, at all levels, should:– Provide leadership and policy that prepares thenation for the future while sustaining publictrust and confidence today;– Create a supportive legal and regulatory frameworkthat enables rapid introduction of newproducts and services;– Encourage open and fair global competition andmarkets; and– Invest in the future—workforce development,special-purpose national infrastructure and longtermresearch.• Industry should:– Understand customer and market needs;– Produce quality aerospace products and services;– Invest in technologies and concepts that willprovide a competitive advantage;– Leverage government investments in long-termresearch; and– Ensure that it has the manufacturing capacityand human resources needed to produce and sellnew products and services quickly and affordably.• Labor should:– Represent workers and ensure that they aretreated fairly by employers,– Engage in collective bargaining on behalf of theworkforce,– Hold industry accountable to the workforce andthe communities where work is performed,– Develop and enhance existing training andapprenticeship programs, and– Provide a voice for workers.• Academia should:– Play a leadership role in developing the welleducated,scientifically literate workforce thatgovernment and industry will need in the future,and– Perform cutting-edge research for the nation.To date the success of private-public partnerships aremixed, but they are improving. One potential measureof the outcome of these partnerships is the numberof jobs, wages, establishments and payroll datafor the U.S. aerospace and aviation industry.Appendix E provides a summary of national,regional, state and metropolitan data collected by the<strong>Commission</strong>.The <strong>Commission</strong> believes that all of the stakeholdersmust work together to ensure that the governmentcan do its mission and the commercial sector toprosper and compete successfully. They all have astake in the outcome; and all need to work togetherto ensure that the outcome is in the best interest ofthe nation and the American people.5-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ConclusionsThe <strong>Commission</strong> concludes that the governmentmust ensure that the nation has a healthy aerospaceindustry today and in the future, an industry thatcan not only meet the security and economic needsof the country but also can compete successfully inthe international market place. The governmentneeds to exert leadership and prioritize and promoteaerospace by managing its activities efficiently, effectivelyand as a sector to accomplish national objectives.It needs to create an environment that fostersinnovation in the U.S. aerospace industry, ensuringits competitiveness into the 21st century.Create a National Aerospace Consensus. The federalgovernment does not have a national aerospaceconsensus that supports broader national securityand economic policies, goals and objectives. This willrequire Presidential and Congressional leadership todevelop a consensus of federal, state and local government,industry, labor, academia and non-governmentalorganizations to sustain a healthy U.S. aerospacesector.Reorient Government Organizational Structures.The federal government is dysfunctionalwhen addressing 21st century issues from a longterm,national and global perspective. Government isorganized vertically while national problems arebecoming more horizontal in nature requiring system-of-systemssolutions. Key government processes,such as planning and budgeting, are currently spreadacross multiple departments and agencies, with oversightby numerous Congressional committees. As aresult, none of these government groups has an integratedview of our national aerospace efforts.The executive and legislative branches need to bereoriented to provide a focus on national aerospaceneeds and priorities, government aerospace plans andbudgets, and government management of nationalaerospace initiatives.• Federal Departments and Agencies. Every federaldepartment and most federal agencies shouldcreate an Office of Aerospace Development toprioritize and promote aerospace activities withintheir organizations and with the public that theyserve;• Office of Management and Budget. OMB shouldestablish a Bureau of Aerospace Management todevelop and implement an aerospace strategicplan, establish an acceptable categorical definitionof the aerospace sector, prepare an annual aerospacesector budget as an addendum to thePresident’s Budget Request, and manage majornational aerospace initiatives; and,• White House. The White House should establishan aerospace policy coordinating council todevelop and implement national aerospace policyconsistent with national security and economicgoals and objectives.• Congress. In response to these executive branchchanges, the <strong>Commission</strong>s encourages the legislativebranch to create a Joint Committee onAerospace to coordinate legislatively the multifacetedjurisdictional issues.Streamline and Integrate Key GovernmentProcesses. Government processes for policy, planning,and budgeting, and for developing and acquiringaerospace products and services are vestiges of theCold War. As a result, they tend to be ad hoc, complex,lengthy and inefficient. The Administrationand the Congress need to make a concerted effort tostreamline these key government processes to reflectthe new realities of a highly dynamic, competitiveand global marketplace. Specifically, they shouldwork together to create: an integrated federal planning,budgeting and program management process;an integrated government science, technology andacquisition process; and an environment that fostersrather than impedes innovation in the aerospacesector.Promote Private-public Partnerships. Partnershipsand interconnectedness are keys to competitivenessin the future. Government, industry, laborand academia play different, but important, rolesin developing and deploying new aerospace productsand services. They cannot perform these rolesseparately and in isolation. But today, cultural and5-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 5 – Government: Prioritize and Promote Aerospaceinstitutional biases hinder their ability to partner andachieve national goals. We need to create an environmentand the incentives that will foster privatepublicpartnerships.RECOMMENDATION #5The <strong>Commission</strong> recommends that the federalgovernment establish a national aerospace policyand promote aerospace by creating a government-widemanagement structure. This wouldinclude a White House policy coordinating council,an aerospace management office in the Office ofManagement and Budget, and a joint committeein Congress. The <strong>Commission</strong> further recommendsthe use of an annual aerospace sectoral budget toestablish presidential aerospace initiatives, assurecoordinated funding for such initiatives, andreplace vertical decision-making with horizontallydetermined decisions in both authorizations andappropriations.5-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairRECOMMENDATION #6: The <strong>Commission</strong> recommends that U.S. andmultilateral regulations and policies be reformed to enable the movementof products and capital across international borders on a fully competitivebasis, and establish a level playing field for U.S. industry in the globalmarketplace. The U.S. export control regulations must be substantiallyoverhauled, evolving from current restrictions on technologies through thereview of transactions to controls on key capabilities enforced throughprocess controls. The U.S. government should neutralize foreign governmentmarket intervention in areas such as subsidies, tax policy, exportfinancing, and standards, either through strengthening multilateral disciplinesor providing similar support for U.S. industry as necessary.Chapter 6Global Markets: Openand FairU.S. aerospace companies currently enjoy a dominantposition in the global market for civil anddefense products. Seven of the world’s top ten aerospacecompanies measured by annual aerospacerelatedsales are based in the United States. The successof U.S. aerospace companies has been a result oftwo factors: (1) government investments in longtermresearch and cutting-edge national infrastructure;and, (2) industry’s ability to develop and integratenew technology into their products and servicesand achieve economies of scale in productionthrough access to a broad global customer base.Since the end of the Cold War, the U.S. aerospaceindustry has changed from an industry primarilydependent upon the defense market to one in whicha significant portion of its sales are commercial. Theresult of this change is that for the first time in U.S.history aerospace companies must succeed commerciallyto remain viable. If they do not, the nation willlose itsdefense industrial base. As a result, the United Statesmust maintain its global commercial leadership.However, U.S. industry dominance of the commercialmarket is eroding. Some of this loss in marketshare is inevitable as other companies mature andimprove their ability to compete. Government regulations,protectionist policies and our government’sfailure to invest adequately in technology innovationalso are to blame. We must take action to reverse thiserosion.Figure 6-1 2001 Annual Aerospace-related Revenue(in billions) of Top Global Aerospace CompaniesBoeing/USAEADS/EULockheed Martin/USABAE Systems plc/EURaytheon/USAGE/USAUTC/USAHoneywell/USANorthrop Grumman/USABombardier/CanadaSource: company annual reports$27.0$24.0$19.0$16.4$13.0$13.0$9.7$8.2$7.6$58.26-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The <strong>Commission</strong> wants to make it clear that we arenot calling for industrial policy. Rather, we call for apolicy of cooperation between the U.S. governmentand the U.S. aerospace industry to establish a fairand open competitive global market. Governmentpolicies and investments have a major impact on thehealth and future of the U.S. aerospace industry.Therefore, it is important that government andindustry work together to achieve national policyobjectives. For example, U.S. government investmentsin aerospace are viewed by some as commercialsubsidies. They are not.U.S. investments in defense provide security forAmerica as well as for its friends and allies abroad.Likewise, U.S. government investments in long-termresearch and critical aerospace infrastructure benefitU.S. companies as well as companies around theworld. National Aeronautics and Space Administration(NASA) investments in fly-by-wire technology,for example, were first applied to commercial aircraftdesigned in Europe. What concerns the <strong>Commission</strong>is that other governments are practicing industrialpolicy by funding the transfer of our research andtheirs into commercial products and services, givingtheir industries a competitive advantage.Objective: A Globally-CompetitiveIndustryTo lead an increasingly global industry, U.S. companiesmust remain at the forefront of technologyinnovation and continue to have access to globalmarkets. This requires collaboration at the global system-of-systemslevel, such as in air transportationmanagement, to establish common rules and procedures,and competition at the system level, such asaircraft, parts, components, to drive innovation,quality and efficiency.The United States government must: (a) enable U.S.companies to retain their position at the forefront oftechnology innovation, (b) reduce government interventionin the market whenever possible, and (c)counteract government-generated market distortionswhen no alternative exists. Where other countries orcoalitions of countries distort the market throughpolicy, regulation or subsidy, the U.S. governmentmust act to level the playing field. If successful, U.S.companies will compete in an environment characterizedby:• An export control system and military procurementpolicies that allow U.S. companies toFigure 6-2 U.S. Aerospace Trade Balance**Includes aircraft, missiles, space vehicles and parts.$80$60ExportsImportsSurplus$40$ Billions$20$0-$20-$40 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Source: Aerospace Industries Association6-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairFigure 6-3 U.S. Aerospace Export Share of ProductionBillion $180Shipments in $ Exports in $ Export % of Shipments1601401201008060402001981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Source: Aerospace Industries Association100%90%80%70%60%50%40%30%20%10%0%compete and partner globally without compromisingnational security;• Robust U.S. government funding for long-termresearch and development; and• A global aerospace market free from distortionscaused by protectionist and market distorting foreigngovernment policies.IssuesOpen global markets are critical to the continuedeconomic health of U.S. aerospace companies and toU.S. national security. International markets helpU.S. companies to grow by providing a broad customerbase. The 2001 U.S.aerospace trade surplus wasnearly $32 billion, the largestsurplus of any U.S. manufacturingsector. Over half of allU.S.-manufactured large civilaircraft are sold to non-U.S.customers, and foreign airlines represent the largestmarket growth prospects for the next 20 years. 1Twenty-five percent of general aviation airplanesproduced in the United States are sold to overseascustomers. 2 Overall, exports consistently account foraround one third of total U.S. aerospace production.Global demand for aerospace products and servicesincreased dramatically over the last twenty years.The <strong>Commission</strong> wants to makeit clear that we are not callingfor industrial policy.Global airline fleets tripled as aircraft connectedthe world’s economies with readily available andrelatively affordable transportation. Governmentsaround the world reduced tariffs and other trade barriersthrough multilateral and bilateral agreements,opening up new markets for airlines and for producersand reducing the cost of trade.Revenues generated through export sales helpedcompanies to fund development of new technology,and a broad customer base enabled U.S. companiesto achieve economies of scale necessary to incorporateinnovative technology into new generations ofproducts. Open international markets enabled U.S.aerospace companies to retainproduction and jobs in theUnited States instead of forcinginvestment overseas to getaround trade barriers.International partners alsohave contributed to the economicsuccess of U.S. companies and to our nationalsecurity. These partners have contributed technologyand funding to development of new civilian and militaryproducts and services. They have opened upnew markets and strengthened our ties with allies.They are contributing to our national security byfacilitating the increased cooperation and interoperabilitywith allies required in emerging models ofcoalition and network-centric warfare.6-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Figure 6-4 Turbojet Aircraft in the WorldAirline Fleet by Country of OriginEU 11%1980 2000Russia 4%Russia 9%Other 5%Figure 6-5 Turboprop Aircraft in the WorldAirline Fleet by Country of Origin1980 2000U.S. 25% U.S. 31%Other 27% Other 21%EU 21%Russia 10%Russia 11%U.S. 85%Total Jet Aircraft = 5,756U.S. 65%Total Jet Aircraft = 16,405U.S. EU Russia OtherTotal Turboprop = 2,059AircraftEU 38% EU 37%Total Turboprop = 7,330AircraftU.S. EU Russia OtherFigure 6-6 Turbine Helicopters in the WorldAirline Fleet by Country of OriginEU 15%1980 2000Russia 2%Russia 11%EU 28%Other 1%U.S. 83% U.S. 60%Total Helicopters = 195 Total Helicopters = 1,438U.S. EU Russia OtherFigure 6-7 Installed Jet Engines in the WorldAirline Fleet by ManufacturerIAE 1%CFM 6%Rolls-Royce 9%GE 10%1980 2000Other 22%CFM 20%Rolls-Royce 10%IAE 3%GE 14%P&W 52% P&W 36%Total Engines = 30,016 Total Engines = 41,681P&W GE Rolls-Royce CFM IAEOther17%OtherFigure 6-4 through 6-7 Source: Aerospace Industries AssociationThe U.S. industry share of the global market, however,has declined in key sectors over the last twentyyears. We are on the brink of ceding our position asthe top producer of large commercial aircraft, andare losing market share in civil helicopters and aircraftengines. We have made small gains in the commercialturboprop aircraft market, although regionaljets are replacing larger turboprops in many markets.The situation is somewhat better in space-relatedindustries. The United States remains one of onlytwo nations with human-rated space launch capability,and the only operator of a versatile space shuttle.Until 1999 U.S. companies led the world spacelaunch market in terms of number of commercialand military launches, and have established a numberof joint programs with Russian companies, theirclosest competitors. 3 U.S. companies dominatethe world satellite manufacturing industry in largesatellites and are very competitive in the manufactureof new smaller satellites. U.S. manufacturers continueto lead worldwide in sales and development ofmissile systems. 4We remain strongest in military aircraft markets.U.S.-origin aircraft dominate existing internationalfleets of military transports, tankers and helicopters. 5Existing world fleets of Russian origin combat aircraftand non-piston engine trainers exceed those ofU.S. origin, but U.S. market share is set to grow withthe introduction of the Joint Strike Fighter and procurementsof F-22 fighters, while sales and replacementsof Russian fighter aircraft are weak at best.Nonetheless, we have determined that continueddominance of each of these sectors is by no meansassured. U.S. industry is slowly losing market shareto foreign competitors.6-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and Fairposition in many sectors. Russia is an importantpartner in space flight and exploration, and agrowing partner and competitor in commercial andmilitary aerospace production.Other countries with long-established aerospaceindustries historically have focused on producing alimited range of complete products and supplyingparts and subsystems to other large manufacturers.They are now expanding their market presence withfirst-tier prime manufacturers.U.S. companies dominate the worldsatellite manufacturing industry.European companies present the most formidablecompetition to U.S. companies in global markets asthe only other current producers of large civil aircraftand complete engines, and leading producers of helicoptersand many elements of military hardware.Europe leads the world commercial space launchmarket, and European advances in satellite manufacturingcapability as well as consolidation of theEuropean missile industry may result in decliningU.S. share of these markets. 6European companies also are our most importantpartners. U.S. companies collaborate more withcompanies from Europe than from any other countryor region in the world, through partnerships onprojects and systems, joint ventures and directinvestment. Not surprisingly, Europe is the biggestcustomer of U.S. aerospace exports, as well as thelargest supplier of U.S. aerospace imports.The Russian aerospace industry also is highly developedin all sectors, although most Russian aerospacemanufacturing has ground to a halt under the weightof economic and political problems following thedissolution of the Soviet Union. This is turningaround, in part because of the evolving relationshipsbetween U.S. companies and their Russian counterparts.However, it is unclear when and if Russianaerospace manufacturing will regain a competitiveFor example, U.S. and Canadian aerospace industrieshave had close ties for decades with significantcross-border trade and investment. Successful sales ofregional and business jet aircraft have propelledBombardier into one of the top ten global aerospaceindustry companies with plans to break into the 100seat commercial aircraft market. Japan has long beenan integral supplier of small and large subsystems fora wide variety of U.S. aircraft and engine programs.Japan also produces a limited selection of indigenouscivil and military aircraft and trainers. After nearlytwenty years of development, Japan has just completeddevelopment of its first space launch vehicleto be offered on the global commercial market.New partners and competitors in Asia and LatinAmerica are further changing global market dynamics.For example, the Chinese aerospace industry hasa number of civil and military aircraft programsunder development. More importantly, the Chinesegovernment has identified aerospace as one ofEuropean companies present the most formidable competitionto U.S. companies in global markets as the only other currentproducers of large commercial aircraft.6-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The Chinese government has identified aerospace as oneof China’s leading high-technology industries for the 21stcentury centered around a core government policy goal ofself-reliance in the aerospace and defense sectors.China’s leading high-technology industries for the21st century centered around a core governmentpolicy goal of self-reliance in the aerospace anddefense sectors. Chinese companies seek to becomeworld-class producers by 2012, in part via closecooperation with major international aerospace firmsand enhanced supplier relationships with non-Chinese primes. Other Asian countries such as Koreaand India also are establishing sophisticated aerospaceindustries. In SouthAmerica, Brazil has emerged asa significant player in a numberof areas, led by sales of regionalaircraft to airlines around theworld.Competition is healthy. Itdrives innovation, quality andefficiency.We are greatly concerned, however, where the rise inforeign competition has been aided by persistentgovernment intervention. We see concerted strategiesby other governments to unseat U.S. companiesfrom their position of world leadership.Interventionist policies are being used as tools toestablish and support “national champions” protectingthem from market forces at the expense of U.S.We are greatly concernedwhere the rise in foreigncompetition has been aidedby persistent governmentintervention.industry. These policies are described in the“International Playing Field” section later in thischapter.Many governments have well-established aerospaceindustrial policies because of the unique marketdynamics of the industry and the blurring linebetween civil and military products. Aerospace is acomplex, expensive and highly cyclical industry characterizedby long lead times for new product developmentand purchase decisions. The aerospaceindustry also is highly susceptible to external factorssuch as terrorism or general economic downturn.And in spite of growing overall size of the commercialaviation market, it can support only a limitednumber of major aerospace manufacturers. As aresult, governments often provide financial supportto help their companies get into the market and tostay there.Production choices are not made entirely accordingto immediate market demand and price. Manufacturersin essence “buy market share” by offering discountsto entice downstream sales of additionalproducts, replacements, spares and repairs. Airlinestend toward equipment commonality to increaseflexibility of their labor and route structure, as well asto reduce operation and maintenance costs. Militaryprocurements often are focusedon procurement of a singleproduct to satisfy each particularrequirement. In this environment,governments sometimesare able to sway procurementdecisions with political pressure.It also is difficult to separatecommercial considerationsfrom national security. Militaryusers increasingly look to civilian aerospace productsfor military applications, and hence may intervene incivilian markets to protect military capability. Forthis reason, recent years have witnessed dramaticconsolidation of the aerospace industry on a nationallevel, but insufficient rationalization on a globallevel.6-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairWe have identified key areas of intervention thatwarrant a policy response from the U.S. government.These include:• Restrictions on sales or transferof technology to foreigncustomers through exportcontrols;• Restrictions on collaborationthrough partnerships, acquisitions,foreign investmentand military procurement offoreign-sourced products;• Significant governmentfunding for commercialaerospace research and development,and in some casesassistance with the “launch”of new products;• Tax law;• Export financing for civil and military products;• Obstacles to collaboration on commercial projects;Our qualitatively superiormilitary force depended onsubstantial peacetime researchand development to producequalitatively superior weapons,and a systematic program tokeep that advanced technologyout of our opponents’ hands.composed of democratic states committed to standingtogether against the threat. Second, we stationedsubstantial American forces in Europe and Asia onan indefinite basis and extended America’s nuclearguarantee to our allies. Third,we committed ourselves tobuilding a qualitatively superiormilitary force to counterthe numerical superiority ofthe Warsaw Pact.The qualitatively superior militaryforce depended on twosubordinate strategies. First,we committed to a program ofsubstantial peacetime researchand development to insure weinvented more advanced ideasand brought those ideas intoproduction with qualitativelysuperior weapons. Second, we instituted a systematicprogram to keep that advanced technology out of thehands of our opponents through effective exportcontrols.• Regulations and standards used by national governmentsto distort markets and provide theirdomestic firms a competitive advantage; and• Insufficient commitment to global partnerships inair transportation systems and space activities.Export Controls and Defense Procurement Policies:Impede CompetitivenessThe preeminence of U.S. military aerospacecapability is a direct result of our concerted policiesto withstand and ultimately defeat internationalcommunism. In the early years of the Cold War,America and our allies were confronted by anumerically-superior opponent that threatenedour European allies from secure interior linesof communication compared to our need tomobilize and project forces from the United States.To deter our opponent, we crafted a three-part strategy.First, we assembled a standing military allianceISSUES• Export Controls and Defense Procurement Policies– Restrictive Export Controls– Collaboration in Defense Procurement• International “Playing Field”– Commercial Research and Development Funding– Domestic Tax Policy– Export Financing– Commercial Mergers and Teaming– Offsets– Regulations and Standards• Global Partnerships– Air Traffic Management– Open Global Air Transportation– Cooperative Space Activities6-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The RAH-66 Comanche helicopter is one of the keyupcoming aircraft programs that has been scaled back.The strategy worked. The commitment to militarysuperiority depended on those two equally importantpolicies—strong continuing research anddevelopment and systematic export control. Itshould be noted that these policies never preventedthe Soviet Union from stealing America’s industrialsecrets, or the secrets of our allies. Indeed, we werecontinually confronted by effective Soviet espionagethat stole our military secrets. But in the main, thestrategy worked because it insured that we stayedqualitatively ahead of ouropponent. We won the racebecause we never stoppedrunning.The end of the Cold Warbrought about a shift in U.S.military research and procurementpriorities, withnegative consequences forthe U.S. military aerospaceestablishment. U.S. Departmentof Defense (DoD)spending for aircraft research, development, testingand evaluation (RDT&E) declined dramatically inthe 1990s. U.S. DoD aircraft procurements droppedby half during that period as well.The end of the Cold War broughtabout a shift in U.S. militaryresearch and procurementpriorities, with negativeconsequences for the U.S.military aerospace establishment.The RDT&E trend appears to be reversing as theU.S. fights the war on terrorism and takes a new lookat U.S. military capabilities and priorities. Hopefullythis increase in spending is evidence of a long-termreorientation instead of a temporary aberration. Ourdefense investment is critical to provide for the securityof the U.S. and the world. This increase isneeded due to the lack of defense investment elsewherein the world.The outlook for military aircraft procurement is lessclear. Although we now are committing moreresources to keeping our military aircraft fleet flying,future aircraft procurement projects face an uncertainfuture. U.S. military planners are investigatingoptions to fund transformational changes in our militarycapability to meet emerging needs. This hasresulted in scaling back or canceling key upcomingaircraft programs, including the F-22 fighter, theV-22 tilt-rotor and the RAH-66 Comanche helicopter.However, air and space assets likely will continueto play a central role in any new concepts of militaryoperations and warfare.Restrictive Export Controls. One of the primaryobstacles to the health and competitiveness of theU.S. aerospace industry isour own export controlregime. Export controls havebeen and should be animportant component ofAmerica’s national security.We believe, however, currentexport controls are increasinglycounterproductive toour national security interestsin their current form andunder current practices ofimplementation. In ourjudgment, export control reform is crucial to providebetter security in the future and to insure the healthand vitality of our aerospace industry.6-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairAs a central element of our concerted military policy,export controls took two forms. We tried to controlthe export of weapon systems directly through a systemof export controls managed by the Departmentof State. We also tried to limit the export of commercialproducts and technology that could beapplied to military purposes, the so-called “dual use”items. Dual use export controls were managed by theDepartment of Commerce.Export controls largely worked because we created aconsensus with our European allies to control thesame things globally. All of the countries agreed tolimit the export of military items. And the dual-useitems were controlled through the CoordinatingCommittee of the North Atlantic TreatyOrganization (COCOM) process.At the end of the Cold War, several trends dramaticallyaffected the course of export controls. First, theUnited States broadened the use of export controlsbeyond our Cold War strategy. Export controls andembargoes became a favored way to signal our disapprovalof other countries and to express foreignpolicy objectives. Second, the consensus with ourallies broke down after the end of the Warsaw Pactand the Soviet Union. The COCOM system was dissolvedand replaced by a weakWaasenar process. Europeanallies often saw our exportrestrictions as protectionismintended to enhance U.S.commercial competitivenessrather than national securitymeasures. Third, the nature ofadvanced manufacturing anddesign evolved sharply as companiesand consortia of companiesestablished trans-national design teams. Justin-timebusiness practices evolved with internationalshipments of components being installed withinhours of receipt at the loading dock.Export controls, which were set up in an era of localmanufacturing and slow paper-based processing,strained (unsuccessfully, we believe) to cope with theexplosion of new technologies and business practices.Export controls largely workedin the past because we createda consensus with our Europeanallies to control the samethings globally.Over 180 individual export control licenses have been needed forexport sales of C-130J military transport aircraft to the United Kingdom(UK) Royal Air Force, to support companies in the UK that are involvedin the production of the aircraft. The U.S. prime manufacturer mustapply for a new Technology Assistance Agreement every time the U.S.company needs to discuss technical issues for parts being manufacturedby the UK partner. The UK company was selected for it's manufacturingexpertise and capabilities and therefore it is difficult to see how thisprocess is effective in protecting national security.In the process, export controls became increasinglycomplex, elaborate and burdensome.Our complaint about export controls is twofold.First, we believe export controls now provide toolittle security and impose enormous inefficiency.Some 40,000-export licenses are reviewed every yearby the Department of State, and 99.8 percent of thelicenses are approved, too often after many longmonths of review. The bulk of the licenses arerequired for prosaic items of equipment, often to ourstrongest allies. Ninety percentof the military export licensesare granted to companiesexporting equipment andcomponents to North AtlanticTreaty Organization (NATO)allies, for example. The currentsystem fails to distinguish adequatelybetween friend andfoe, between cutting-edge andpedestrian technology.Administrative hurdles and out-of-date informationfurther exacerbate the inefficiencies of the system.Country risk surveys used to evaluate the willingnessand ability of recipient nations to comply withrestrictions on the unauthorized use or retransfer ofU.S.-origin defense exports are woefully out of date.The absence of up-to-date information causesexport-licensing authorities to depend on data that6-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>may no longer reflect current conditions in manyUnited States defense export markets when evaluatinglicenses. It also puts U.S. negotiators at a disadvantagewhen consulting with other governments onhow to strengthen compliance among the communityof nations with whom the U.S. shares moderndefense hardware and technology. Bad informationmakes for bad decisions.More importantly, U.S. export controls are underminingone of the central goals of military planningduring the past 30 years—alliance interoperability.We actively try to get allies to buy American militaryequipment to improve our ability to fight as analliance, yet we bog down that process through nettlesomeexport controls. For example, during theKosovo air war, allies were petitioning the DoD tointercede with the State Department to expeditelicense approval of weapon systems needed to armcombat aircraft flying side-by-sidewith American pilots.Export controls are underminingthe collaboration betweencompanies in alliance countrieson new system developments.Foreign companies have actuallyinstructed design engineers toWe believe U.S. exportcontrols now provide toolittle security and imposeenormous inefficiency.We do think it is important to block the sale of stealth technology,for example, but see little reason to block the sale of five-ton trucks.avoid American components because of the difficultyof acquiring license approval from the United Statesgovernment.The current approach to exportcontrols is increasingly isolatingthe American aerospace industryfrom the commercial sector in anunproductive cocoon of regulation.The defense industrial baseis falling farther and fartherbehind the commercial marketplace because it has to cope withexcessive regulation.During the Kosovo air war, allies were forced to petition theDefense Department to expedite license approval of weaponsystems needed to arm combat aircraft, such as the Royal AirForce Harrier GR7, flying side-by-side with American pilots.The <strong>Commission</strong> is fully prepared to defend suchregulation where it purchases indispensable security.But we are convinced that today’s export controls donot. We do think it is important to regulate the saleof stealth technology, for example, but see little reasonto block the sale of five-ton trucks. We see thneed to formally decide whether to sell a combat aircraftto an ally, but we see little need to require hundredsof subsequent licenses for necessary supportgear, training manuals, replacement spare parts, etc.We see the clear need to block the sale of militaryequipment and dual use items to irresponsiblenations like Iran and Libya, but we see little justificationto impose the same standards on our strongestallies.6-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairIn sum, the current export control regime providestoo little security and is choking American companiesand preventing effective technology collaborationwith others.The United States export control system needs athorough overhaul. We recommendeda number of immediatereforms in Interim Report #2.However, if we are to improvethe long-term competitivenessof our industry, minor tinkeringon the margin is unacceptableand even counterproductive.Shift From Transaction to ProcessLicensing. We call for a fundamental shift away fromthe existing transaction-based licensing system toprocess licensing. Currently, we require an exportlicense for every sale and every shipment. Instead, weshould establish a process that approves a companyfor basic operations under predefined conditions. Auseful analogy here is the way aircraft are produced.Before Boeing can sell a new design aircraft it mustsubmit to extensive, detailed licensing approval bythe Federal Aviation Administration (FAA) for thatnew design. It cannot be sold or delivered to a customerwithout that basic production approval. Onceit is approved, however, Boeing does not need to subsequentlytest and safety-certify every subsequent aircraftthat comes off the production line. The FAAcertifies the design and the production methodologyonce for safety, and then monitors ongoing productionon the basis of departures from the baselinedesign.The export control system would be much more efficientif it were similarly reconfigured. Companiesthat wish to export would undergo a rigorous certificationprocess to ensure they possess the internalcontrols that safeguard against the sale of weapons ordual use items to unacceptable parties. Onceapproved, the company would be free to sell and shipgoods consistent with U.S. government policy.The government would monitor and audit thoseoperations for compliance. In some instances, theWe call for a fundamentalshift away from the existingtransaction-based licensingsystem to process licensing.government approval would require case-by-caseapproval of sales. For example, we believe the governmentwould want to approve any and all individualsales of advanced technology like stealth technology,even to our strongest allies. Also, we believe thegovernment would want case-by-case approval of anysale to countries that we judge tobe serious security risks.Additional Reforms Are Needed.This shift to a process approvallicensing system will not be effectiveunless other elements of theU.S. export control policy arechanged as well.• Expand International Traffic in Arms Regulations(ITAR) Waiver Process to Allies With AppropriateSecurity Controls. Currently, the United Statesrequires approval of exports of components even toa subsidiary of the same company that is located ina different country. Because of the integration ofU.S. and Canadian production capacities, theUnited States entered into an agreement withCanada for license-free transactions of non-classifiedcomponents between the two countries.Licenses are required if the item leaves either theUnited States or Canada for another country. Webelieve this streamlined ITAR waiver processshould be expanded to other key allies. We believethat countries should be granted this waiver onlyafter agreeing to appropriate security procedureswith the United States.• Fix the Munitions List. The current so-called“munitions list” is far too inclusive and out of date.It has not been reviewed since 1992. The listshould be shortened substantially and refocused onitems that meet the multilateral standards of significance,such as precursor chemicals for chemicalweapons. It should no longer control commercialproducts and technologies that have been “modifiedor designed for” a military product, unlessthey substantially improve military performance.In particular, commercial communication satellitesand related components should be removed from6-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>the “munitions list” and again be controlled as adual-use product. The government should establishan annual review process to continually cleanup the munitions list.Just fixing the U.S. list is not enough. We mustwork with our allies to identify critical technologyand come up with solutions on how to protect it.By and large, the United States and its allies agreeon the items that should be controlled for nonproliferationreasons. However, we lack sufficientbuy-in from the international community on actuallygetting the job done. The six major Europeancountries that account for most European defenseproduction have signed a Letter of Intent (LOI) toharmonize export controls for countries outsidethe group while facilitating defense trade and competitionamong the group. The United Statesshould begin discussions with the “LOI six” toexchange ideas and to examine the possibility of aframework between the U.S., the “LOI six” andlater with other industrial democracies.• Establish an Objective Appeals Process. Currently,if the government rejects a license application, theapplicant has no effective method to appeal thedecision except to return to the same people whorejected it in the first place. The only other courseis for companies to take up the matter at the highestlevels of the government, a step that can beused rarely and with great peril. A more objectiveappeals process should be established. Ultimatelyonly the secretary of a department has the authorityto approve or reject a license. But the secretaryshould have an appeals board that can offer analternative recommendation to the secretary if thepanel decides the original decision was unwarranted.This way the secretary will have an independentperspective to consider before making afinal decision. It also permits a more normal wayfor appeals to be made, other than throughextraordinary intervention to senior officials that islargely unavailable except to the largest defensecontractors.• Extraterritorial Retransfers. One of the currentgreat controversies in the export control system isthe American insistence that no component partor technology from the United States that is usedby a foreign producer can be sold to a third partywithout gaining permission each and every timefrom the United States. No matter how small thecomponent is as a part of the entire system, theUnited States has asserted that it has exclusive controlrights over the entire sale. This retransfer obligationshould be retained for significant militaryequipment, such as complete end items. But forother items, the 25 percent de minimus contentthreshold originally developed by the ReaganAdministration should be reinstated as the thresholdgoverning extraterritorial retransfers.• Compliance Risk Management. Decision makersmust have an up-to-date and detailed understandingof the willingness and ability of recipientnations to comply with restrictions on the unauthorizeduse or retransfer of U.S.-origin defenseexports. Updated country risk surveys are one keyway of developing and maintaining this information.Moreover, up-to-date country risk surveyswould provide a basis for government-to-governmentconsultations to strengthen complianceamong the community of nations with whomthe U.S. shares modern defense hardware andtechnology.Since the <strong>Commission</strong>’s February 2002 public hearing, U.S. federalagencies have reviewed nearly half of the chapters of the U.S.Munitions List, including the chapter on aircraft. Agencies are consideringremoving a number of aircraft from the USML, as well asexpanding the use of waivers for spare part export licenses to certainparties. As the first review of the USML in a decade, this is astep in the right direction. Nonetheless, this review will be insufficientunless it culminates in a comprehensive revision of the list.6-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and Fair• Administrative Streamlining. Finally, the federalgovernment should make a major investment instreamlining the licensing administrative process.The Department of State should establish timelinesand interagency dispute resolution procedures.The process outlined in the national disclosureprocess is appropriate. The federalgovernment also should modernize the informationtechnology backbone for the license approvalprocess, and establish a totally interoperable systemwith all executive branch departments thathave a role in the license review/approval process.Such a system ought to allow industry to filelicenses and all supporting data electronically.Adequate staffing and training are fundamental tothe success of any reform initiative.Collaboration in Defense Procurement. Exportcontrols are not the only problem—other U.S. militaryprocurement policies also undermine our goalsof alliance interoperability and U.S. competitiveness.In order to protect our position of military leadershipand capability, we must re-evaluate military procurementpolicies that hampercollaboration with our allies.The United States has a numberof restrictions affecting militaryacquisitions of foreign-manufacturedproducts, systems andparts. U.S. legislation requiresmany military products to bemanufactured in the UnitedStates. Even in instances whereforeign procurement could beauthorized, some DoD programmanagers have a bias against considering non-U.S. equipment.These restrictions do not reflect the realities of a newglobal economy. Instead, they hamper U.S. industries’access to technology and impede their competitiveness.In some cases these restrictions limit U.S.industry and government access to superior capabilitiesand technology developed in other countries. Inother cases it means that U.S. companies have toestablish two separate production facilities for theExport controls are not theonly problem—other U.S.military procurement policiesalso undermine our goals ofalliance interoperability andU.S. competitiveness.same product to ensure that no foreign nationals areinvolved in producing the copy of the product goingto the DoD. As commercial companies become moreglobal, they will be less and less willing to go throughthe financial and administrative expense of selling tothe DoD.Existing solutions to this problem are cumbersome.Most foreign companies interested in selling to theDoD end up investing in U.S. companies or workingthrough U.S. prime contractors. In fact, a numberof leading European aerospace companies havean extensive presence in the U.S. market through“special security agreements” (SSAs) designed to preventtechnology flows out of the U.S. from U.S. subsidiariesto their foreign parent companies. Therecertainly are benefits to this system. For example, the1995 acquisition of the U.S. Allison EngineCompany by Rolls-Royce plc of the UK has resultedin a stable, ongoing partnership that has broughtbenefits to companies on both sides of the Atlantic.As a result of this investment, the U.S. DoD is Rolls-Royce’s largest single military engine customer.However, not only do SSAsprevent U.S. technology fromleaving the country, so do theyprevent U.S. subsidiaries fromtaking advantage of foreigntechnology advances.If we do not change our procurementpolicies, it willbecome increasingly difficult tofind competitive suppliers ofmilitary products as U.S.industry consolidates. We willbe stuck with sole-source contracts for critical technologies,and may be forced to subsidize U.S. suppliersjust to keep them operating.Support International Collaboration and Procurement.U.S. government procurement rules should berevamped to support increased collaboration with,and in some cases procurement from, non-U.S.based companies. The resulting competition willdrive innovation and efficiency, and allow the governmentto choose items at the best cost and6-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>performance, regardless of where it is produced. Itwill promote interoperability with key allies, a criticalelement to the success of the emerging model ofcoalition and network-centric warfare. It will enableU.S. industry to take advantage of the best technologyavailable anywhere in the world, integrating itinto products for the U.S. warfighter.We are doing this in the Joint Strike Fighter program,bringing in technology from key allies, securingaccess to additional markets, stabilizing fundingand ensuring the long-term sustainability of bothU.S. and partner defense industries.This close partnership alsoestablishes a channel of influencewhen dealing with thesecountries on defense andnational security issues. We recognizethat this partnership is atwo-way street, providing foreigngovernments and supplierssome level of influence overproduction and maintenance ofU.S. military equipment. However,if projects are correctlymanaged this is a manageableconcern, since further integrationwill bring a dual dependencyresulting in convergence of views.The Bush Administration is taking positive steps inpromoting international collaboration on other keydefense programs as well. For example, the DoD isinvestigating the possibility of including internationalpartners in development of its new ballisticmissile defense system. In July 2002 at theFarnborough Air Show, Boeing and the EuropeanAeronautic Defense and Space company (EADS)announced plans to work together on missile defensein response to the DoD’s policy. EADS already is amajor subcontractor to Integrated Coast GuardSystems (ICGS) recently selected by the U.S. CoastGuard to work on the Deepwater CapabilityReplacement Program (“Deepwater”). As a majorsubcontractor to ICGS, EADS will refurbish andsupply helicopters and surveillance aircraft.We need to reform DoDprocurement regulationsto permit integration ofcommercial components intomilitary products even if theyare provided by non-U.S.companies or worked on byforeign nationals.We need to reform DoD procurement regulations topermit integration of commercial components intomilitary products even if they are provided by non-U.S. companies or worked on by foreign nationals.For example, if a commercial aircraft is to beupgraded with military hardware, the companyshould not have to set up a separate assembly facilityto ensure that particular aircraft are not worked onby foreign nationals.We are not calling for unilateral opening of ourdefense market. Key allies must offer reciprocalaccess to U.S. companies biddingin foreign procurementcompetitions. Increased U.S.procurement of foreign productscan only work if ourcompanies have access totheir markets as well.Countries seeking access toour defense market also mustreconsider their investmentpriorities. These allies shouldinvest their limited developmentbudgets in creation ofnew capabilities instead ofseeking to displace sales ofexisting U.S. products. Such targeted investment willbring bigger returns and advance the overall capabilitiesof all parties. This partnership has established astrong foundation for cooperation with our allies inNATO and elsewhere in the past that must not beweakened in an effort by some parties to simplybroaden the product range of domestic champions.International partners have contributed technology andfunding to the multinational Joint Strike Fighter program.6-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairThe U.S. government should protect the strengthand viability of the U.S. industrial base in certainareas of critical technology and capability. Thisincludes continuing to procure the most criticalequipment from U.S. prime contractors, and carefulconsideration of partnership/teaming requests. TheUnited States government should remain committedto continued foreign investment in the United Stateswith the appropriate safeguards for U.S. technology.The U.S. government also should continue to monitorclosely the transfer and use of sensitive technologyto ensure that it stays in the control of our partners.Most importantly, policies on procurement andteaming must be clear and consistent, enabling companiesto make judicious decisions on new projectsand acquisitions.NASA rotorcraftresearch waseliminated entirelyin Fiscal Year2002, bringing anend to rotorcraftwind tunnel testingat the AmesResearch Center.International “Playing Field”: Out of BalanceCommercial Research and DevelopmentFunding. Although we are ahead of other countriesin investment in military technology and capability,we are on the edge of dropping out of the race in thecivil sector. Instead of continuing to invest, our governmenthas increasingly pulled back from the civilaerospace market and left it up to U.S. companies tocompete against competitors subsidized by governmentsthat have “not stopped running.”The U.S. government historically has limited civilaerospace technology-related funding to basicresearch, creating enabling technologies and sharingthe results with U.S. andnon-U.S. companies. Wehave left it up to the companiesto integrate these technologiesinto commercialproducts.NASA spending for aerospaceresearch has declined inrecent years, resulting infewer and less robust programs. NASA rotorcraftresearch was eliminated entirely in Fiscal Year 2002.In those projects that remain, the U.S. government iscutting off funding at earlier stages of technologyNASA spending for aerospaceresearch has declined in recentyears, resulting in fewer andless robust programs.development as a cost-saving measure. FAA R&Dfunding has remained flat in recent years in the midstof plans to completely overhaul our air traffic controlsystem. These budgets are likely to decline in thenear future as FAA diverts funding from all areas toaviation security.Starved of funds, the U.S. government research anddevelopment infrastructure is deteriorating as well.Some NASA research facilities have closed, whileothers are saddled with an aging infrastructure anddeclining number of programs.In fact, the percentageof the budget NASA mustspend on maintaining aginginfrastructure has increasedover the last ten years, displacingmoney intended to bespent on other aspects of theresearch programs.Instead of increasing private funding for basic R&D,U.S. industry spending has fallen off too. Becausecompanies contribute money and resources whenthey participate in government-funded R&D6-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Langley Research Center’s 16-foot Transonic Tunnel, which hasbeen making major contributions to the aerospace community fornearly 50 years, will be mothballed in 2003 due to budget cuts.projects, a reduction in federal funding is matchedby a corresponding decrease in industry funding.Companies have little incentive to fund basicresearch on their own because capital markets andstockholders shy away from risky investments withindeterminate returns.Chapters 5 and 9 addresses in more detail the needto reverse this decline in federal civil aeronauticR&D funding. Although there are many reasons totake action in this area, declining international competitivenessis near, if not at, the top of the list.Other countries do not share the United States’ philosophyregarding civil aerospace research and developmentfunding. Many take their funding beyondbasic technology development, choosing to fundproduct development and even bringing the productto the market (also known as product launch). Thesegovernments seek to establish and support aerospaceproducers, even if their products are not fully commerciallyviable. In their view, the benefits ofemployment in a high-value and high-tech industry,establishment of a national aerospace industrial baseand even national pride outweigh the costs of marketdistortions. This has become one of the most politicallycharged forms of government interventionrequiring U.S. government attention.Foreign government subsidies directly affect thecompetitiveness of our companies. Subsidized primemanufacturers as well as suppliers are able to undercutprices offered by their U.S. competitors, and arebetter able to weather market downturns. Subsidizedcompanies are able to secure cheaper commercialfinancing since their governments share the risk associatedwith bringing new products to market.Subsidized production skews the market itself byflooding it with products that are not commerciallyviable. Governments providing the subsidies alsoapply political pressure on customers in an effort tofacilitate a positive return on the governments’“investments”. In many cases, these government subsidiesstifle competition and often slow the introductionof new technology into the market.European funding has had the most dramatic impacton U.S. competitiveness because European productsdirectly compete with U.S. products in most sectors.This problem will be compounded as other governmentsfund new competitors that will seek to enteran already saturated market. If we maintain the statusquo, U.S. industry will be left to compete againstcompanies that don’t play by the same rules.European and U.S. companies benefit from similartypes of government funding in many respects.European governments fund military R&D and buyaerospace products, albeit at lower levels than theUnited States. Accordingly, European Union (EU)aerospace companies benefit from enhanced technologycapability and a strengthened aerospace industrialbase in the same manner as U.S. firms benefitfrom U.S. military spending. However, some EUofficials have indicated that in the absence of sufficientdefense contracts, they seek to establish andsustain their aerospace industrial base through commercialaerospace subsidies. European industry andsome NATO officials have called for increasingEuropean military procurement and improving capabilities,although such changes are likely to comeabout slowly. More importantly, there has been nocorresponding call for reducing funding for commercialaerospace products in light of increased militaryinvestment.Like the U.S., individual European governmentsprovide funding for basic civil aerospace research in6-16FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and Fairmany areas such as materials, aerodynamics, safety,propulsion, systems and manufacturing processes.This has led to a number of basic technologyadvances ranging from composites to greater fuelefficiency. Participation in these programs, andaccess to the research results, is limited to Europeanfirms.The EU supplements its member state basic R&Dfunds via European <strong>Commission</strong> (EC) “frameworkprograms” (FPs). In contrast to declining NASA andFAA funding, FP funding has increased dramaticallysince 1987. The first EU four-year FP (1987 – 1991)consisted of $35 million in R&D assistance to theaerospace industry. This figure jumped to nearly$1 billion in the sixth EU FP (2002 – 2006). 7According to the EC, Sixth Framework fundinggoals are to enhance the competitiveness ofEuropean commercial aerospace manufacturers,improve EU air traffic management and other safetyissues, reduce emissions and aircraft noise andenhance the space industry. An advisory committeewas established in 2001 to create EU-wide aerospaceresearch goals and coordinate EU member stateactivities in an effort to improve the effectiveness ofEuropean basic research.European and U.S. government approaches divergeon the issue of project “launch aid” (financiallysupporting the introduction of commercial aerospaceproducts in the market). The U.S. has neversupplied “launch aid” for commercial products.In contrast, “launch aid” funded development ofalmost every large commercial aircraft and aircraftengine model produced by European companies.As one example, over 75 percent of total developmentcosts for Airbus commercial aircraft, totalingover $30 billion at current market value, were paidby European governments to help Airbus establisha competitive product line. Thus far, Airbus hasrepaid an estimated 25 percent of these total developmentcosts according to the U.S. CommerceDepartment.As another example, UK engine company Rolls-Royce plc has received nearly $2.2 billion since 1975in government “launch aid” for the RB-211 and successorTrent engine programs that constitute the bulkof their engine offerings for Airbus and Boeing largecommercial aircraft. According to government andprivate sector sources, an estimated $300 million ofthat launch aid has been repaid, with the majority ofthis debt erased from the slate at privatization in1987 and during subsequent royalty repayment loanforgiveness by the UK government. Beyond this support,multiple European aerospace companies havereceived equity infusions (sometimes concurrentwith privatization) to cover losses.Figure 6-8 Boeing vs. Airbus Deliveries**Number of large civil jet transport aircraft produced; Boeing figures before1997 include aircraft models manufactured by McDonnell DouglasNumber of Aircraft Delivered700600500400300200BoeingAirbus10001985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002(est)Source: U.S. Department of Commerce6-17FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Figure 6-9 Boeing vs. Airbus Announced Orders**number of new large civil jet transport aircraft orders announced by each manufacturer,not adjusted for unannounced order cancellations; Boeing figures before1997 include aircraft models manufactured by McDonnell Douglas.Number of Announced Aircraft Orders120010008006004002000BoeingSource: U.S. Department of CommerceAirbus1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Figure 6-10 Boeing vs. Airbus Backlog**Backlog of large civil jet transport aircraft to be manufactured; Boeing figures before1997 include aircraft models manufactured by McDonnell Douglas.Number of Aircraft in Backlog2000160012008004000Source: Aerospace Industries AssociationBoeingAirbus1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Often European subsidies are targeted specifically toreplace U.S. suppliers with European companies.The EC subsidy to Sextant to develop the avionicssuite for the A340 provides a clear example. In itsapproval of this subsidy, the French governmentcited the goal of displacing the U.S. supplier ofavionics for earlier models of that aircraft. 8European funding for the “launch” of new commercialproducts is continuing. Nearly $4 billion in governmentpublic funds have been allocatedfor development of the Airbus A380, 9 and nearly$385 million have been allocated by the UKgovernment for new Rolls Royce engine derivativeprojects. 10 In both cases, funding is being providedin the form of royalty-based loans that don’t have tobe fully paid back unless the projects are a completecommercial success.To the Europeans’ credit, their funding strategy hasbeen very successful. EU companies have developedrobust commercial product lines that are slowly displacingU.S.-produced commercial aircraft and helicopters,aircraft engines and components.Government subsidies have aided in this rise ofEuropean industry competitiveness.6-18FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairThe recently unveiled EUaerospace policy strategy calls foran increase in subsidies to continuebuilding market share, largely atthe expense of U.S. companies.European subsidies to Airbus had a direct impact onthe exit of McDonnell-Douglas from the market asan independent large civil aircraft (LCA) manufacturerand its subsequent merger with Boeing.European government and industry officials repeatedlyhave cited the goal of Airbus achieving a fiftypercent share of the global LCA market. With Airbussurpassing Boeing in terms of orders and backlog in2001 and possibly poised to exceed Boeing in deliveriesin 2003, it appears that the Europeans areachieving their goal.Unfortunately, it appears that European officialsintend to continue directly subsidizing EU companies.The recently unveiled EU aerospace policystrategy calls for an increase in subsidies to continuebuilding market share, largely at the expense of U.S.companies. If trends continue, European companiesmay soon gain market leadership in other productsand technologies as well. This fundamental mismatchof declining U.S. government R&D fundingfor basic research and increasing European governmentfunding for both basic research and productdevelopment is reaching crisis proportions for U.S.industry. This challenge cannot go unanswered.Disputes over subsidies are likely to be exacerbated inthe coming years as other governments look toEurope as a role model and support their indigenousmanufacturers in an attempt to establish or gainmarket share. Countries such as China have wellestablishedplans to foster their domestic aerospacemanufacturing capability for military and civil aircraft.Production by Russian aerospace manufacturershas fallen off greatly since the dissolution of theSoviet Union, and the Russian government hasimplemented a number of protectionist policies inan attempt to rebuild their industry.Stop Direct Commercial Product Subsidies. In orderfor the playing field to be level, foreign companiesneed to be subject to the same market forces as theirU.S. competitors when seeking funding for theintroduction of new products to the market. Weshould support the further privatization andincreased transparency of European companies sothey become more responsive to company shareholdersthan to government planners. Establishmentof EADS as a private company is an importantstep in this direction. Another positive trend isEuropean companies reportedly seeking other risksharingpartners to cover nearly a third of the developmentcosts for the two newest commercial aircraftrelatedprograms, namely the Airbus A380 and theRolls-Royce Trent 900 program to power the A380.Increasing availability of commercial financing mayreduce European industry dependence on governmentsubsidies.In reality, European companies are unlikely to stoptaking government money if European governmentskeep offering it. Therefore we should make everyeffort to work bilaterally with EU governments toget them out of the business of “product launch”.This will be very difficult. European officials offergrossly exaggerated claims of U.S. subsidies to commercialaircraft programs through funding of militaryresearch and procurement as justification fortheir continuing subsidies. U.S. efforts to clear upthese misconceptions thus far have fallen on deafFormer Apollo astronaut and <strong>Commission</strong>er Buzz Aldrin signsYuri Gagarin’s Tribute Book at Star City Russia.6-19FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ears, but we should continue to press our case. Weare skeptical that bilateral efforts with Europeangovernments or other market newcomers will besufficient.Any truly workable solution must therefore be multilateralin nature. International trade agreementshave significantly liberalized trade of civil aerospaceproducts and reduced government intervention inthe civil aerospace market, starting in 1979 with thenegotiation of the General Agreement on Tariffs andTrade (GATT) Agreement on Trade in Civil Aircraft.This agreement has successfully eliminated importtariffs on aircraft, engines and parts by signatories,and had some impact on reducing government interventionin procurement decisions.Under the pressure of a possible U.S. challenge ofEuropean subsidies to Airbus in the GATT, U.S. andEuropean negotiators went to the table to draft the1992 Agreement U.S.–EU Agreement Concerningthe Application of the GATT Agreement on Trade inCivil Aircraft on Trade inLarge Civil Aircraft (the“1992 Aircraft Agreement”).This agreement further clarifiedthe type and extent offinancial and political supportU.S. and European governmentscould provide to largeaircraft manufacturers.The 1994 Marrakech Agreement establishing theWorld Trade Organization (WTO) contained furtherdisciplines on market-distorting subsidiesthrough the Agreement on Subsidies andCountervailing Measures (ASCM). Together, thesethree trade agreements provide relatively robust disciplinesthat theoretically establish a level playingfield for global aerospace producers.Although WTO provisions are established to ensurethere is fair and open trading between signatorynations, the system breaks down when one partychooses to violate the agreement. Application ofremedies becomes difficult when addressing actionsOur response must be to fix theWorld Trade Organizationinstead of abandoning it.by nations in support of global companies withglobal customers and partners. Governments may bereluctant to pursue trade cases in the WTO for fearof starting a devastating trade war. Globally-focusedcompanies may be reluctant to press for actionagainst their subsidized competitors for fear of losingaccess to foreign suppliers or customers because ofcounter-retaliation or political pressure.Failure to enforce WTO provisions, however, resultsin distorted competition where the subsidized companygains market share at the expense of unsubsidizedcompanies. The only option left is to subsidizein kind. Once one country steps out of line, the restfollow. We find ourselves in a “race to the bottom”,where both parties would find it in their best intereststo withhold subsidies but instead find themselvespressured to take the exact opposite course.The ongoing dispute between Brazil and Canadaover violations of the ASCM by both parties in supportof regional aircraft sales shows both the strengthand the weakness of WTOprovisions in addressing aerospacesubsidies. A WTODispute Panel conducted anobjective study of both countries’subsidy programs andfound them to be in violationof the ASCM. A successfulresolution to this dispute has been far more elusive,as neither party has been willing thus far to eliminatethe market distorting effects identified by the panel.Our response must be to fix the system instead ofabandoning it. The U.S. government should work tostrengthen the existing WTO provisions restrictingthe use of subsidies to distort the market. This couldbe a combination of new and/or more stringent subsidydisciplines applicable to aerospace companies tobe negotiated in the WTO Doha round of negotiations.This will be a difficult challenge as previousattempts have been only partially successful, perhapsdue to a failure of all parties to commit to finding aworkable solution. In any event, existing provisionsmust not be weakened.6-20FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairThe U.S. government also should work with otherWTO members to adopt more effective trade remediesto address distortions that do occur. Theseremedies must be usable and effective in a marketcharacterized by increased globalization. We cannotlet the WTO become a forum where member governmentsseek to divide up markets and productionwork shares. Instead, WTO members must committo work together to eliminate market distortions toenable competition between companies, not betweencountries.Despite the deficiencies of the existing system, theU.S. government should not shy away from challengingillegal subsidies under applicable WTO provisions.All parties have negotiated these provisionsin good faith and willingly agreed to them.Accordingly, the U.S. government should requirethat European and other governments live up totheir obligations. This includes obligations in the1992 U.S.–EU Aircraft Agreement as well as theWTO.We also believe there is a compelling case to help ourcompanies get back in the technology race by revisingour policies on investment in basic research anddevelopment. The U.S. government should not provide“product launch” funding for new programs.However, we should increase funding for investigationof revolutionary enabling technologies andprocesses such as propulsion, materials, communications,air traffic management and security. In areaswhere we conduct basic research, the governmentshould bring technology to a more advanced level oftechnology readiness than is current practice to assistwith technology diffusion among the industry.Without such investments, our companies will onlyfall farther behind.Domestic Tax Policy. Like subsidies, tax policiesimpact the prices companies are able to offer in internationalsales. Accordingly, tax policy is the source ofanother long-standing dispute between the U.S. andthe EU. EU countries rely heavily on a value-addedtax (VAT) for revenue. The VAT tax is imposed onimports and rebated at the border for exports. EUcountries also tend to tax their companies moreleniently on overseas earnings than on domestic profits.Similar benefits are not traditionally available toU.S. companies under domestic U.S. tax law.To create a more level playing field, over thirty yearsago the United States government established a provisionin U.S. tax law that permitted U.S. companiesto reduce domestic taxes on a share of profits derivedfrom exports. This regime, called the DISC(Domestic International Sales Corporations), wasintended to offset the competitive advantage offeredto European companies via the VAT system. Europechallenged the DISC program under multilateralrules (the GATT) as an unfair advantage to U.S.companies, and the U.S. challenged the VAT systemin response. Following negotiations with theEuropeans, in 1984 the U.S. government establishedthe U.S. Foreign Sales Corporation (FSC) taxregime, replacing the DISC with a more restrictiveregime that still leveled the playing field.Fifteen years later, Europe once again challengedU.S. tax law under multilateral rules, even thoughWTO negotiators had refrained from establishingexplicit WTO rules on domestic taxation. Althoughthe FSC system directly offset tax benefits availableto European competitors, the WTO determined thatthe FSC regime was an illegal export subsidy inconsistentwith WTO rules. In an effort to becomeWTO compliant, the United States repealed FSCand enacted the “FSC Repeal and Extra-territorialIncome Exclusion Act of 2000” (ETI) regime inNovember 2000. The WTO subsequently ruled thatETI also was not in compliance.We highlighted in Interim Report #2 the need forthe United States to work closely with the EU to finda mutually agreeable solution to this dispute in orderto avoid the up to $4 billion in trade sanctionsagainst the United States threatened by the EU.Retaliation of this magnitude would be devastatingto U.S.–EU trade relations. However, U.S. companieswill face a significant competitive disadvantage ifa replacement U.S. tax regime is adopted that doesnot counter the export-related benefits to Europeancompanies of their VAT system. Loss of the ETItax incentive would result in declining sales as U.S.6-21FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>manufacturers have to raise prices to compensate forthe increased tax burden, and may result in the lossof U.S. employment as companies move jobs to offshorefacilities that enjoy favorable tax treatment byforeign governments.The U.S.–EU dispute over FSC/ETI will have a particularimpact on U.S. aerospace companies. Becausethey generate a significant portion of their revenuefrom export sales and their primary competitors areEuropean companies who receive VAT benefits,many U.S. aerospace companies are active users ofthe FSC program.Negotiate Permanent Solution to Tax Disputes. In thenear term we must seek to delay European sanctionswhile both parties negotiate a solution. We urge thePresident and Congress to authorize changes to U.S.tax law that are WTO compliant but that continueto offset the advantage enjoyed by European companies.The <strong>Commission</strong> highlights some favorableproposals for such changes in Chapter 7, namely anenhanced national security R&D credit and proposalsoffered by the National Foreign Trade Councilrelated to wage credits and changes in accordancewith WTO rules (including “Footnote 59” of theWTO ASCM). The <strong>Commission</strong> urges theAdministration to work with industry and Congressto develop an equitable resolution to this dispute.In the longer term, the Administration should initiatechanges in the WTO rules to remove the currentinequity in the treatment of direct and indirect taxesthat caused the dispute in the first place. We are notadvocating the global harmonization of tax law,rather we wish to ensure that WTO rules create alevel playing field.Export Financing. The U.S. government also hassought to eliminate unfair pricing practices and tolevel the playing field in the area of government-supportedexport financing.Financing plays a critical role in the ability of customersto procure military and commercial aircraft.International agreements, such as the Organizationfor Economic Cooperation and Development(OECD) Arrangement on Officially SupportedExport Credits, establish ground rules for governmentsseeking to support commercial export financingby absorbing some of the risk of loan default bycustomers. These financing arrangements, known asexport credit agency (ECA) programs, facilitate thepurchase of aircraft by customers who would nototherwise have sufficient access to commercialfinancing.The U.S. Export Import Bank (Ex-Im Bank) supportsfinancing for sales of commercial aircraft as theU.S. ECA. Ex-Im Bank loan guarantee applicationsare rigorously reviewed for commercial viability andrisk before they are approved, resulting in an excellenthistory of repayment. Nonetheless, Ex-Im Bankhas congressionally appropriated funds to coverlosses from high-risk projects that exceed programfees.Ex-Im Bank funding programs for exports of commercialaircraft are an essential tool to counter discountedor otherwise preferential financing termsoffered by foreign manufacturers with the assistanceof their governments. Continued support from Ex-Im Bank is particularly important in light of a recentagreement among European ECAs to expand theirexport credit support for European aircraft andengines.Ex-Im Bank financing also enables airlines frompoorer countries or with credit problems to accessfinancing they need to keep operating and to integratesafer and more environmentally friendly aircraftinto their fleets. Airlines struggling to survivethe current downturn in global traffic will becomemore reliant upon these programs in the near future.Continue Commercial Aircraft Official ExportFinancing. Continued funding for Ex-Im Bank isimportant to the U.S. aerospace industry. The U.S.government also should support efforts to reduceinternational reliance on ECAs for export financingassistance, such as through ratification of the “CapeTown convention” (The International Institute forthe Unification of Private Law Mobile EquipmentConvention and Aircraft Protocol). This convention6-22FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairThe House Armed Services Committee has proposed expandingthe list of countries eligible for DELG assistance in aneffort to make the program more usable. We supportedinclusion of this provision in the FY 2003 DefenseAuthorization legislation, and encourage further revisions tothe program.and protocol sets rules that determine the order inwhich creditors will get paid if an airline defaults onmortgage payments. The certainty provided by theserules helps airlines to access cheaper financing andhelps creditors to make wise loan decisions.The U.S. government falls short in providing necessaryfinancing for military aircraft exports. TheDefense Export Loan Guarantee (DELG) programestablished by Congress in 1996 provides a frameworkfor such financing, but the shortfalls inthe program are evidenced by its limited use. TheDELG program shares most of the characteristics ofthe Ex-Im Bank loan guarantee program for civil sectorexports with an important exception—thedefense loan guarantees are not subsidized withfunds appropriated to the DoD. Because of statutoryconstraints and regulatory and administrative practices,this program has proven to be unattractive topotential foreign customers—only one small transactionhas been executed in more than five years ofoperation. As a result, the United States is the onlysignificant exporter of defense-related equipmentwithout an effective military-related exports creditmechanism.Modernize the DELG. The DELG program needs tobe modernized to permit the DoD to create an effectiveexport credit organization that will facilitate thefinancing of defense exports to U.S. allies andfriendly nations abroad. Modernization of theDELG should remove dysfunctional statutory andregulatory constraints that frustrate implementationof the DELG statute. A number of legislativeand policy changes would make this program moreeffective. For example, customers should be permittedto finance their exposure fees, the lists of countrieseligible for DELG financing should beexpanded, and administrative costs should bereduced. These reforms are highlighted in moredetail in the <strong>Commission</strong>’s Interim Report #2.In addition to DELG reforms, Export Import Bankfunding could be extended to military equipmentpurchases and the Foreign Military Sales (FMS) programcould be updated.Commercial Mergers and Teaming. Internationalcollaboration between companies and much neededrationalization of the global aerospace industry areimpeded by a number of foreign government policieson foreign investment and mergers and acquisitionsin the commercial sector. Oftentimes countriesimpose restrictions in these areas to protect their“national champions” from national or internationalcompetition.Because of the increasing global nature of productionand customers, foreign governments have increasingjurisdiction over mergers or teaming plans of U.S.companies. This becomes a competitiveness issuewhen foreign governments make decisions based ondifferent criteria than the U.S., or based on concernsabout the market share of their own “nationalchampion”.This issue has been most prominent in Europe.United States and European officials appear to havedifferent philosophies on consolidation and partnerships.U.S. regulators tend to investigate the impactof a merger on the consumer and the ultimatemonopoly power of the company in the overall market.EU policy makers seek to preserve stability of theinternal European market and to protect marketshare of European companies competing with U.S.companies.The EU imposed a number of conditions upon the1997 merger between the Boeing Company andMcDonnell Douglas in an attempt to prevent anycompetitive advantage of the new company overtheir own Airbus Industrie. More recently, concerns6-23FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>about the competitive impact on EU based manufacturersapparently contributed to the EU rejectionof the General Electric-Honeywell merger in spite ofU.S. anti-trust approval.All countries, including the United States, have somelevel of restriction on foreign investment in sensitiveindustries to preserve national security. However, weare concerned about instances where countries suchas Russia restrict foreign investment in their commercialaerospace industries to foster their nationalchampions. In fact, these restrictions can be counterproductivewhen they isolate companies from internationalmarkets and much-needed sources of capitalinvestment.For example, U.S. aerospacecompanies have investedextensively in Russia overthe last ten years, providingmuch needed financial supportand access to globalmarkets for Russian productsand capability. Multiplepartnerships between U.S.and Russian companies inthe space launch industry have had a significantimpact on the global launch market. U.S. andRussian civil aerospace manufacturers also haveworked extensively together to develop Russian aircraftwith U.S. parts, systems and even engines andto secure FAA safety certification. However, domesticpolitical pressure on the Russian government hasled to restrictions on foreign investment in Russianaerospace companies, potentially resulting in divestmentby U.S. companies in their Russian partnersand depriving them of the myriad benefits of internationalcollaboration.Remove Obstacles to Commercial Mergers andTeaming. The U.S. government should remove policyand regulatory obstacles to increased commercialmergers and teaming within the U.S. and with internationalpartners. Examples of the benefits ofthis business model abound. Most commercial aircraftengine programs today are characterized byextensive international collaboration, where U.S.EU policy makers seek to preservestability of the internal Europeanmarket and to protect market shareof European companies competingwith U.S. companies.and foreign partners combine their technology andinvestment capital to bring new engines to the market.U.S. prime producers of large civil aircraft andhelicopters also rely heavily on foreign suppliers andpartners to provide critical elements, componentsand expertise.U.S. suppliers benefit from this business model aswell, as evidenced by the regional jet industry. Theglobal market for regional jets is only big enough fora limited number of manufacturers, but untilrecently was plagued by oversupply. The manufacturingbase has undergone some consolidation/rationalization in recent years with the exit of Fokkerand BAE from regionalaircraft production.Following the impendingdeparture of Fairchild-Dornier from this marketsegment, Embraer (Brazil)and Bombardier (Canada)will be the remainingregional jet manufacturersin business today.U.S. prime manufacturershave not directly pursued the regional jet market.However, U.S. suppliers have significant content onboth the Embraer and the Bombardier aircraft models.In fact, U.S. companies provide nearly 70 percentof the hardware to Embraer for assembly, fromengines to electronics to structural components. 11 Inturn, Embraer is a key supplier of structural componentsto Boeing for other aircraft. U.S. suppliersbenefit from an increased market for their products,and U.S. customers win as some of the largest customersof these Brazilian and Canadian regional jets.The U.S. government should assist in developingand policing international anti-trust treaties relatingto mergers/teaming between commercial entities.Such multilateral agreements could minimize divergenceof requirements and the methods of assessment,presumably making reviews more objective.The U.S. government also must continue to workbilaterally with key countries to remove barriers toforeign investment.6-24FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairOffsets. “Offsets” are a form of market distortion inglobal aerospace trade that can take on the form offorced collaboration. Offsets are conditions that aforeign government negotiates with a company seekingto export a major defense or commercial systemto its country. Under an offset agreement, theexporting company agrees to either shift some productionof the system and/or parts to the procuringcountry, or to offer some other technological or economicbenefit. Procuring governments usually seekto negotiate the best offset package possible from allcompeting bidders, e.g., U.S. and foreign aerospacecompanies.Offsets are most prevalent in defense procurementsbecause governments negotiate the terms of the sales.According to figures gathered by the U.S.Department of Commerce and the Office ofManagement and Budget, the dollar value of defenseoffset agreements negotiated with U.S. companies asa percentage of the export sales with which they areassociated has ranged from 34 percent to 98 percentover 1980 – 1998. U.S. exporters of defense systemscomplete approximately $3 billion per year indefense offset transactions with other nations. Thedollar value of defense offset agreements relative todefense exports has remained stable over time; however,ancedotal evidence provided to the Offsets<strong>Commission</strong> suggests that offset demands may havegrown qualitatively as the receiving countries increasinglyrequire specific results rather than best effortsfrom the U.S. exporters and seek greater technologytransfer. 12 These figures in most cases exceed theactual dollar value of offsets provided, since procuringgovernments usually will associate higher valuesto offsets that are more important to them and henceuse a “multiplier” to equate the actual offset and thenegotiated percentage.Offsets also can be involved in exports of commercialaerospace products and systems where governmentsown or have influence over the buyer, such as stateownedor controlled airlines. There is little data onthe prevalence of commercial aerospace offsetrequirements since the government does not haveany effective or comprehensive reporting requirementsfor offsets in the commercial industry.Industry surveys indicate that countries require offsetson a relatively small percentage of commercialexport sales.The full impact of offsets is difficult to determine.Such agreements can reduce the U.S. content in theproduct or system being exported, and can shiftsome production or technological capability to theprocuring country. This may result in a shift of U.S.jobs to foreign suppliers. However, if an offset agreementenables a U.S. company to make an export salethat would not have occurred without the offset, theeffect is to create additional work and jobs in theUnited States. Offsets also can provide U.S. industryaccess to new markets and technology. We highlightconcerns about the impact of offsets on the U.S.workforce in Chapter 8.Reactivate Offsets <strong>Commission</strong>. To minimize any negativeimpact of government-mandated offsets on theU.S. aerospace industry and employment, theUnited States should maintain its policy of discouragingsuch offset requirements by foreign governments.Unilateral restrictions that prevent U.S. producersfrom participating in offset agreements likelywould shift demand to other countries, reducingbusiness for a wide range of U.S. prime contractorsand subcontractors. Therefore the U.S. governmentshould pursue a multilateral solution to curtail offsetdemands.The National <strong>Commission</strong> on Offsets inInternational Trade established in 2000 to examinethe use of offsets has not undertaken further studyfollowing the publication of an interim report inJanuary 2001. Reactivating that <strong>Commission</strong> may bethe best alternative for developing policy recommendationson this issue.Regulations and Standards. Global standards andregulations are critical to the efficient operationof the global aviation system and international markets.They provide predictability and stability that6-25FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>companies and customers alike need to make wiseinvestment choices. They are the avenue throughwhich governments ensure the safety and security ofair travel. They also facilitate the free movement ofgoods and people by creating transparency of policiesand compatibility of products and systems.Governments use standards and regulations to pursueother goals in the publicinterest as well, such asreducing the environmentalimpact of aviation.The decline of traditionaltrade barriers has led to anincreasing impact of standardsand regulations on thecompetitive position of U.S.companies. To gain competitiveadvantage, some countrieshave established domesticstandards or regulationsthat do not fully reflect or,in some cases, ignore globalaerospace standards andpractices.Since the signing of the Chicago Convention in1944, the International Civil Aviation Organization(ICAO)—a specialized agency of the United Nations(UN)—has served as the forum for establishment ofinternational civil aviation standards and recommendedpractices that have enabled development ofthe aerospace industry as we know it today. As a consensusorganization made up of representatives fromalmost every nation of the world, ICAO has beenand remains the right place for aviation standardsand practices to be developed and policed.In view of the increasing international competition,the U.S. has not kept pace by devoting adequateresources to the development of global standards. Asof the end of 2001, U.S. citizens occupied only 11 ofthe 27 staff positions the United States is entitled tohold in ICAO. Our involvement in ICAO oftenis further hampered by general U.S. government policyregarding the UN, such as the zero nominalTo minimize any negative impactof government-mandated offsetson the U.S. aerospace industryand employment, the UnitedStates should maintain its policyof discouraging such offsetrequirements by foreigngovernments.growth policy for UN budgets. Even though we wantand need ICAO to do more to support global aviation,we are prevented from providing the resourcesnecessary to do so. Lack of resources and reducedinvolvement in ICAO and other international cooperativeefforts erode the image of the U.S. FAA as aglobal leader. The U.S. is losing its position as the defacto standard setter.In contrast, European governmentsactively are seekingglobal leadership in this area,often at odds with U.S. andother country interests. Theyhave devoted increasingresources to internationalstandards-setting bodiessuch as ICAO in an effort toshape global standards andregulations. The EU also isactive in providing technicalassistance to third-countryregulators in an effort toinfluence their regulatorydecisions. When they are not satisfied with theprocess or outcome of international deliberations,the EU has chosen to establish unilateral regulationsto force their position.The unilateral European “hushkit” regulation(European Council Regulation-EC No. 925/1999)established in 1999 by the EU clearly illustrates theneed for internationally agreed-upon standards. Thestated goal of the hushkit regulation was to provideEuropean citizens relief from aircraft noise, but theregulation was constructed in a way that it had a disproportionateimpact on U.S. products and airlines.U.S. industry-estimated economic damage caused bythe European hushkit regulation approached $2 billionin lost sales of aircraft engines and hushkits andreduced asset value of U.S. airline fleets. 13This dispute has been partially resolved by ICAOadoption in October 2001 of a new aircraft noisestandard and related policy guidelines. U.S. politicalleadership and technical expertise was instrumental6-26FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and Fairin developing this global consensus on aircraft noise.It is exactly this sort of effort from the U.S. governmentthat must be sustained, as well as expanded inother areas. Future unilateral regulations, especiallyenvironmental regulations related to aircraft noiseand emissions, constitute a serious threat to fair andopen trade.Another example of regulation being used to furtherEU competitiveness goals relates to aircraft safetycertification. European authorities appear to haveused delays or denial of certification of U.S. aircraftto be operated in Europe for competitiveness reasonsinstead of safety or objective technical reasons. Thereare numerous examples where additional certificationtesting or procedures were required or where thecertification process was unjustifiably prolonged forparticular U.S. manufactured aircraft models. Theresulting delays caused by European regulatorsworked to the benefit of European manufacturers.Reinforce Commitment to Leadership in GlobalStandards. In most cases, a multilateral solution is thebest remedy for regulatory trade barriers. Globalstandards would reduce the burden on manufacturers,provide clarity and constancy of requirementsand ensure the playing field is level.The U.S. government needs to devote adequate leadershipand resources to the development of globalstandards in ICAO and via other forums. TheUnited States has been a leading voice and influencein ICAO since its inception, although that influenceis waning. We are not critical of increasing Europeaninvolvement in ICAO—in fact, we welcome anincreasing reliance on international standards. TheU.S. government must follow suit and commitsufficient funding and staff resources to ensure U.S.views are integral to ICAO discussions and decisions.Particular attention should be paid to the developmentof global environmental standards and recommendedpractices through ICAO, based on objectiveanalysis and common metrics.An increased commitment to ICAO includesan expanded U.S. presence at ICAO. We mustproactively support the placement of U.S. citizens inleadership and staff positions in the ICAO organization.This means devoting more attention to recruitmentfor ICAO positions and actively supportingFAA employees who make working for ICAO acareer objective. There is no better way of ensuringU.S. views are well represented than having U.S. citizensworking at ICAO.U.S. officials must have sufficient funding to participatein ICAO meetings and to cover operationalexpenses too. Industry has spent significant moneyand resources to facilitate the development of ICAOstandards and procedures. This partnership withindustry is critical to the successful establishment ofstandards, but the burden should not fall solely ontheir shoulders. The United States cannot afford tobe left behind as a result of not devoting adequateresources to protect our interests.The U.S. government also needs to do a better job ofcoordinating U.S. policy positions before bringingthem to international forums. In spite of best efforts,the existing interagency coordination process is notalways effective in giving equitable weight to theviews of each agency or in avoiding unclear or conflictingU.S. positions in international negotiations.The government structure reforms outlined inChapter 3 would facilitate this coordination.Although ICAO is in essence a consensus organization,numbers still matter. Therefore, we take issuewith one element of increasing European involvementin ICAO—the European voting block. TheU.S. is disadvantaged in ICAO discussions by theEuropean voting block of fifteen European votes toone U.S. vote when there is a disagreement. TheUnited States government should oppose adding avoice in ICAO for the EC unless it will replace individualEU member state votes instead of complementingthem.Our cooperation should not be limited to activitiesin ICAO—some issues such as requirements forsafety certification may be best addressed bilaterally.The United States should continue to devote6-27FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>resources to harmonizing U.S. and foreign safety certificationrequirements to ensure the highest level ofsafety while reducing the burden of meeting multiplerequirements in different countries. Harmonizingaircraft safety certification also would reduce theability of foreign authorities to unfairly restrict U.S.industry access to their markets. This will require acommitment to international exchanges of technicalexperts and policy makers as well as a concertedeffort to develop support of all the necessary constituentsaffected by such a harmonization.Global Partnerships: Lack of CommitmentThe importance of global standards and cooperationextends beyond avoidance of regulatory barriers totrade. International partnerships are essential to thecreation of system-of-systems solutions to globalchallenges.Air Traffic Management System. In order to movepeople and goods anywhere around the world, anytime,we need a global air traffic management system.In Chapter 2 we discuss the need to transformour management of U.S. airspace through the use ofadvanced technologies and improved procedures. Wealso need to ensure that there continues to be a seamlesstransition for aircraft entering or leaving U.S.airspace. Therefore, the transformation will be successfulonly if the United States acts in concert withother governments around the world in a number ofareas.ICAO, aviation experts have established recommendedpractices to guide the operations of pilotsand air traffic controllers. Pilots and controllers willrely on each other and share information in newways in the proposed new system. As a result, theUnited States should lead development of new operationalguidelines through ICAO, as well as promoteopportunities for training of pilots and controllers inthe new procedures.Interoperable technology is another critical elementof compatibility. ICAO now is developing standardsand recommended practices for global navigationsatellite services, one element of the new system wepropose. The United States should lead ICAO effortsto accelerate work in this area, bringing togetherexisting technology and expertise gained fromAmerican GPS and Russian GLONASS systems andnew systems of the future. We also must start worknow in ICAO to identify additional areas whereintroduction of new ATM technology will requirecommon standards and procedures, and committechnical and policy resources to assist in their development.A failure of the United States to commitsufficient resources and attention to ICAO work inthese areas could have disastrous implications for ourefforts to field a new system.We also must ensure that deployment of a satellitebasednavigation and ATM system is not thwartedFundamentally, the overall architecture of the newsystem we envision must be compatible with thatof neighboring airspace, requiring cooperation onnear-term upgrades as well as long-term developmentplans. We are encouraged that long-term developmentplans issued by Eurocontrol and other foreignauthorities appear similar to the new system weare proposing. The FAA must continue to consultwith their foreign counterparts to ensure that thesedevelopment plans are coordinated.Common operational procedures and standard protocolsare critical elements of compatibility. Through6-28FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and Fairby disputes over radio spectrum allocation. TheUnited States must work cooperatively with othercountries via the World Radio Conference and othermultilateral forums to ensure that the necessary frequenciesare available around the world. For us to beeffective, U.S. governmentofficials must coordinate policiesamong our own governmentagencies as well as committhe resources needed foractive participation in internationalnegotiations.European plans to establishthe “Galileo” satellite constellationsystem could eitherhelp or harm efforts to establisha new global ATM system.Galileo is intended to provide the same type ofservice as the existing Global Positioning System(GPS) constellation owned and operated by theUnited States government and available to all usersfor free. GPS and other satellite services would serveas the foundation of our proposed new ATM system,providing better navigation and positioning informationto pilots and to controllers around the world.The impact of Galileo on the global air traffic systemand on U.S. industry depends largely on howEuropean policy makers choose to develop and operatetheir system. In the best-case scenario, Galileowould offer enhanced capability as well as redundancyto users of the satellite navigation system,although we are skeptical that establishment of acompletely redundant system is necessary or even awise investment of limited budgets. To be compatible,Galileo and GPS must use common protocolsand not interfere with each others’ signals.In the worst-case scenario, Galileo signals would beincompatible or even interfere with GPS signals. Weare concerned that current European governmentproposals for funding development, deploymentand operation of Galileo could lead to just such aconflict.U.S. government officials mustcoordinate policies among ourown government agencies aswell as commit the resourcesneeded for active participationin international negotiations.European governments do not intend to fully fundGalileo as the U.S. government funds and operatesthe GPS constellation. Instead, the EU intends torely on commercial revenues from the sale of accessto Galileo signals. We are unclear how the EUintends to generate demandfor a fee-based system thatoffers the same service as afree system, unless EU regulatorsmandate the use ofGalileo transponders andservices by European companiesor within the borders ofthe EU. We strongly opposeany such mandate. It wouldbe very harmful to U.S. andall other non-Europeanindustry and create artificial barriers to the integrationof European and neighboring airspace. Such ascenario surely would be grossly detrimental to theglobal aviation community.U.S. government officials must work bilaterally andmultilaterally to ensure GPS and Galileo are compatibleand complementary in the event that Galileobecomes a reality. There have been some positivesteps taken by U.S. and EU officials over the lastyear toward this goal, and we urge those officials tocontinue their discussions. We also must collaboratewith others in the global aviation communityto develop common standards and procedures insupport of a truly seamless system of worldwidecapability.Open Global Air Transportation. A safe, efficientglobal transportation infrastructure provides littlebenefit if airlines are not able to use it. We thereforecall for increased liberalization of air transportservices. Growing demand for air traffic will translateinto the need for more planes and equipment, benefitingpassengers, airlines and manufacturers aroundthe world. Therefore, continued liberalization of theair transport market is another critical prerequisite tothe continued growth and competitiveness of theU.S. aerospace industry.6-29FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Restricted access to airports is a problem. The UnitedStates government should continue to negotiate“open skies” agreements that allow domestic and foreignairlines to use airports and airspace more productivelyby reducing overcapacity and enablingmore point-to-point travel. This will avoid relianceupon congested hubs and reduce the cost and time oftravel for the passenger, an issue of particular importancegiven the increased prevalence of securityrelateddelays.Cooperative Space Activities. Our cooperationshould not be limited to terrestrial-based systems.We discuss in detail recommendations related tospace in Chapter 3, but would be remiss if we failedto mention some key points related to the globalnature of space exploration and planetary defense.Space Exploration. The success or failure of our futureefforts in space exploration is linked to our ability towork effectively with international partners. Themagnitude of establishing a permanent presence inspace and exploring new systems is too great toundertake alone—nor would we want to. Beginningwith the first Apollo-Soyuz mission in 1975, we havelearned that collaboration in space exploration benefitsall parties as we set aside differences and pool ourresources to achieve common goals.Although we are responsible for managing and operatingthe International Space Station (ISS), U.S. governmentdecision makers must remember that U.S.The success orfailure of ourfuture efforts inspace explorationis linked to ourability to workeffectively withpartners onprojects such asthe InternationalSpace Station.funding and policy decisions directly affect the abilityand willingness of international partners to participatein the ISS program. We want and need theISS to be an international endeavor. ISS partnerscontribute expertise and resources fundamental tothe operation of the station.NASA must consider carefully the impact on internationalpartners of decisions to restructure or reorientU.S. space exploration priorities. This includesdecisions on a crew return vehicle needed to boostISS staffing to a level beyond basic operation of thestation. ISS partners have invested significantresources and expertise in developing and producingresearch modules and other ISS components thatsimply won’t be used unless there is sufficient staffingon board.Planetary Defense. Cooperative space efforts alsoshould include planetary defense against Near EarthObjects (NEOs) ranging from asteroids to cometsthat come near (or impact) the earth. NEOs pose apotentially serious threat for the planet and forhuman kind. Scientists point to evidence of NEOsstriking the earth millions of years ago, dramaticallyaltering the climate and life on earth. The 1908“Tunguska event” in Siberia, estimated to have hadan impact equivalent to a 40 megaton bomb, was amore contemporary warning that this threat is real.Recent press reports have highlighted a series of nearmisseson a planetary scalewhere NEOs the size ofsmall cities came dangerouslyclose to striking theearth.NEOs represent a trulyglobal problem in needof a truly global solution.The U.S. governmentmust work with othercountries through the UNand other organizationson efforts to integrate aplanetary surveillance,identification and defensesystem.Radar image of Asteroid 1950 DA,which may have a close encounterwith Earth in 800 years.6-30FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairConclusionsOpen global markets are critical to the continuedeconomic health of U.S. aerospace companies and toU.S. national security. In order to remain globalleaders, U.S. companies must remain at the forefrontof technology development. They must also haveaccess to global customers, suppliers and partners inorder to achieve economies of scale in productionneeded to integrate that technology into their productsand services.Government intervention continuesto distort global markets,from subsidies to anti-competitiverestrictions on partnershipsand collaboration to biasedstandards and regulations. U.S.companies frequently findthemselves competing againstforeign competitors supporteddirectly or indirectly by their governments. We needto move to a different model of business characterizedby competition between companies instead ofbetween countries.Reform Export Controls and DefenseProcurement Policies. U.S. national security andprocurement policies represent some of the mostburdensome restrictions affecting U.S. industrycompetitiveness.We call for a fundamental shift away from theexisting transaction-based export-licensing regime toprocess-based licensing. Under this new system, thegovernment would rely on companies to safeguardagainst the sale of controlled technologies to unacceptableparties through internal company controlscertified by the government. The government thenwould monitor and audit those company operationsfor compliance. Such a process-based licensingregime would improve security, reduce licensingcosts and enable our companies to collaborate withinternational partners and sell to global customers.Additional reforms, including those outlined inInterim Report #2, are necessary to make this newsystem effective. As quickly as possible, theOpen global markets arecritical to the continuedeconomic health of U.S.aerospace companies andto U.S. national security.government should revise the U.S. Munitions List,remove barriers to global project licenses, expandwaivers for trading with friendly nations, andupdate country risk surveys to facilitate better policydecisions.U.S. procurement regulations currently are toorestrictive and must be modified to be supportive ofa global industrial base to meet military requirements,while maintaining U.S.industrial capacity in criticaltechnologies and capabilities.We need to reform DoD procurementregulations to permitintegration of commercial componentsinto military productseven if they are provided by non-U.S. companies or worked on byforeign nationals.Establish a Level International “Playing Field”.U.S. companies have lost market share to foreigncompanies supported by protectionist and marketdistorting policies. The U.S. government must takeimmediate action to neutralize these distortions andenable fair and open competition.We must continue to meet our responsibilities of settingnational goals and priorities for basic research,reverse declines in basic R&D funding and expandefforts to fund technology diffusion through U.S.industry.We also must work bilaterally and multilaterally toget foreign governments out of the business of commercial“product launch.” In spite of inadequacies ofthe current WTO system, the U.S. governmentshould work in the WTO Doha round of negotiationsto strengthen the existing WTO provisionsrestricting the use of subsidies to distort the market.The U.S. government also should work with otherWTO members to adopt more effective trade remediesthat are usable and effective in a market characterizedby increased globalization. When countriesdo violate existing provisions, we should not shyaway from taking action.6-31FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>We must ensure that U.S. companies are not disadvantagedby differences between U.S. and foreign taxpolicies as exemplified in the current WTO disputeover U.S. FSC/ETI regulations. In the near term wemust seek to delay European trade sanctions whileboth parties negotiate a solution to this dispute. Weurge the Administration and Congress to authorizechanges to U.S. tax law that are WTO compliant butthat continue to offset the advantage enjoyed byEuropean companies. In the longer term, theAdministration should initiate changes in the WTOrules to remove the current inequity in the treatmentof direct and indirect taxes that caused the dispute inthe first place.Official export credit support for commercial andmilitary products is an essential tool to facilitate U.S.aerospace exports. In addition to continued fundingfor U.S. Ex-Im Bank programs, we should seek toreduce international reliance on official export creditsfor export financing assistance, such as throughratification of the “Cape Town convention.” For militaryexports, the DELG should be modernized topermit the DoD to create an effective unsubsidizedexport credit organization to facilitate the financingof defense exports to U.S. allies and friendly nationsabroad.The U.S. government should remove policy and regulatoryobstacles to increased commercial mergersand teaming within the U.S. and with internationalpartners. The U.S. government should assist indeveloping and policing international anti-trusttreaties relating to mergers and teaming betweencommercial entities to minimize divergence ofrequirements and the methods of assessment in antitrustreviews, presumably making reviews moreobjective. The U.S. government also must continueto work bilaterally with key countries to remove barriersto foreign investment.Global standards and regulations are critical to theefficient operation of the global aviation system andinternational markets. The U.S. government needsto step up its commitment to the development ofglobal standards in ICAO and via other forums. Thiswill help to mitigate the efforts of other countriesseeking to provide a competitive advantage for theircompanies through biased domestic standards or regulations.Commit to Global Partnerships. Internationalpartnerships are essential to the creation of systemof-systemssolutions to global challenges.In order to meet our goal of transforming the way weuse airspace through the use of advanced technologyand improved procedures, we must act in concertwith other countries around the world. We mustcommit to developing common standards and recommendedpractices for satellite navigation inICAO, and ensure that global cooperative efforts arenot thwarted by disputes over radio spectrum allocation.We strongly urge U.S. officials to work bilaterallyand multilaterally to ensure that U.S. GPS andEuropean Galileo systems are compatible and complementaryin the event that Galileo becomes areality.U.S. policy makers should work toward global standardsfor safety certification as a way to prevent theuse of safety certification by some governments toenhance their domestic competitiveness. We alsocall for increased liberalization of air transportservices through negotiation of open skies agreementsin order to expand the demand for all countries’air transport services and alleviate undue congestionat the largest airports.The success or failure of our future activities in spaceis fundamentally linked to our ability to work effectivelywith international partners. It is in our country’sbest interest to work cooperatively with partnernations in space exploration and protection of ourplanet from the threat of NEOs.6-32FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 6 – Global Markets: Open and FairRECOMMENDATION #6: The <strong>Commission</strong> recommendsthat U.S. and multilateral regulationsand policies be reformed to enable the movementof products and capital across international borderson a fully competitive basis, and establish alevel playing field for U.S. industry in the globalmarketplace. The U.S. export control regulationsmust be substantially overhauled, evolving fromcurrent restrictions on technologies through thereview of transactions to controls on key capabilitiesenforced through process controls. The U.S.government should neutralize foreign governmentmarket intervention in areas such as subsidies,tax policy, export financing, and standards,either through strengthening multilateral disciplinesor providing similar support for U.S. industryas necessary.6-33FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorRECOMMENDATION #7: The <strong>Commission</strong> recommendsa new business model designed to promote ahealthy and growing U.S. aerospace industry. This modelis driven by increased and sustained government investmentand the adoption of innovative government andindustry policies that stimulate the flow of capital intonew and established public and private companies.Chapter 7Business: A New Modelfor the Aerospace SectorTo retain its vitality, the aerospace industry must beable to attract private investment in the highly competitiveglobal capital markets. The investment communityvalues companies with predictable revenueflows, sustainable growth in sales and earnings,strong positive cash flows, healthy profitability, innovativecapabilities, and a vibrant workforce.For the past half-century, the U.S. aerospace anddefense industry has been inextricably linked to adefense budget characterized by a “10 years up, 10years down” cycle. A vibrant, productive, enduringenterprise is not consistent with this “boom-andbust”cycle, and aerospace companies must bevibrant, productive, and enduring. Our armed forcesrely on advanced technology for awareness, protection,and instruments of action. Our governmentmust provide for the many needs of our society, sovalue for money efficiently spent on security must bedemonstrated. Our aerospace systems are designed toperform for decades, with some extending through aFigure 7-1 Defense Outlays from 1952-2007 inconstant FY 1996 dollarsBillions $37535032530027525022520052’ 57’ 62’ 67’ 72’ 77’ 82’ 87’ 92’ 97’ 02’ 07’YearSource: FY03 Budget of the U.S. Government, Historical TablesProjected7-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>half century of service, and companies must be in aposition to support customers through their evolvingand demanding missions.Historically, investors have characterized the aerospaceindustry, including the commercial business, asa low-growth sector, chronically hampered by highcyclicality, low margins, revenue instability, andinadequate returns on investment, amplified by theuncertainty in the government budgeting and acquisitionprocess.As a result, the relative importance of the aerospacesector in the global marketplace for capital has significantlydiminished over the last two decades asevidenced by the decline in sector market capitalization.In 1980, the aerospace sector had a market capitalizationof $13 billion, equivalent to 2.4 percent ofthe total Standard and Poors (S&P) 500. In 1990,the sector dropped to 1.8 percent of the market, anddeclined further to 0.9 percent in 2000. Today, evenwith the largest proposed defense budget in historyand the longest bear market since World War II,aerospace comprises 1.4 percent of the S&P 500—well below the sector's comparative value just priorto the Reagan defense buildup. See Figure 7-2.The most compelling determinant in an investors’decision-making process is their expected riskadjustedreturn on investment. By this standard, theaerospace sector is unattractive. From 1997-2002,the returns on investors’ capital from aerospaceinvestment lagged behind even the risk-free rate ofreturn on Treasury securities. See Figure 7-3.During the last “bust” cycle that impacted the industryduring the 1990s, more than 50 companies werecompelled to consolidate into today’s “Big 5”:Boeing, General Dynamics, Lockheed Martin,Northrop Grumman, and Raytheon. See Figure 7-4.While successful efforts to consolidate capacitywithin the framework of current government regulationsare clearly evident, significant over-capacityremains. To fuel the consolidation process, the use ofdebt was significantly expanded across the sector,reducing financial flexibility, increasing leverage,straining coverage and liquidity, lowering creditquality, and increasing capital costs. Furthermore,the industry lost more than 600,000 scientific andtechnical jobs in the past 13 years significantlydepleting intellectual capital and experience andincreasing the average age of today’s workforce (seeChapter 8). In important and enduring aspects, theindustry has been weakened.Some observers of the current equity markets notethat selected aerospace firms with little commercialmarket exposure appear to be doing comparativelywell with regard to other stocks given the renewedinterest in defense spending. The <strong>Commission</strong> notesthat this perceived strength in the sector is transient,as the industry is for the moment enjoying theimproved funds flow of the “boom” portion of thedefense cycle while the rest of the economy is inFigure 7-3 Total Five-Year Return onInvestment by Sector (1997-2002)—Valuetoday of $10,000 investment made in 1997.Source: Morgan StanleyFigure 7-2 Aerospace/Defense Sector as aPercentage of the S&P 500 Market CapLT Gov’tBondsHealthcareValue Today with Total Annual Return in parentheses$16,208 (10.1%)Source: Morgan Stanley$13,732 (6.5%)4.0%4.2%3.8%Source: Morgan StanleyT-Bill30 Day$12,380 (4.4%)3.0%2.0%1.0%2.4%1.8%0.9% 1.0% 1.4%ConsumerStaplesFinancialAero /DefenseTechnology $6,479 (-8.3%)$11,379 (2.6%)$11,349 (2.6%)$9,039 (-2.0%)0.0%1960 1970 1980 1990 2000 2001 2002$0 $5,000 $10,000 $15,000 $20,0007-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace Sectorrecession. History suggests that the sector willdecline as the broader economy recovers. Where historywill fail, however, is in support of the assumptionthat a call to action may be unnecessary—thatindustry will endure and recover as it has throughpast cyclical declines without immediate and substantialattention—because history does not accuratelyreflect the current weakened state of the industrythroughout its entire supplychain.Without significant change tothe business model upon whichthe sector relies, the industrywill be unable to survive thenext downturn in either thecommercial or military aerospacecycle. The <strong>Commission</strong>has identified several elements ofU.S. government policy as wellas industry practice that, if implemented, would significantlyimprove the industry’s position in the capitalmarkets.Objective: Aerospace IndustryAttractive to InvestorsInnovative industry-government initiatives arerequired now to sustain the preeminence of theAmerican aerospace industry, ensuring industryhealth and producing sustained contributions toboth the economic performance and national securityof the United States. The U.S. government mustinitiate measures to establish and maintain a stableand predictable budget for aerospace investmentand remove government constraints to reasonableprofitability, thereby reducing risk and improvingreturns such that the industry can better attract capital.A government focus on essential core competencieswill stimulate long-term investment in bothfacilities and the best and the brightest talent, ultimatelyspawning new cycles of exciting technologydevelopment.The future economic vitalityand national security of theUnited States depends on astrong, vibrant, and flexibleaerospace industry.Innovative partnerships among global suppliers ofadvanced technology are needed to assure the interoperabilityof systems while fostering the pursuit ofnew opportunities through assured open marketaccess. Efficiency within the industry can be stimulatedby a further revolution in business affairs thattransforms all processes and practices to a single,integrated industry-government model that employsthe maximum use of commercialbusiness practices and innovations.A solid frameworkof balanced export and taxpolicies will safeguard vitalnational security informationand protect intellectual propertywhile allowing successful industrycompetition in the globaleconomy.The future economic vitalityand national security of the United States dependson a strong, vibrant, and flexible aerospace industry.The <strong>Commission</strong> views these initiatives as essentialsteps necessary to establish a successful and enduringgovernment-industry partnership.7-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Figure 7-4 20 Years of Industry ConsolidationLockheed MartinGD Ft. WorthMEL Defense SystemsSanders AssociatesLockheedGE Aerospace BusinessMartin MariettaGould (Ocean Systems)GD Space SystemsHoneywell (Electric-Optics)Fairchild Westan SystemsLoralGoodyear AerospaceBDM InternationalLibrascopeLTV (Missile Business)IBM Federal SystemsUnix (Defense Electronics)ComsatBoeingHughes Electronics SateliteJeppensen SandersonHughes HelicoptersMcDonnell DouglassBoeingArgo SystemsLitton Precision GearRockwell International - AerospaceAutomaticRaytheonMarine Sys Grp of Allian TecCAE LinkMagnavox ElectronicsGD (Missile Business)Radiffusion SimulationHughes AircraftGM (Hughes Aircraft)Corporate JetsRaytheonE-SystemsChrysler Tech AirborneTI DefenseNorthrop GrummanAvondale IndustriesTASCPRCGI DefenseLitton IndustriesVarian (Solid State Elec.)Sperry Marine (Storage)GrummanNorthropVoight AircraftWestinghouse DefenseSysconLogiconGeodynamicsRyan AeronauticalComptekfederal dataSteering SoftwareAerojetNewport News ShippingTRW*General DynamicsPrincess TechnologiesGTS Govt SystemsNASCO HoldingsTeledse Vehicle SystemsBath Iron WorksCesna AircraftChrysler DefenseGeneral DynamicsCeridian's Computing Devices Int'lDefense & Anament SysAdvanced Technology SysGulf Stream AerospaceK-C AviationGalaxy AerospaceMotorola Info Sys GroupL-3 CommunicationLockheedMartinBoeingRaytheonNorthropGrummanGeneralDynamics1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* Merger Pending ApprovalFIRST WAVESECOND WAVE7-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorIssuesThe U.S. government budgeting and procurementsystem is extraordinarily complex and inefficient,driving up the cost of needed national security systemswhile delaying the introduction of new capabilities.This observation is hardly new. Since shortlyafter the end of World War II, about a dozen majorstudies and literally thousands of lesser assessmentshave cited this finding. Furthermore, sound governmentacquisition reform initiatives have been proposedand debated for more than 40 years, but onlymarginally implemented. Because we have failed tosustain the will necessary to secure lasting change, weare today spending more for national security andgetting less.To the casual observer, this proposition may seemdramatically counterintuitive—do we not have thefinest, best equipped military on earth? The directanswer is “yes”, but it was purchased decades agounder conditions that do not exist today. Many ofthe systems in use now are a result of the Reagandefense build up of the 1980’s when defense spendingwas approximately 5 percent to 8 percent ofGross Domestic Product (GDP). Today that spendingis about 3 percent. 1A greater proportion of total spending then wasdevoted to “investment funds”, i.e., Research andDevelopment and Procurement, which expandedscientific frontiers, engineered leading edgesolutions, attracted talent to the industry, stimulatedinterest by the capital markets, and fieldedcapabilities that won the Cold War and performedsuperbly well in Operation Desert Storm. Todaymore funds flow to Operations and Maintenance,the fastest growing segment of the defense budget,the bulk of which pays for health care, military training,support of aging systems, equipment maintenance,and other support activities.The overall budget, therefore, remains insufficient tomaintain existing capabilities, meet operationaltempo needs, fulfill our commitments to militarypersonnel, protect our homeland, and assure transformationalcapabilities are fielded in a timely mannerto meet 21st century threats across a broadeningISSUES• Budgeting and Funding– Investment funding– Financial Flexibility– Program Management• High-Tech Partners and Suppliers– Contract Reform– Privatization, Competitive Sourcing, and Public-PrivatePartnerships– Commercial Acquisition Practices• Domestic and International Business Climate– Foreign Sales Corporation (FSC)/Extra Territorial Income (ETI)Resolution– Research & Experimentation Tax Credit– Percent of Completion Tax Accounting– Export Control– Airline Bankruptcy and User Fees• Long-Term Growth and Financial Health– Personnel Training– Global Mergers and Acquisitionsand increasingly complex spectrum. Funding sourcesmust be adequate, reliable, and stable. Acquisitionand program management practices require simplificationand reform. Trade and tax policies need to bestreamlined and harmonized.The <strong>Commission</strong> has strong and unanimous convictionthat without immediate initiatives to address thelong-term health of this indispensable industry, theU.S. aerospace sector will lag in the capital markets,lose global market share, provide a reduced contributionto the U.S. balance of trade and the U.S.economy, atrophy its essential core competencies,and lose high-tech and high-paying jobs to overseascompetition. The <strong>Commission</strong> believes this downwarddrift and dissipation of potential, no matterhow difficult to discern on a day-to-day basis, isnonetheless occurring and constitutes an unacceptablerisk to the U.S. economy and national security.7-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Budgeting and Funding: Unpredictable andUnstableThe overall defense budget has two broad provisions:one for near-term personnel, operations maintenancecosts, and one for investments to fulfill ourlong-term need for technological advancementthrough research and development (R&D) and procurement.Despite budget increases over the lastdecade, growth in investment funding remains relativelysmall, especially as a share of the federalbudget.In the past, the Department of Defense’s (DoD)promised growth in investment funding has notmaterialized adding to the complexity of capacityplanning and labor force management while diminishingoverall efficiency. At the same time, systemcosts continue to be underestimated by both thegovernment and industry due to the pressure toadopt the optimistic scenarios necessary to accommodatelimited funding, the progressively aggressivebidding behavior that results as companies withexcess capacity resist being marginalized in the competitionfor a diminishing number of new programopportunities, and the desire to incorporate everincreasing program capability requirements. Withinthis unpredictable framework, many programs arealso changed annually through the Congressionalauthorization and appropriation process or reprogrammings.See Figure 7-5.Government-unique acquisition processes and proceduresare cumbersome and unnecessarily complex,adding time and expense to systems development,and are not complementary to healthy commercialpractices. Finally, any failure to perform on contract,at times induced by program and budget instability,exacerbates the tensions between government andindustry and heightens the tendency to impose evenmore oversight and financial penalties on contractors.These factors create a cycle that contributes tothe diminished return on the government’s investmentin national security capabilities and serves as animpediment to long-term industry excellence.Figure 7-5 Actual Procurement Spending has Consistently Fallen Below ProjectionsSource: Morgan Stanley90ActualProjected8580Constant FY03 $B757065605550451994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Fiscal Year7-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorThe government must stabilize program requirementsand protect adequate long-term investmentfunding, enact reforms that increase the financialflexibility of companies and the government, andimprove program management stability and continuity.Industry must focus on performance and executionand deliver on contract commitments. Thesechanges will help provide the resources necessary todrive competition, incentivize research and development,and enhance industry’s performance on contractand in the investment markets.Protect Investment Funding. As discussed inInterim Report #2, a stable long-term investmentbudget is critical to the modernization and transformationgoals of the ArmedServices. However, thebulk of recent DoD fundingincreases has been consumedby costs associatedwith operations, fuel, payraises, and health-care. Toprotect investment funding,the <strong>Commission</strong> reiteratesits recommendationscontained in the interim report, that governmentestablish and maintain a stable investment budget inthe Future Years Defense Program (FYDP), protectedfrom reductions to cover unbudgeted operationsand support (O&S) and other support and personnelcosts. In addition, the <strong>Commission</strong> suggeststhat DoD study the management of O&S costs, withthe goal of better estimating and annually budgetingfor these costs, rather than continuing to tap theinvestment accounts to pay unanticipated, unbudgeted“must pay” O&S bills.The <strong>Commission</strong> also reiterates its recommendationin the interim report that DoD require industry andthe military Services to develop realistic cost estimatesand fully budget for those program costs in theFYDP. The <strong>Commission</strong> believes this action is necessaryto reduce the current tendency to understateprogram costs in order to include unaffordableprograms within the FYDP, and will also precludecontractor and DoD investment in programs thatcannot be realistically completed.Reprogramming thresholds for allaccounts should, as a minimum, bedoubled to account for 20 years ofinflation since their last adjustment.Increase Financial Flexibility. The <strong>Commission</strong>believes that both the government and contractorsmust do a better job of realistically estimatingprogram costs. The <strong>Commission</strong> also believes thecurrent financial system is overly restrictive in that itallows only very limited financial flexibility, once thebudget is formalized, to address unanticipated costsor requirements as individual programs progressthrough execution. The “color of money” and inadequacyof program reserves preclude programmanagers from making common-sense adjustmentswithin a program, and decades-old reprogramminglimitations preclude the government fromeffectively managing its budget to reflect changesin program priorities or performance.The <strong>Commission</strong> advocatesincreasing the government’sfinancial flexibility to makefunding adjustmentsamong and within programs.Program managersshould have the authorityto move funds from procurementto R&D to coverunanticipated development and sustainment costs,or to apply unused R&D funds to procuring theweapon system. Reprogramming thresholds for allaccounts should, as a minimum, be doubled toaccount for 20 years of inflation since their lastadjustment. Such action will provide governmentwith the needed flexibility to meet higher priorityrequirements as they arise, make the best use of costsavings in any program phase, and resolve problemsearlier.Streamlining cost principles, the elimination ofstatutory cost principles, and the use of GenerallyAccepted Accounting Principles will benefit the sectorby eliminating unnecessary and duplicativerequirements and allow government contractors whoalso have significant commercial business to use asingle accounting system across the enterprise. The<strong>Commission</strong> concludes that the government shoulddevelop a proposal to implement cost principles andaccounting standards that are more commerciallyoriented.7-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Realignment of the Defense Working Capital Fund(DWCF) will provide DoD managers with accurateand reliable cost information to manage their operations,while improving weapon system readiness andthe total cost of ownership. The fund had beendesigned to provide an effective mechanism forfinancing, budgeting, accounting for, and controllingthe costs of goods and services. In practice, theDWCF is structured to support and maintain logisticsstovepipes in terms of supply management,maintenance, and transportation, thus limiting theability to meet DoD customers’ new product supportchallenges. The <strong>Commission</strong> urges ongoingGeneral Accounting Office (GAO) managementreview of the DWCF, as well as an allowance forrestructured costs and a shift to performance orprice-based acquisition structures.Revise Program Management. As discussed in the<strong>Commission</strong>’s Third Interim Report, the<strong>Commission</strong> believes the use of multi-year fundingand contracting for both procurement and R&Dprograms will not only improve program stabilityand performance, but produce needed cost savings.The <strong>Commission</strong> reiterates its recommendationsfrom Interim Report #3 for expanded use of multiyearprocurement contracts and milestone-to-milestonebudgeting for development programs, includingthe incorporation of spiral development andevolutionary acquisition principles into these longtermcontracts.In addition, the <strong>Commission</strong> supports the immediaterepeal of the June 2002 DoD FinancialManagement Regulation that establishes an artificialand unnecessary ceiling on unfunded cancellationcosts in multi-year contracts. The <strong>Commission</strong>believes the prudent use of multi-year contracting,applied to stable programs that are performing well,makes unnecessary the establishment of financinglimitations that will stifle innovative acquisitionstrategies.The ability of the government to become a “worldclass” buyer of research, products and services is anessential element of acquisition excellence. A<strong>Commission</strong>-sponsored study on the application ofSmart Price-Based Acquisition reviews the currentcost-based and price-based approaches to governmentprocurement and recommends a progressiveand evolutionary roadmap for implementingchanges to more fully capitalize on the price-basedacquisition of goods and services.The report cites the wide variance in federal departmentand agency contracting that is in need ofreview, and recommends moving to price-based,rather than cost-based acquisition under certain conditions.First, the government must be able to clearlyand adequately define its requirements for the productor service. Second, there must be a commercialmarket for the product or service, or the governmentthrough past or ongoing government unique effortsmust have a sufficient basis of price comparison.The report correctly states that, while the utility ofprice-based acquisition for government procurementsis evident, it is not meant to be viewed as anacross the board solution for all government procurements.For example, research and developmentinitiatives where requirements cannot be clearly andadequately defined due to dynamic situational analysisand/or there is high risk in the potential utilizationof technologies, must remain cost-based. Thereport also cites the reluctance of the DoD to leverageits buying power and the power of electroniccommerce by utilizing the General ServicesAdministration’s (GSA) Federal Supply Schedule andFederal Technology Services for certain procurements,as permitted by current law. While someagencies are required to purchase items through GSAschedules, the DoD—through the Defense FederalAcquisition Regulations—does not mandate the useof GSA schedules and continues to issue their owncontracts for GSA-available items.The report cautions that, if the requirements ofsmart price-based acquisition are to be met, the governmentmust have a procurement workforce thatunderstands market prices and the capabilities of themarket. In order to create an appropriately trainedprocurement workforce, the organizational structure7-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace Sectorfor federal procurement must be redesigned to focuson development and maintenance of market knowledge.The ability of the government to leverage itsbuying power and centralize “smart buying” functionswill enable better performance management ofits many providers.The <strong>Commission</strong> views the recommendations in thisreport as one of many possible approaches to streamlinedacquisition of products and services, especiallywhen procured as part of a stable program involvinglow-risk technology and clear requirements. As ageneral rule, the <strong>Commission</strong> does not endorsegreater use of fixed-price contracting for programsthat do not meet these criteria. The <strong>Commission</strong> furtherbelieves that the report supports the existingFederal Acquisition Regulations (FAR), concerningprice-based acquisitions. Neither does the<strong>Commission</strong> view the report as advocating such anapproach across-the-board. Instead, the <strong>Commission</strong>reads the report as recommending an option for astreamlined acquisition process that could producenot only a more efficient and less burdensome contractingprocess, but could also produce savings inpersonnel costs and time that could be allocated tohigher-priority national security requirements.Other reforms to be considered include:• Implementation of a requirements process that issupportive of evolutionary acquisition and spiraldevelopment.• Development of an acquisition approach for system-of-systemsefforts, rather than a componentbasedapproach.• Provide adequate profit on R&D contracts so contractorsdo not wait until production contracts torecoup lost profits.• Separately funding R&D on key components andsub-systems that are not integral parts of majorsystems.• Facilitating incorporation of commercial technologyin current weapons systems by expanding useof the FAR (Part 12, commercial buying) forR&D.• Expanding the potential for contractors to earnhigher profit margins and providing other incentivesto drive and reward positive performance.The following table summarizes recommendedreforms, the specific participants responsible for eachreform, and the near and long-term actions necessaryto achieve the objectives earlier described.Reforms Actors 18-month Enabling Actions Long-term ActionsBudgetReformOMBDoDNASACongress•Establish/maintain stable top-line for DoD investmentin the FYDP (see June 26, 2002 interim report)•Fully fund programs within the FYDP(see June 26, 2002 interim report)•Study and develop methods forcentralized management ofnon-program specific O&S costs.FinancialReformOMBDoDCongressIndustry•Enact proposals to increase DoD financial flexibility(see June 26, 2002 interim report)•Realign Defense Working Capital Fund•Streamline cost principles, andeliminate statutory cost principles.•Revise cost accounting standardsto move toward GAAP.ProgramStrategyReformDoDNASACongress•Expand the use of multiyear procurement contracting,and implement multiyear milestone budgeting fordevelopment programs.•Repeal the June 2002 Financial ManagementRegulation establishing a 20% ceiling on unfundedliability costs in multiyear contracts.•Expand use of performance-based acquisition.•Allow contractors to earn higher profit•Develop and implement a new system-of-systemsacquisition approach.•Provide adequate profits on R&D contracts•Develop and implement anevolutionary/spiral requirementsprocess.•Expand FAR Part 12 commercialbuying for R&D.•Separate R&D funding forcomponents that are not integralparts of major systems.7-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>High-Tech Partners and Suppliers: Difficult toAttract and RetainWhile it is sometimes convenient to refer to the aerospaceindustry through the short hand of the “Big 5”referring to the five largest aerospace systems companies,it is important to note that the government andcommercial “industry” for aerospace products andservices in fact extends through a network of purchasers,subcontractors, suppliers, and partners,sometimes referred to as the supply chain. Each ofthe participants in the sector is intrinsically tied tothe factors affecting the industry. Encouraging a climatethat is attractive to new entrants while stableenough for current players will promote competitionand innovation, add to efficiencies, and lower costs.In addition, steps must be taken to establish a stableand predictable business climate (see section entitled“Long-term Growth and Financial Health: InJeopardy” for additional information).Contract Reform Must Focus on Simplificationand Innovation. Successful implementation ofacquisition reform is a profound challenge thatinvolves two distinct and interdependent elements.The first, culture change, involves evolvingthe behavior of acquisition personnel from the traditional“buying of resources under a design specification”to the “buying of results under a performancespecification”. Today, an extraordinary amountof government talent, time, and resources aredevoted to the process of refining and detailing comprehensivedesign specifications. Despite good intentionsand considerable effort, this practice yieldsquestionable value added and should be discontinued.Contemporary acquisition management practicedemands a shift away from the emphasis onpurchasing assets to a focus on the delivery of capabilities.Second, the implementation of newcontracting rules will foster understanding of theconceptual and pragmatic nature governing thebuyer-seller relationship.Building on the <strong>Commission</strong>’s earlier findings concerningexpanded use of multi-year contracting, the<strong>Commission</strong> calls for the consideration of multi-yearleasing arrangements as well as multi-year contractsfor the procurement of goods and services.Developing stable baselines and establishing andprotecting current and future year funding forprograms not only provides cost savings, but allowsfor the use of innovative procurement strategies suchas buy-to-budget in which quantities procured arelimited only by available funding. Long-term excellencein this area is further enabled by near-termreforms, such as utilization of “other transactionauthority” and implementation of efficiency savingsand share-in-saving strategies that recognizes thebenefits of productivity improvements and rightsizingof workforce and facilities, that can improve,streamline and strengthen technology access, encourageopen-market competition and implement technology-drivenprototyping.The <strong>Commission</strong> notes that certain changes toDoD’s “shared savings” initiative since the<strong>Commission</strong>’s endorsement of that effort in itsMarch 20, 2002 interim report have caused the<strong>Commission</strong> to reconsider its recommendations.The <strong>Commission</strong> is concerned that these changes tothe efficiency savings initiative will so limit its applicabilityand utility as to make the effort almost negligibleand ineffective in incentivizing contractorinvestment in right-sizing and productivity improvements.The <strong>Commission</strong> urges DoD to reevaluatethis initiative and consider once again including program-specificinitiatives to provide the greatest possibleincentives and broadest application of the policy.Finally, a vital element of effective contract reform isdirectly related to reforming regulations regardingreturns on government contracts. The <strong>Commission</strong>asks that DoD strongly consider proposing andimplementing changes to permit: increased awardfees, carryover of unearned award fees into the nextrating period, elimination of fixed price developmentcontracts, elimination of profit take backs and withholdson Cost Plus Fixed Fee (CPFF) contracts far inexcess of requirements to protect the government,and revised profit guidelines for fee bearingIndependent Research & Development (IR&D).7-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorOther reforms that should be considered include:• Create a liability limitation for sales to all governmentagencies, as well as state, local, and commercialentities, to facilitate incorporation of homelandsecurity technologies across America.• Repeal/reform Civil False Claims Act to increasethe number of high technology suppliers to government.• Allow prime contractors to waive flow-down tolower-tier suppliers of unnecessary and costlyterms and conditions.• Minimize reliance on cost data.• Facilitate the use of common subcontractingprocesses.• Investigate leasing as an acquisition tool.Privatization, Competitive Sourcing, and Public-Private Partnerships. Widespread business practiceoverwhelmingly supports the economic and performancebenefits that result when enterprises focuson the essential core competencies through which itfulfills its mission and createsvalue. Indeed the goal of everycontemporary organizationincludes an intense focus ondefining and cultivating thecore while realigning roles andresponsibilities accordingly.The <strong>Commission</strong> believes thatthere are many opportunitiesfor redefinition and prioritizationof routine non-core governmentalactivities currentlyperformed by governmentagencies. Private sector providersspecializing in militarybase maintenance, facility firefightingservices, payroll and accounting, and humanresources management can perform such services.The <strong>Commission</strong> calls for a government-wide reviewof functions and services to identify those functionsthat are not “core” to the effective execution of themission and which could best be performed by theprivate sector.Widespread business practiceoverwhelmingly supports theeconomic and performancebenefits that result whenenterprises focus on theessential core competenciesthrough which it fulfills itsmission and creates value.The <strong>Commission</strong> has significant philosophical reservationsregarding public-private competition, andbelieves such competitions under current regulationsdisadvantage all parties.Office of Management and Budget (OMB) CircularNo. A-76, “Performance of Commercial Activities,”establishes federal policy for the performance ofrecurring commercial activities, and provides guidanceand procedures for determining whether recurringcommercial activities should be operated undercontract with commercial sources, in-house usinggovernment facilities and personnel, or throughinter-service support agreements (ISSAs). In principle,Circular A-76 is not designed to simply contractout. Rather, it is designed to: (1) balance the interestsof the parties to a make or buy cost comparison, (2)provide a level playing field between public and privateofferors to a competition, and (3) encouragecompetition and choice in the management and performanceof commercial activities.The A-76 process was established in an era wherecost was the principal award determinant for allcompetitions. Reliable cost andpast performance informationis crucial to the effective managementof government operationsand to the conduct ofcompetitions between public orprivate sector offerors.Unfortunately, this informationhas not been generally availableand/or has often been found tobe unreliable. In today’s era ofbest value procurements, whichrecognize that cost is but one ofmany important factors thatassure taxpayer interests aremost appropriately served, theold “cost-based” decision tree is no longer valid.The <strong>Commission</strong> believes that it is vital for governmentagency competition with private offerors ofgoods or services to be conducted on the basis oftruly comparable cost accounting practices, past performanceand best value. In addition, the process7-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>should be kept as high-level and streamlined as possible,avoiding the excessively detailed, overly mechanistic,aspects of the current A-76 procedure. The<strong>Commission</strong> supports reform of A-76 procedures toachieve these goals.As changes to outsourcingcompetitions are developedand implemented, the<strong>Commission</strong> believes thatdefense and aerospace industrymust work with governmentorganizations todevelop effective partneringrelationships. To the maximumextent possible, thesepublic-private partnershipsshould be founded on bestbusiness practices and shouldfocus on enabling both governmentand industry to providethe products and services best suited to theirorganizational characteristics. Public-private partnershipswill be required to integrate best provider governmentorganizations, satisfy statutory requirements,and provide access to unique facilities,infrastructure and technical expertise. These partnershipswill also foster a more business-like relationship,reduce administrative and life-cycle costs andreallocate risks, and assist in the evolution of governmentand industry roles and responsibilities. Recentchanges to Title 10 U.S. Code regarding “hold harmless”will facilitate the use of conventional contractualarrangements and partnerships between industryand government. The <strong>Commission</strong> recommendsthat both industry and government vigorously pursuesuch partnerships, and supports changes in lawor regulation that would facilitate increased use ofpublic-private partnerships.Commercial Acquisition Practices. One of thegoals of acquisition reform is streamlining and simplifyingthe procurement process in order to reducedevelopment and production cycle times and lifecycle program costs, and to strengthen the technologyand industrial base through increased access to,As changes to outsourcingcompetitions are developed andimplemented, the <strong>Commission</strong>believes that defense andaerospace industry must workwith government organizationsto develop effective partneringrelationships.and use of, advanced commercial items. The FARdeveloped a broad range of “unique” controls andrequirements for its contractors and subcontractorsover the past 50 years. The government is nowattempting to realign thesepublic dollar.purchasing processes to lowercosts and gain access to newtechnology by eliminating, orat least lowering, barriers thatmake government businessinefficient and unattractive tocommercial firms and inhibitgreater integration of commercialand military productionlines. The <strong>Commission</strong>supports these efforts, but recognizesthat the governmentmust make this transformationwhile maintaining goodfaith and stewardship of theThe <strong>Commission</strong> supports these enabling actions:• Eliminate government unique contract requirements.• Expand use of commercial like terms andconditions.• Establish a presumption that products and servicespurchased from predominantly commercial companiesare commercial vs. government enablingcommercial contracting processes.• Eliminate FAR cost principles that are administrativelyburdensome and discouraging to typicalnon-government contractors.• Broaden available contract types under FAR (Part12) to include standard commercial-type contractvehicles.• Accelerate implementation of e-businessenvironment.• Streamline all payments with electronic processingand payments.7-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorReforms Actors 18-month Enabling Actions Long-term ActionsContractReformOMBDoDCongressIndustry•Develop and enact laws and regulations limitingcontractor liability for homeland security sales to allgovernment agencies, as well as state, local, andcommercial entities.•Minimize use of certified cost or pricing data.•Facilitate use of common subcontracting processes.•Expand use of “other transaction authority”.•Reevaluate changes in DOD Shared Savings initiative.•Revise government profit policy to permit increasedaward fees, unearned award fee carryover, higher profitguidelines for fee-bearing IR&D.•Eliminate fixed price development contracts, profittakebacks, and withholds on CPFF contracts in excess ofrequirements to protect the government.•Formulate effective share-in-savings policies;reevaluate changes in efficiency savings initiative•Study the use of leasing as anacquisition tool.•Repeal/reform Civil FalseClaims Act.•Authorize prime contractors towaive flow down to lower-tiersuppliers of unnecessary and costlyterms and conditions.•Expand multiyear contracting toleasing and procurement of goodsand services.•Develop and implement proposalsto allow “buy to budget”.CompetitiveSourcingOMBDoDCongressIndustry•Conduct a government-wide study of activities andservices performed by government civilian and militarypersonnel, and develop recommendations for privatizationof non-core functions and services.•Reform OMB Circular A-76 to provide for more equitableand effective public-private competitions•Incentivize and expand the use of public-privatepartnerships•Enact proposals to privatizenon-core functions and services.CommercialAcquisitionPracticesOMBDoDCongressIndustry•Eliminate government unique contract requirements.•Continue the implementation of e-business environment.•Implement electronic processing and payments forall transactions.•Expand use of commercial practices.•Revise FAR part 12 to include standard commercialtypecontract vehicles.•Eliminate burdensome FAR cost-based principles.•Expand commercial item definition to include all productsand services purchased from commercial companies•Fully implement e-businesspractices.Domestic and International Business Climate:BurdensomeCertain U.S. tax and trade laws and regulations thataffect a wide variety of industries weigh particularlyheavily on defense and aerospace,both in competition with domesticcommercial entities as well asin the international markets.The complex U.S. Tax Code doeslittle to reward or incentivize privateinvestment in maintainingand enhancing our nation’s technologicaledge, either military orcommercial. The Tax Code alsofails to recognize the uniquenature of defense developmentand production. In addition, a proposed resolutionto a long-standing trade dispute with the EuropeanThe complex U.S. Tax Codedoes little to reward orincentivize privateinvestment in maintainingand enhancing our nation’stechnological edge.Union threatens to place military and aerospaceexporters at a distinct disadvantage in the globalmarketplace.Outdated and restrictive U.S.export control laws and regulationsdo little to protect vitalnational security technologiesand, at the same time, adverselyaffect the ability of defense firmsto export military products to ourallies and friends, and negativelyimpact the ability of the governmentto pursue vigorously effortsto improve the military readinessand interoperability of our allies.Finally, high-tech companies arediscouraged from doing business with the U.S.government, and current contractors are unfairly7-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>penalized, by the laws and regulations governingrights to inventions and technology developed undergovernment contract.The <strong>Commission</strong> believes the government shouldact promptly to replace these burdensome tax lawsand outdated trade laws, as necessary, with laws andregulations that remove unnecessary administrativeburdens from industry and recognize the uniquecontribution of defense and aerospace companies toour nation’s defense and economic security. Enactingor implementing the proposals outlined belowwould remove some of the clearest impediments todefense/aerospace industry health.Ensure FSC/ETI Resolution Maintains IndustryBenefit. As discussed in the <strong>Commission</strong>’s SecondInterim report, U.S exporters face possible sanctionstotaling up to $4 billion per year in tariffs on the saleof U.S. goods if the Foreign Sales Corporation (FSC)Repeal and Extra Territorial Income (ETI) ExclusionAct of 2000 (FSC/ETI), which was ruled an illegalexport subsidy by the World Trade Organization(WTO), is not repealed.In Interim Report #2, the <strong>Commission</strong> recommendedthat the U.S. Trade Representative seek adelay in imposition of any sanctions on U.S. exportsto allow government and industry the time todevelop a resolution of the FSC/ETI issue. The<strong>Commission</strong> is concerned that, while sanctions maynot be imposed in the near term, the threat of significantsanctions will negatively impact the U.S.economy and other trade issues with our Europeanallies. The <strong>Commission</strong> also reaffirms its belief thatloss of the FSC/ETI benefit would have a seriousadverse impact on the ability of U.S. defense andaerospace companies to compete in the global marketplace.The <strong>Commission</strong> therefore strongly concludes thatthe Administration, Congress, and industry engagein serious discussions to develop an equitable resolutionof this issue that maintains the current level ofbenefits for defense and aerospace companies. The<strong>Commission</strong> considered several proposals that couldbenefit defense and aerospace companies, whilemeeting the test of WTO compliance. The proposalsfavored by the <strong>Commission</strong> are an enhancedNational Security R&D credit, the National ForeignTrade Council (NFTC) wage credit proposal, andthe NFTC Footnote 59 changes.Enhance the Effectiveness of the Research andExperimentation (R&E) Credit. The <strong>Commission</strong>emphasizes the recommendations contained in itsSecond Interim report for improving the utility ofthe current research and experimentation tax creditfor defense and aerospace companies. Expanding onits earlier recommendations to make the R&E creditpermanent and increase the rates for the currentAlternative Incremental Research Credit, the<strong>Commission</strong> sees value in an additional alternativecredit that would allow defense and aerospace companiesto enjoy the same level of benefit as otherindustries—currently a 6 percent average credit. The<strong>Commission</strong> believes there should be a new alternativetax credit of 12 percent of the excess of currentyearqualified research expenditures (QRE) over 50percent of the average QRE for the prior three years,or 6 percent of current-year QRE for start-up taxpayers.Repeal Percent of Completion (POC) TaxAccounting Method. One area of particular complexityin the U.S. Tax Code is the Percentage-of-Completion method under Section 460 of theInternal Revenue Code (the “POC method”) thatwas enacted in 1986 when the “Competed Contractmethod” was repealed. Under the POC method, taxpayersare required to perform a complicated set ofcalculations involving estimated costs, price, and revenuesto derive a percentage that is used to determinethe amount of annual tax due on each contract.Many defense and aerospace contracts must be handledunder the POC method, either because they arelong-term contracts (requiring more than 12 monthsto complete) or because the items being produced are“unique” items not normally carried in inventory.Section 460 imposes an unfair burden on defenseand aerospace companies, as well as certain otherindustries, by requiring them to pay tax before profitis earned. In addition, complicated look-back and7-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace Sectorother requirements impose a compliance burden ontaxpayers and a correspondingly large administrativeburden on the Internal Revenue Service to monitorand enforce compliance, for relatively little revenuegain.The <strong>Commission</strong> welcomes theAdministration’s expression ofinterest in reviewing Section 460of the Tax Code. The <strong>Commission</strong>concludes that the POCmethod should be repealed,allowing defense contractors tobe treated similarly to all otherbusinesses. At the very least, themethod should apply only to contracts involvingitems that take a very long time to manufacture, i.e.,three years vice the current one-year limit in law.Export Control Reform. Export controls have areal and direct impact on the defense and aerospaceindustry’s ability to establish and maintain internationalpartnerships, meet market demand and staycompetitive, and address the requirements of existingoverseas partners and customers. Current exportlicensing policies and procedures are complicatedand inefficient, and erode the competitive positionof U.S. companies in the global marketplace.Left unchecked, the airlineindustry crisis will have aserious negative impact onthe entire Americaneconomy.The <strong>Commission</strong> believes that protection of ournational security and technological edge in key capabilitiesmust continue to be the principal focus of ourexport control laws. However, without a fundamentalrestructuring of the currentsystem, American companies willlose out to foreign competitionand our nations own industrialand high technology base will besignificantly undermined. Referto Chapter 6, Global Markets fora detailed consideration of the<strong>Commission</strong>’s recommendationson this critical topic.Airline Industry Bankruptcy and User Fees. The<strong>Commission</strong> also considered the plight of the U.S.airline industry, which is in the midst of a financialcrisis. If left unchecked, this crisis will have a seriousnegative impact on the entire American economy.The impact could become more serious very quicklyif more airlines are forced to declare bankruptcy leadingto payment delays or defaults on debts owed tolabor, manufacturers, and service providers. U.S. airlineslost $7.1 billion in 2001, and, according to theAir Transport Association, will lose an estimated $9.0billion in 2002. The airline loss of revenue has beenexacerbated by the combined effects of the terroristFigure 7-7 Increases in Taxes and Fees Over Time Have Reduced Airline ProfitsTax/Fee197219922002R/T***Passenger Ticket Tax*Passenger Flight Segment Tax*Passenger Security SurchargePassenger Facility ChargePassenger Facility ChargeInternational Arrival TaxINS User FeeCustoms User FeeAPHIS Passenger FeeCargo Waybill Tax*Frequent Flyer TaxAPHIS Aircraft FeeJet Fuel Tax*LUST Fuel Tax*Air Carrier Security Fee8.0%---$3.00----5.00%-----10.0%--$3.00**$6.00-$5.00$5.00$2.006.25%-$76.75-0.1¢/ga-7.5%$3.00$2.50$4.500**$13.00$13.20$7.0$5.0$3.106.25%7.5%$65.254.3¢/gal0.1¢/galTBD7.5%$12.00$10.00$18.00**$13.20$13.20$7.00$5.00$3.106.25%7.5%$65.254.3¢/gal0.1¢/galTBD*Tax Applies Only to Domestic Transportation **Legislative Maximum ***Single-Connection Rountrip With $4.50 Passenger Facility ChargeSource: U.S. Tax Code via www.airlines.org7-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Reforms Actors 18-month Enabling Actions Long-term ActionsFSC / ETIUSTRTreasuryCongressIndustry•Convene working group ofAdministration/Congress/Industry negotiations todevelop resolution that maintains benefit fordefense/aerospace industry by enacting one offour suggested alternatives.•Negotiate a change in inequitableWTO rules regarding treatment ofdirect and indirect taxes that putU.S. exporters at a competitivedisadvantage.R & E CreditTreasuryCongress•Propose and enact legislation making the R&Ecredit permanent, increasing the AIRC rates, andcreating a new alternative credit of 12% of taxpayers’excess QRE over 50% of the average QRE for theprior three years, or 6% for start-up taxpayers.•Periodically evaluate theeffectiveness and equity of theR&E credit in incentivizingprivate sector investment innew technology.Section460 Repeal/ ReformTreasuryCongress•Conduct a review and hearings on Section 460 ofthe Tax Code.•Propose and enact legislation to repeal orsubstantially reform Section 460.AirlineReformIndustryCongressCommerceFAA•Conduct study of airline user fees impact oncommercial aviation.•Urge early Congressional action on terrorismre-insurance•Develop U.S. policy regardingairline debt payments to foreigncreditors.attacks of September 2001, the current economicslump and chronically high internal cost structure.On the manufacturing side, the surplus of commercialaircraft is at a record level and worldwide productioncontinues to exceed demand. The<strong>Commission</strong> has been told by experts that theyexpect demand to pick up with an eventual reboundin the economy. Most believe evolving market forceswill eventually lead to a major restructuring of theairline and aviation servicing industries.The <strong>Commission</strong> finds that one cause of the currentfinancial condition of the industry relates to the federalgovernment’s over-taxation of the industry, principallyin the form of aviation and security-relateduser fees. Testimony before the<strong>Commission</strong> indicated that for a$100 airline ticket, approximately40 percent of that cost isthe result of governmentimposed fees. See Figure 7-7.The <strong>Commission</strong> believes thatthe Administration andCongress should review andconsider reducing these user feeson the airlines and their customers.The government shouldalso look at how to mitigateToday’s aerospace industrydemands a dynamic, resultsoriented workforce with thetalents, multidisciplinaryknowledge, and up-to-dateskills to enhance anorganization's value.problems caused by the scheduling cost and lack ofavailability of terrorism insurance.The <strong>Commission</strong> is aware of concerns that, in futurebankruptcies, airlines may be pressured to give foreigncreditors preferential treatment over domesticcreditors. The <strong>Commission</strong> urges the government toensure that all creditors are fairly and equitablytreated.Long-Term Growth and Financial Health: InJeopardyIn order to create a stable and predictable businessclimate that enables growth and fosters the longtermfinancial health of the industry, governmentand industry must first recognizethat the global marketplace itselfdrives this very dynamic, complex,and innovative businessenvironment. Challenges can nolonger be simply viewed as issuesbetween the U.S. governmentand American business. Wemust consider whether governingpolicies and regulations supportor weaken good businesspractices, and whether thesesame rules support or weaken7-16FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace Sectorthe technological capabilities of the aerospace industrialbase. A healthy, competitive, and innovativeindustry meeting defense and aerospace needs mustbe closely integrated with the global commercialmarketplace. Reduction in the uncertainty of ongoingbusiness and future aerospace markets enablesgovernment and industry to make the necessaryinvestments in people, technology, and facilities, tocontinue to ensure “world class” aerospace productstoday and for the future.Major challenges to this desired climate include theneed for dramatic personnel and training reform—how will we attract and retain necessary intellectualcapital, sustain a robust workforce for the future, andattract highly and specifically qualified individuals togovernment service; and merger and acquisition policyreform—a global perspective and approach tomergers and acquisitions for aglobally driven industrialbase.The <strong>Commission</strong> concludesthat investors and the technologyindustry will continueto direct their focus towardthe global commercial marketplaceif specific reformsare not implemented in thenear term, thus depriving thegovernment and the aerospaceindustry of the best andbrightest personnel, innovativeideas and technologies, and capital investments.The <strong>Commission</strong> has outlined a desired end-statewithin each of these areas and has provided a specificframework for long-term excellence.Government and industryshould work together to developand implement training andexchange programs that wouldeducate and expose theirworkforces to their respectivechallenges and responsibilities.organizational structures, activities, core processes,and resources to support mission accomplishments.Aerospace-oriented organizations in both the publicand private sectors recognize that people are an organization'skey asset. Today’s aerospace industrydemands a dynamic, results-oriented workforce withthe talents, multidisciplinary knowledge, and up-todateskills to enhance an organization's value to itscustomers and to ensure that it is equipped toachieve its mission. Because mission requirements,customer demands, technologies, and other environmentalinfluences change rapidly, a performancebasedorganization must continually monitor its talentneeds. It must also be alert to the changingcharacteristics of the global (not just U.S.) labormarket and identify the best strategies for filling itstalent needs through recruiting and hiring, and followup with the appropriateinvestments to develop andretain the best possible workforce.The <strong>Commission</strong> believesthat a primary barrier toaccomplishing many of theother recommendations inthis report is the lack ofunderstanding by the governmentand industry workforcesabout the roles,responsibilities, and challengesfacing their counterparts.The <strong>Commission</strong> is also concerned aboutreported instances of government acquisition personnelfailing to recognize business realities, such asthe need for adequate profit margins.Personnel and Training—The Engine forChange. Today’s most successful organizations aredefining in very specific terms what they want toaccomplish and what kind of structures are necessaryfor success. They are also defining a shared vision forthe future, focusing on core values, goals, and strategiesand communicating this shared vision clearly,constantly, and consistently. Top organizationsthen choose the best strategies for integrating theirGovernment and industry should work together todevelop and implement training and exchange programsthat would educate and expose their workforcesto their respective challenges and responsibilities.These programs should include internship andfellowship programs, cooperative training programs,and personnel exchanges to provide firsthand experiencefor both workforces in the others’ day-to-dayactivities.7-17FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The <strong>Commission</strong> also concludes that governmentacquisition personnel should be required to beknowledgeable about the characteristics of the integratedcivil contracting model, and that industryacquisition personnel be fully trained in the complexitiesof the government acquisition system. The<strong>Commission</strong> also believes that all government officialswith budget and program acquisition, management,or review responsibilities, both appointed andelected, should have either a business or financialbackground or be provided access to expert advice inthese areas. The <strong>Commission</strong> urges each newPresident to take these criteria into account whenmaking selections for relevant positions. Both theexecutive and legislative branches are encouraged tocreate training programs so that personnel in relevantpositions are fully knowledgeable about businesspractices and financial issues.The <strong>Commission</strong> also believes that investments innew, contemporary learning systems should beimmediately established to respond to the backlog ofnew policies and regulations that urgently needgreater cultural understanding and further skilldevelopment. System focus should include: emphasison the “how to” practical aspects of applying newrules and techniques, clear treatment of both culturechange and new process, maximum use of technologybased learning tools, mechanisms for validatinglearning tools and measuring the effectiveness ofthe learning process, and incorporation of jointbuyer-seller learning scenarios in selected criticalareas. Additionally, judicious use of outsourcing toaccess private sector education and training capability,aggressive use of government-industry exchangemechanisms to best leverage each side’s knowledge,and finally, skills and sustained management attentionand accountability including requirement forbusiness and financial backgrounds and training forall government personnel responsible for programacquisition and financial management should beimplemented.A Global Approach to Merger and AcquisitionPolicy. Just as the global marketplace drives ourbusiness environment, a global approach to mergersand acquisitions is fundamental. Today’s economy iscomprised of multi-national corporations, operatingacross all time zones and financial markets. No onecountry or corporation has a corner on technology,innovation, or management processes. Access toglobal best practices and markets is an absolutenecessity in today’s environment.The <strong>Commission</strong> believes the government mustdevelop and implement a policy regarding internationalcooperation in defense and aerospace that recognizesthe global industrial base. The <strong>Commission</strong>urges the Administration to undertake a review ofthe current policy regarding both domestic andinternational business combinations, based on ananalysis of the U.S. defense industrial base, includingthe supplier industrial base.Reforms Actors 18-month Enabling Actions Long-term ActionsPersonnel& TrainingReformDoDIndustryOMBCongressImplement government/industry internship, fellowship,and exchange programs for acquisition personnel.Require training for government acquisition personnelin integrated civil contracting, and require training forindustry personnel in government acquisition processesand systems.Require all government officials with budget or programacquisition, management, or review responsibilities tohave a business or financial background or training.Develop and implementcontemporary learning systems torapidly disseminate informationabout new policies and regulationsMerger &AcquisitionPolicyReformAdmin.DoDStateCommerceInitiate/update/complete studies on U.S. defenseindustrial base.Initiate/update/complete studies on U.S. supplier base.Conduct study of U.S. policy on domestic andinternational mergers and acquisitions.Develop U.S. policy regardingglobal mergers and acquisitions.7-18FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 7 – Business: A New Model for the Aerospace SectorConclusionsThe <strong>Commission</strong> concludes that for our aerospaceindustry to be globally preeminent, now and in thefuture, it must be able to attract vitally needed capitalat a reasonable cost. We further conclude that thedefense and aerospace sector is viewed as a lowgrowth industry with low margins, unstable revenueand a capricious major customer, the government.Without a significant change in the business model,the future of the aerospace industry, so critical to ournational economic and homeland security, is uncertainand at risk.Provide Investment Opportunities. Predictability,stability and performance are critical to the healthand growth of a robust aerospace industry. The governmentmust stabilize program requirements andprotect adequate long-term investment funding,enact reforms that increase the financial flexibility ofindustry and the government, and improve programmanagement stability.Enable Industry to Attract and Retain High-Tech Partners and Suppliers. The future of theaerospace industry is intrinsically tied to the abilityof the sector to attract and retain high-tech partnersand suppliers throughout the supply chain. The governmentshould pursue near-term reforms to realignpurchasing processes to lower costs and gain access tonew technology by eliminating, or at least lowering,barriers that make government business inefficientand unattractive to commercial firms. DoD shouldimplement changes to permit greater profitabilityand financial flexibility of industry working ongovernment efforts. A government-wide review offunctions and services should be conducted to identifythose functions that are not “core” to theeffective operation of government and those functionsthat could best be performed by the privatesector.Create a favorable Domestic and InternationalBusiness Climate. Certain U.S. tax and trade lawsand regulations that affect a wide variety of industriesweigh particularly heavily on defense and aerospace,both in competition with domestic commercialentities as well as in the international markets.The government should act promptly to replace burdensometax laws and outdated trade laws with lawsand regulations that remove unnecessary administrativeburdens from industry and recognize the uniquecontribution of defense and aerospace companies toour nation’s defense and economic security. In addition,the Administration and Congress should reviewand consider reducing user fees on airlines and theircustomers.Ensure Long-Term Growth and FinancialHealth. Government and industry must recognizethat a healthy, competitive, and innovative industrymeeting security and aerospace needs must be closelyintegrated with the global commercial marketplace.Major challenges to this desired climate include theneed for dramatic personnel and training reform andrecognition of the dynamic interrelated global environment.Government and industry should worktogether to develop and implement training andexchange programs that would educate and exposetheir workforces to those challenges and responsibilities.All government officials with budget and programacquisition, management, or review responsibilities,both appointed and elected, should berequired to have a business or financial backgroundor training. Finally, government must develop andimplement a policy regarding international cooperationin defense and aerospace that recognizes theglobal industrial base. The Administration is urgedto undertake a review of the current policy regardingboth domestic and international business combinations,based on an analysis of the U.S. defense industrialbase, including the supplier industrial base.RECOMMENDATION #7The <strong>Commission</strong> recommends a new businessmodel designed to promote a healthy and growingU.S. aerospace industry. This model is drivenby increased and sustained government investmentand the adoption of innovative governmentand industry policies that stimulate the flow ofcapital into new and established public and privatecompanies.7-19FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the FutureRECOMMENDATION #8: The <strong>Commission</strong> recommends the nation immediately reverse thedecline in, and promote the growth of, a scientifically and technologically trained U.S. aerospaceworkforce. In addition, the nation must address the failure of the math, science and technologyeducation of Americans. The breakdown of America’s intellectual and industrial capacity is athreat to national security and our capability to continue as a world leader. Congress and theAdministration must therefore:• Create an interagency task force that develops a national strategy on the aerospace workforceto attract public attention to the importance and opportunities within the aerospace industry;• Establish lifelong learning and individualized instruction as key elements of educationalreform; and• Make long-term investments in education and training with major emphasis in math and scienceso that the aerospace industry has access to a scientifically and technologically trainedworkforce.Chapter 8Workforce: Launchthe FutureThe <strong>Commission</strong> believes the intellectual preparationof the American workforce is the cornerstone forthe industry’s future and the nation’s economic wellbeing.The aerospace industry greatly enhances thevitality of the national economy by providing hundredsof thousands of high-skilled, well-compensatedmanufacturing jobs and by constantly developingsophisticated new technologies that benefit the entireeconomy, increase productivity and enhance nationalOur policymakers need to acknowledgethat the nation’s apathy towarddeveloping a scientifically andtechnologically trained workforce isthe equivalent of intellectual andindustrial disarmament, and is a directthreat to our nation’s capability tocontinue as a world leader.security. It is clear, therefore, that in the 21st century,the U.S. must continue to have a highly skilled, stable,secure, and growing aerospace workforce and acitizenry that is well prepared in mathematics andscience.Government, industry, labor, and academia mustwork together to identify and develop needed skillsat all levels and create programs and strategies tokeep the aerospace workforce “pipeline” filled. Thiswill ensure a world-class workforce ready to lead in aglobal economy.Objective: Well Educated, ScientificallyLiterate and Globally CompetitiveWorkforceAerospace workers will continue to be the mostknowledgeable and the most productive in theworld. U.S. students will be the world’s best in mathematics,science and technology. The U.S. will havea vibrant aerospace industry that will once again beattractive to future workers.8-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>IssuesToday’s Aerospace Workforce: In JeopardyClearly, there is a major workforce crisis in the aerospaceindustry. Our nation has lost over 600,000 scientificand technical aerospace jobs in the past 13years. 1 These layoffs initially began as a result ofreduced defense spending following the end of theCold War. But subsequent contraction of the industrythrough mergers and acquisitions and the eventsof September 11 have made the situation worse. Aconsequence of this environment has been an overallaging of the aerospace workforce, which risks the lossof intellectual capital. In addition, the industry hasshifted from one reliant upon defense sales to one inwhich a significant portion of sales are commercial,making U.S. aerospace industries vulnerable to foreigncompetition. All of this has placed our workforcein jeopardy.Cyclical Nature of the Industry. The aerospaceindustry has historically been cyclical and stronglydriven by defense spending, with increases correspondingto national conflicts and the militarybuild-up in the Reagan-Bush years. Sales within thecommercial industry have been cyclical as well, as hasFigure 8-1 Total Employment in the AerospaceIndustry (1989 – 2002)Number of Aerospace Workers (in thousands)14001200100080060040020001989 1991 1993 1995 1997 1999 2002Source: Aerospace Industries Association** Chart uses AIA definition of aerospace workers that includes all occupationsunder manufacturing SIC codes.ISSUES• Today’s Aerospace Workforce– Cyclical Nature of the Industry– Global Competition– Offsets– The Aging Workforce– Failure to Attract and Retain Workers• Tomorrow’s Aerospace Workforce– Failure of Mathematics and Science Education inthe K-12 System– Higher Education in Aerospace Disciplinesbeen government spending on space science andexploration.Aerospace procurement by the military (expressed inconstant dollars), for example, fell nearly 53 percentfrom 1987 to 2000. 2 The Department of Defense(DoD) also reduced its overall investment inresearch, development, testing, and evaluation bynearly 20 percent from 1987 to 1999. 3These reductions dramatically decreased the relativecontribution of DoD to the aerospace industry, andcontributed heavily to manpower losses in boththe commercial and military sectors. However, aerospaceprocurements by DoD have recently begun torebound, with an estimated 8.5 percent increasefrom 2000 to 2002. 4In addition to the reduced aerospace spending by thefederal government, the aerospace industry itself cutinvestment in developing new technologies.Industry-funded aerospace research and developmentfell by 37 percent from $8.1 billion in 1986 to$5.1 billion in 1999 (in inflation adjusted dollars). 5In response to decreased government spending, theaerospace industry started consolidating in the mid-1990s through company mergers and buy-outs,further contributing to job losses. The number ofmajor U.S. aerospace prime contractors shrank from8-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the Futuremore than 50 to just five: Boeing, GeneralDynamics, Raytheon, Lockheed Martin, andNorthrop Grumman. Aerospace firms continue toconsolidate to maximize resources, eliminate excesscapacity, and access new market segments. Partssuppliers have also undergone contraction andconsolidation.This consolidation has eroded the U.S. industry’stechnology base and competitiveness. With feweraerospace employers, many skilled engineers andtechnical experts have left the industry, resulting in aloss of intellectual capital. The most senior workersretired, while the most junior workers were laid offand migrated to other more promising industries.The attacks of September 11, 2001 deepened theindustry’s economic downturn. Airlines have cancelledplane orders and two have filed for bankruptcy.Aerospace industry representatives noted thatthe total announced layoffs since September 11 haveexceeded 100,000 workers across the industry. 6Global Competition. Global competition has risenrapidly since 1989, most notably from Europe, andis likely to grow in the future. According to theEuropean Association of Aerospace Industries, theU.S. share of world aerospace markets as measuredby annual revenue fell from over 70 percent in themid-1980s to below 50 percent in 2000. 7 In 2001,Airbus, the European consortium, commandedA CASE STUDY OF AEROSPACE WORKFORCE BARRIERSThe story of Sandra Goins, a Boeing employee from 1989 to 2001,illustrates how the aerospace industry’s instability contributes to itsworkforce difficulties.After eight years in Boeing’s copy center, Ms. Goins entered a labormanagementsponsored technical apprenticeship program, seekingmore valuable skills, interesting work, and a secure future. In the nextfour years, Ms. Goins completed 8,000 hours of apprenticeship trainingand a college degree and passed Boeing’s initial assessment forentry-level management jobs.But in December 2001, soon after completing her apprenticeship, Ms.Goins joined the 30,000 Boeing employees laid off due to 9/11. Nowpursuing a teaching career, she says people will avoid the aerospaceindustry until its jobs are secure.38 percent of large commercial aircraft market deliveries.Since mid-1997, market share, as measured byorder backlog, has shifted from Boeing to Airbus. Atthe end of 2001, Airbus had a backlog of 1,575orders versus 1,357 for Boeing. 8 European Union(EU) increases in research and development investmentmay well challenge the U.S. lead in commercialaircraft. This competition has resulted in consolidationand rationalization in both countries.Figure 8-2 U.S. and EU AerospaceEmployment (1980 – 2001)1,400,0001,200,000United StatesEuropean UnionEmployees1,000,000800,000600,000400,000200,00001980 1985 1990 1995 2000Source: MIT / LARA8-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Canada and Brazil, both with steadily growing aerospaceworkforces, have taken a leadership role in producingregional jets. This indicates that the futureglobal aerospace industry is likely to have a growingnumber of niche products tied to particular nationsor regions. Japan has long had such a niche status,centered on avionics. And while employment datafrom the Commonwealth of Independent States(CIS, the former Soviet Union) and China are notreadily available, it is clear that they have major aerospaceindustries. In short, the aerospace industrynow has four major clusters—U.S., Europe, CIS,and China—along with several regional centers,including Canada, Japan, Brazil, and others.ISLANDS OF EXCELLENCEBOEING/IAM QUALITY THROUGH TRAINING PROGRAMIn 1989, the International Association of Machinists and AerospaceWorkers (IAM) and the Boeing Corporation created a joint trainingprogram through their collective bargaining agreement to train theworkforce in new technology through apprenticeship programs andother training venues. The program, financed by a fund that collects4 cents per payroll hour from all bargaining unit employees, had a$25 million training budget in 1999.Offsets. Offset agreements represent a very complicatedaspect of global competition in the aerospaceindustry. Such agreements, many of which shift productionof aircraft partsto nations that buy finishedU.S. aircraft, are akey ingredient in manyforeign sales agreements.Manufacturers argue thatoffsets are a cost of doingbusiness internationally.Labor unions contendthat offsets are a majorcause of job loss, compromisenational security, and hurt our ability to remaindominant in aerospace by giving other nations thetechnology to produce aircraft and weapons.“If the aerospace industry cannotattract and retain the best and thebrightest, then the industry doesn’thave a future.”<strong>Commission</strong>er Tillie FowlerSubcontractors and suppliers are concerned with offsetsbecause foreign outsourcing means fewer salesfor American producersand lead to overcapacityin the market. By oneestimate, 11 percentof the U.S. aerospacejobs lost from 1989 to1997 were traceable toincreased imports. 9While the offset issue iscontroversial, it must benoted that since the 1970s, no large U.S. commercialaircraft or jet engine has been developed withoutmajor participation by foreign firms in technologydevelopment, manufacturing, or marketing. 10 Offsetsare likely to grow in the future, due to global trendsin the commercial aircraft market, and it is expectedthat “newly emerging markets” (developing nations)will soon order more aircraft than industrializednations, enabling them to impose heavier offsetrequirements. 11 For additional details on the subjectof offsets, see Chapter 6.The Aging Aerospace Workforce. Statistics from avariety of sources indicate that the aerospace workforceis “aging” and that 26-27 percent of aerospaceworkers are eligible to retire by 2008. The averageage of production workers is 44 in the commercial8-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the Futuresector, 53 in defense 12 and 51 at the NationalAeronautics and Space Administration (NASA). 13 Inaddition, the proportion of workers age 30 oryounger dropped by almost two-thirds, from 18 percentin 1987 to 6.4 percent in 1999. 14These statistics reflect a legitimate concern about theloss of intellectual capital in the aerospace industry.Intellectual capital may be the most important factordetermining the competitive success of aerospaceand other industries. Tangible aspects of intellectualcapital include a firm’s investments, such as patents,proprietary processes, and training. Intellectual capitalalso includes knowledge created through collaborativework, relationships with suppliers, individualworkers’ expertise, and the firm’s reputation. Newemployees may have the credentials to do the work,but the knowledge and relationships built throughyears of experience are difficult to replace. The pendingretirements of so many aerospace scientists, engineers,and production workers pose a real threat toan industry already fraught with widespread layoffsand few new hires.Further compounding the challenges aroundintellectual capital are longer product life cycles, adeclining number of new platforms being developed,and reduced overall spending on research and development.These factors also diminish the abilityof the industry to attract the best candidates toaerospace.Failure to Attract and Retain Workers. TheU.S. aerospace sector, once the employer of choicefor the “best and brightest” technically trained workers,now finds it presents a negative image topotential employees. Surveys indicate a feeling of disillusionmentabout the aerospace industry among itspersonnel, whether they are production/technicalworkers, scientists or engineers. The majority of“NASA has three times as many technicians over the age ofsixty as under the age of thirty.”Sean O’KeefeNASA AdministratorISLANDS OF EXCELLENCEROCKWELL COLLINS KNOWLEDGE MANAGEMENTRockwell Collins has a company-wide initiative underway to recordand document hard-to-replace competencies and skills. The initiativeincludes a computer-based training system that gives employees24/7 access to training and information; skills assessment softwarethat enables salaried employees to track the skills within theirdepartment and diagnose their own individual training needs; andQuick Learns, a CD-ROM based lesson series of video segmentstaught by actual hourly employees demonstrating how they performelements of their work. Aerospace companies are also settingup communities of practice, executive succession planning, andmechanisms to capture workers' knowledge before they retire.SPACE CAMPIn Alabama, children ages 9 and up can experience shuttle missionsand space stations at five-day programs. Campers build a lunar colonyand fly their own rocket. They learn about the history of space flight,shuttle and space station basics, and they experience lunar gravity.These stimulating activities educate young people about the space programand aviation, instilling an interest at an early age about theexciting careers in space that they may want to pursue when they areadults.newly dislocated workers say they will not return toaerospace. In a recent survey of nearly 500 U.S. aerospaceengineers, managers, production workers, andtechnical specialists, 80 percent of respondents saidthey would not recommend aerospace careers totheir children. 15Engineering students also gave the aerospace industrylow ratings for its physical work facilities, excitingand meaningful tasks, opportunities for professionaldevelopment and growth, and supportive andencouraging management. 16 Consequently, U.S. studentshave migrated to other technical fields.8-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>While there are no immediate solutions to the aerospaceemployment concerns, the <strong>Commission</strong>believes additional study of workforce issues is warranted.As the <strong>Commission</strong> recommended inInterim Report #3, steps are needed to help stabilizethe aerospace workforce. We need to consider theimpact on U.S. aerospace employment of domesticand international policies and reaffirm the goal ofstabilizing and increasing the number of good anddecent jobs in the industry. The <strong>Commission</strong> alsorecommended the establishment of an interagencytask force on workforce issues in the aerospace industry.The task force should be comprised of representativesfrom the U.S. Departments of Labor,Defense, Commerce, Transportation, Education,and Energy, NASA, National Science Foundation(NSF) and other departments and agencies as appropriate.Additionally, we believe the governmentshould develop a national strategy to attract publicattention to the importance and opportunitieswithin the aerospace industry.Tomorrow’s Aerospace Workforce: UnpreparedFailure of Mathematics and Science Educationin the K-12 System. Written 20 years apart, twoprestigious national <strong>Commission</strong> reports cited belowhighlight the continuing problems in the U.S. indeveloping a solid base of competence in mathematicsand science required for a quality workforce andneeded for general public support of research anddevelopment across the economy. One aspect of thiscrisis is low student achievement. In 1995, the ThirdInternational Math and Science Study found thatU.S. students scored above the international averagein 4th grade, slightly above it in 8th grade, but nearthe bottom in 12th grade. 17These data and numerous other national and statereports lead one to conclude that our K-12 system isdoing an abysmal job of educating our children andthat our nation, 20 years after “A Nation at Risk,” isstill at risk.“If an unfriendly foreign power had attempted toimpose on America the mediocre educational performancethat exists today, we might well have viewed itas an act of war… We have, in effect, been committingan act of unthinking, unilateral educationaldisarmament.”A Nation at Risk, 1981“The harsh fact is that the U.S. need for the highestquality human capital in science, mathematics andengineering is not being met… Second only to aweapon of mass destruction detonating in an Americancity, we can think of nothing more dangerous thana failure to manage properly science, technology,and education for the common good over the nextcentury.”Road Map for National Security, 20018-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the FutureThere are multiple reasons for this failure:• Differential funding in the 50 states and thenearly 15,000 separate school districts in the U.S.;• Shortages of math and science teachers and thelarge number of uncertified teachers in the classrooms;• Lack of competitive salaries for math and scienceteachers who have increasing job opportunitiesoutside the classroom;• Difficult work environments in many schools;• Lack of respect for those who chose to teach; and• Complex, decentralized management/delivery systemfor federal aid in math, science, and technologyeducation systems that lacks sufficient funding,a comprehensive overview and a sense ofmission.Substantive research indicates that the most consistentpredictors of student math and science achievement(and college success) are a teacher’s full certificationand a major in the subject they teach. Yet inU.S. high schools, more than one in four mathteachers and one in five science teachers lack even aminor in their teaching field. 18Figure 8-3 U.S. Students Science & Math PerformanceRelative to Other Countries100Science Math75Percentile Score502504thGrade8thGrade12thGradeSource: Council on Competitiveness, U.S. Competitiveness 200112thAdvanced Mathand PhysicsBoth the Hart-Rudman Report, “Road Map toNational Security,” and the Glenn Report, “Before itis Too Late,” highlight this fact. “Thirty-four percentof public school math teachers and nearly40 percent of science teachers lack an academicmajor or minor in these fields and a serious shortageof K-12 teachers exists in science and math. About56 percent of high school students taking physicalsciences are taught by out-of-field teachers, as are 27percent of those taking mathematics.” 19The prevalence of out-of-field math and scienceteachers is much greater in high-poverty areas andschools where a high proportion of students areFigure 8-4 Percent of Public School Math and ScienceTeachers Without a Major or Certification in Class Subject3025Schools with Less than 20% Minority StudentsSchools with 20% or More Minority Students20Percent151050No Major in Math No Major in Science Not Certified in Math Not Certified in ScienceSource: Council on Competitiveness, U.S. Competitiveness 20018-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ISLANDS OF EXCELLENCEAVIATION HIGH SCHOOLAviation High School, located just outside New York City, is a uniquepublic magnet high school that prepares students to enter the aviationfield. Students take all the academic course requirements toearn a high school diploma, plus vocational course requirements toearn a Federal Aviation Administration (FAA) aircraft mechaniclicense. More than 90 percent of graduates pass the FAA certificationexams and 75 percent of graduates go on to either a four-year universityor attend a two-year college or technical school.members of racial minority groups. According to theU.S. Council on Competitiveness, boosting theparticipation of women and minorities in the scienceand engineering workforce presents the single greatestopportunity to expand the nation’s pool of technicaltalent. 20 Sadly, for the past 20 years, thiscountry has been on a flat or declining trajectory inK-12 math and science teaching.Teacher shortages in these disciplines are likely toworsen in the near future. Because of retirements,attrition, job changes, and other reasons, U.S. schooldistricts will need to hire 240,000 middle school andhigh school math and science teachers between nowand 2010. 21 Even with innovative efforts such as theDefense Department’s “Troops to Teachers” andalternative certification programs in most states,there will continue to be a shortage of qualifiedteachers.The failure of the educational system to engageU.S. students in math and science has a cascading,negative impact on U.S. technological leadershipand foretells an ever-shrinking cohort of engineers,mathematicians and scientists. Additionally, thismeans that many employers must assume remediationand retraining costs, which have been estimatedto be over $60 billion a year. 22 Consequently, the<strong>Commission</strong> believes that if we are to remain a globalleader in aerospace science, engineering and technology,we must address the immediate and criticalnational crisis in our K-12 education system.Lifelong Learning and Individualized Instruction.The <strong>Commission</strong> believes that increased effortsmust be made to teach math and science in a contextualway that engages students in workplace applications.Understanding and solving problems usingreal world examples (e.g., the ballistics of a baseball,computing gas mileage in Corvettes, the chemistryof cosmetics, etc.) provokes student interest in corescientific areas and applications. Institutional softwarepackages can be used to overcome lack of familiaritywith the subject matter by some teachers. The<strong>Commission</strong> especially encourages the developmentof curricula using aerospace problems and examplesas the basis for teaching these subjects.Additionally, the <strong>Commission</strong> believes that emphasismust be placed on the concepts of “lifelong learning”and “individualized instruction” as key elements ofeducation reform. It is likely that individuals nowentering the workforce will hold five or more jobsin their lifetime. The education system must beThe <strong>Commission</strong> applauds the recent governmentefforts to address these problems including the “NoChild Left Behind” legislation, proposed increases tothe NSF budget for science and technology educationand the recently passed “Tech Talent Act.”Unfortunately, these steps are likely to be negated bythe growing financial crisis that exists in many statesand school districts.8-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the FutureISLANDS OF EXCELLENCEHONEYWELL SCHOOL-TO-APPRENTICESHIP PROGRAMHoneywell, a leading global aerospace business based in Phoenix,AZ, invests in an innovative apprenticeship program that beginswith high school seniors and takes them through a four-year programending with an associate’s degree in ManufacturingTechnology.Honeywell pays participants’ wages during the training, as well ascourse tuition costs. Upon completion, these apprentices will bestate-certified machinists or maintenance journey workers.prepared to deliver training and education to meetthese changing skill requirements and meet labormarket needs. U.S. community colleges are doingthis job well. They are adept at designing and deliveringthe workforce training and individualizedinstruction called for in this kind of effort.Higher Education in Aerospace Disciplines.From technician to Ph.D., the growth in technology,coupled with pending retirements, are driving a needfor a well-educated, highly-skilled workforce.Vocational Education and Apprenticeships. Vocationalaerospace programs have had declining enrollmentsover the past 10 years, even though 50 percent of thecurrent aerospace workforce is made up of workers ininstallation, maintenance, repair and production. 23Most of these workers have completed stand-aloneapprenticeship programs, or intensive training programsthat combine on-the-job training with classroominstruction leading to an Associates degreefrom a community college.While some of the major aerospace companies haveapprenticeship programs to train production andtechnical personnel, few currently have apprenticesin their programs due to the downturn in theeconomy. The need to replace retiring workers overthe next 10 years, however, demonstrates the crucialneed to start refilling the “pipeline” of qualifiedworkers now. Analysis of the economic benefits ofapprenticeship programs shows an impressive $50return for every dollar of federal investment. 24 Asstated in Interim Report #3, the <strong>Commission</strong>believes that the nation should make investments invocational education to develop workforce skillsneeded by the industry, promote registered apprenticeshipprograms for technical and skilled occupations,and target tax credits for employers who investin needed skills.Undergraduate Education. At the undergraduatelevel, degrees awarded to U.S. students in scienceand engineering programs have been flat or declining.From a peak of 441,205 in l983, undergraduateFigure 8-5 Aerospace Undergraduate Enrollment Trends (1987 – 2001)450400350300Enrollments2502001501005001987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Source: Dr. Bernard Grossman, Aerospace Department Chair Association, Testimony to the <strong>Commission</strong> on the Future of the Aerospace Industry, May 20028-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ISLANDS OF EXCELLENCESPACETECA consortium of community colleges, led by Brevard CommunityCollege (near the Kennedy Space Center in Florida), is implementingan industry-driven technical education system for aerospace technicians.Through a grant from the National Science Foundation,SpaceTEC will formalize aerospace technical education nationallyand establish a skills-based standards program that is recognizedand endorsed by industry. SpaceTEC will work with K-12 and postsecondaryinstitutes to coordinate curriculum development andinstructional materials.THE AVIATION CENTER OF EXCELLENCEFlorida Community College in Jacksonville has developed four programsto address the shortages of aviation mechanics, managers,administrators and professional pilots in the state. The AviationCenter of Excellence is certified by the FAA and offers Associate ofScience degree programs in Aviation Maintenance Management,Aviation Operations, Professional Pilot Technology and a PostSecondary Adult Vocational certificate in Aviation MaintenanceTechnology. The program works with discharged military personnelas part of their recruitment efforts and offers short-term customizedcourses to address specific employer and student needs.enrollment in engineering declined by more than 20percent, to 361,991 in 1998. 25 In contrast, engineeringenrollments are rising at universities in othercountries. Since 1975, the U.S. has dropped fromthird to 13th in the world in terms of proportion of24 year-olds who hold engineering degrees. 26Within the United States, the number of aerospaceengineering degrees awarded fell 47 percent from1991 to 2000. 27 Although there has been a slightincrease in undergraduate enrollment since 1997, itis not known whether this increase will continue.There has not been a corresponding increase ingraduate enrollment.This overall downward trend raises a serious concernabout the availability of an educated engineeringcohort to maintain U.S. leadership in scienceand technology and in the aerospace industry inparticular.Graduate Education. U.S. graduate enrollment in scienceand engineering fields has also been flat or indecline. From the mid-1990s, the number of doctoratedegrees awarded annually in engineering declinedby 15 percent. 28 The number of doctorates inphysics declined by 22 percent, and there weredeclines in mathematics and computer sciencedegrees as well. 29While the total numbers of advanced graduatedegrees awarded in science and engineering to U.S.students are declining, the proportion of thosedegrees awarded to foreign students has increaseddramatically. In engineering, fewer U.S. citizensearned doctorates in 2000 than in 1970: 2,514 in1970 and 2,206 in 2000. Meanwhile, the number ofengineering doctorates earned by foreign students ontemporary visas grew substantially, from 471 in 1970to 2,444 in 2000. 30Figure 8-6 Graduate Enrollment in Science andEngineering Fields (1992 – 1999)Enrollments140,000120,000100,00080,00060,00040,0001992 1993 1994 1995 1996 1997 1998 1999Social SciencesEngineeringSource: NSF, Science and Engineering Indicators, 2002Natural ScienceMath & Computer Sciences8-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the FutureIn the physical sciences, which include math andcomputer sciences, the numbers are also startling. In1970, 4,631 U.S. citizens and 568 foreign nationalsearned doctorates. 31 In 2000, 3,260 U.S. citizensand 2,161 foreign nationals earned doctorates. 32Foreign students now comprise over 40 percent ofall Ph.D’s awarded in science and engineering. 33This situation presents two problems for the aerospaceworkforce. First, a significant percentage ofthese highly educated scientists and engineers returnto their home countries. Second, many of the foreignPh.D. graduates who stay in the United Statescannot obtain the security clearances required forsome aerospace positions. Consequently, a considerableamount of the talent being trained at our universitiescannot contribute to the U.S. aerospaceindustry or to the long-term development of theU.S. economy.The purpose of this discussion is not to criticize theforeign students seeking advanced degrees from someof the best universities in the world, or the U.S. universitiesthat award the degrees. But serious reflectionis called for when too few of our own citizenspursue the scientific and technological skills and credentialsneeded to maintain this country’s globalleadership.The <strong>Commission</strong> believes that the U.S. governmentmust make substantive, long-term investments ineducation and training with major emphasis onmathematics and science, so that the aerospaceindustry has access to a scientifically and technologicallytrained workforce, second to none in the world.ConclusionsClearly, there is a major workforce crisis in the aerospaceindustry. Our nation has lost over 600,000 scientificand technical aerospace jobs in the past13 years. These layoffs initially began as a result ofreduced defense spending following the conclusionof the Cold War. This led to an industry shift fromreliance on defense sales to one dependent uponcommercial markets. Increasing foreign competitionin the commercial aerospace market has led to contractionsin the industry, resulting in mergers andacquisitions. Job losses from this consolidation havebeen compounded by the cyclical nature of theindustry.Due to these uncertainties, most of the workerswho have lost their jobs are unlikely to return to theindustry. These losses, coupled with pending retirements,represent a devastating loss of skill, experience,and intellectual capital to the industry.8-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Reverse the Decline and Promote the Growthof Today’s Aerospace Workforce. The<strong>Commission</strong> was unable to agree to any immediatesolutions to help stem the loss of jobs within theindustry. It hopes that its recommendations for ahigh-level federal management structure focused onestablishing a national aerospace consensus (Chapter5) and other actions to promote the industry willhave a positive effect in the future. What is clear isthat industry, government, and labor must begin towork now to restore an aerospace industry that willbe healthy, stable, and vibrant.U.S. policy towards domestic aerospace employmentmust reaffirm the goal of stabilizing and increasingthe number of good and decent jobs in the industry.The Administration and the Congress should considerthe impact of domestic and international policieson U.S. aerospace employment.Address the Failure of the Math, Science, andTechnology Education. The aerospace industrymust have access to a scientifically and technologicallytrained workforce. In the long term, the<strong>Commission</strong> stresses that action must be taken toimprove mathematics and science instruction acrossthe entire education range—K-12 through graduateschool. These actions and investments shouldinclude scholarships and internship programs toencourage more U.S. students to study and work inmathematics, science, and engineering fields. Inaddition, investments should be made in vocationaleducation to develop a highly skilled workforce,including registered apprenticeship programs forskilled and technical occupations. Further, asrecommended in <strong>Commission</strong> Interim Report #3,targeted tax credits should be made available toemployers who invest in the skills and training programsneeded by the industry.In addition, the <strong>Commission</strong> concludes that emphasismust be placed on the concepts of “lifelong learning”and “individualized instruction” as key elementsof education reform. It is likely that individuals nowentering the workforce will hold five or more jobs intheir lifetime and the education system must beprepared to deliver training and education to meetthese changing skill requirements and meet labormarket needs. U.S. community colleges are adept atdesigning and delivering workforce training andindividualized instruction.Our policymakers need to acknowledge that thenation’s apathy toward developing a scientificallyand technologically trained workforce is the equivalentof intellectual and industrial disarmament and isa direct threat to our nation’s capability to continueas a world leader.RECOMMENDATION #8: The <strong>Commission</strong> recommendsthe nation immediately reverse thedecline in, and promote the growth of, a scientificallyand technologically trained U.S. aerospaceworkforce. In addition, the nation must addressthe failure of the math, science and technologyeducation of Americans. The breakdown ofAmerica’s intellectual and industrial capacity is athreat to national security and our capability tocontinue as a world leader. Congress and theAdministration must therefore:• Create an interagency task force that developsa national strategy on the aerospace workforceto attract public attention to the importanceand opportunities within the aerospaceindustry;• Establish lifelong learning and individualizedinstruction as key elements of educationalreform; and• Make long-term investments in education andtraining with major emphasis in math and scienceso that the aerospace industry has accessto a scientifically and technologically trainedworkforce.8-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 8 – Workforce: Launch the Future8-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesRECOMMENDATION #9: The <strong>Commission</strong> recommendsthat the federal government significantly increaseits investment in basic aerospace research, whichenhances U.S. national security, enables breakthroughcapabilities, and fosters an efficient, secure and safeaerospace transportation system. The U.S. aerospaceindustry should take a leading role in applying researchto product development.Chapter 9Research: Enable BreakthroughAerospace CapabilitiesAerospace is a technology-driven industry. Longtermresearch and innovation are the fuel for technology.U.S. aerospace leadership is a direct result ofour preeminence in research and innovation.Think of what we have achieved since the Wrightbrothers first flew. Aerospace technology has transformedthe way we live, work and play. Today, weroutinely travel thousands of miles by air in a matterof hours; mail and cargo can be delivered almost anywherein the world overnight; people can communicatewith others around the world instantaneously;and air and space systems play an integral role in ournational security and homeland defense. Satellitesmonitor the health of the planet and its atmosphereRESEARCH: Scientific investigation aimed atdiscovering and applying new facts, techniquesand natural laws.McGraw-Hill Dictionary ofScientific and Technical Terms9-1and provide global information about the weather;robotic spacecraft visit the planets; space telescopeslook back at the origins of the solar system;and the International Space Station orbits theEarth as the first permanent international habitat inspace.The U.S. aerospace sector has achieved many firstsover the last century, but it could have done evenmore. Man walked on the moon 30 years ago, but wehave failed to return. We built the SR-71 “Blackbird”aircraft, and 30 years later it still holds the speedrecord. Aerospace infrastructure built decades ago isstill the mainstay of our capability. If our next 100years are to be as exciting as the last, we must continueto sustain the U.S. research capability to producenew breakthroughs in technology.Government policies and investments in long-termresearch are essential if the United States is goingto maintain its global aerospace technology leadership.Long-term research enables breakthroughs innew capabilities and concepts and provides newknowledge and understanding, often resulting inFINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>unexpected applications in other industries, and inthe creation of new markets. Research is an indispensablepart of the U.S. innovation engine for generatingnew ideas and knowledge and for acceleratingtheir transformation into new products, processesand services. But, government and private investmentsin long-term research have not kept pace withthe nation’s technological needs.Industry has the responsibility for leveraging governmentand university research and for transforming itinto new products and services, quickly and affordably.But, the U.S. aerospace industry has notinvested sufficiently to transition research into marketableproducts and services.Academia has the responsibility for educating thenation’s scientists and engineers and for partneringwith government and industry on long-term, highriskresearch. But, they are dependent on governmentand industry investments.Objective: U.S. Preeminence in Researchand InnovationU.S. preeminence in research and innovation willprovide revolutionary aerospace capabilities in the21st century—safe, secure, fast, clean, quiet.Imagine a future in which:• You can travel wherever and whenever you wanton Earth or in space;• You will be able to get from your doorstep to yourdestination on time and without delay;• You will be able to have customized products deliveredto you where and when you need them;• You will know the weather accurately days inadvance;• Rogue nations and terrorists will no longerthreaten the free world because their actions aremonitored continuously and, if necessary, areresponded to instantaneously wherever they are,day or night;• We will have not only answered fundamentalquestions about our universe but also willhave explored new worlds and reaped their untoldtreasures;• You have clean and quiet aerospace vehicles; and• Our nation’s “best and brightest” seek out theexcitement provided by careers in aerospace.All of these are possible if the nation invests in thefuture.IssuesOver the last several decades, the U.S. aerospace sectorhas been living off the research investments madeprimarily for defense during the Cold War, whichenabled intercontinental ballistic missiles, theSaturn V, SR-71, space-based reconnaissance, missiledefense systems, global positioning systems, stealth,and unmanned aerial vehicles. In the past, the aerospacesector led the technology revolution primarilybecause of large public investments in researchdirected at national security imperatives and goals.Today, we have no integrated national aerospace consensusto guide policies and programs. This hasresulted in unfocused government and industryinvestments spread over a broad range of long-rangeresearch programs and associated aging infrastructure.Meanwhile, foreign governments realize theimportance of public investments in research andinfrastructure. As a result, they are defining theirISSUES• Public Funding For Long-Term Research and Infrastructure– Long-Term Research– Infrastructure• National Technology Demonstration Goals• Transition of Government Research to Aerospace Sector– Information Transfer– Public-Private Partnerships– Product Development Process9-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace Capabilities“But it is not really necessary to look too far into thefuture; we see enough already to be certain that itwill be magnificent. Only let us hurry and open theroads.”Wilbur WrightSpeaking to the Aero-Club de FranceNovember 5, 1908priorities and increasing their investments. 1 TheEuropean Union, for example, has made increasedfunding of civil aeronautics research a priority in itsopenly stated drive for world leadership in the aerospaceindustry. Asia, likewise, has targeted aerospaceas a strategic industry and increased governmentresearch and development (R&D) investments in itsnational manufacturers.The war on terrorism has created a new nationalimperative that demands we make aerospace anational priority again and focus our resources ondeveloping new products and processes as fast aspossible. Because of the unique capabilities it canprovide, aerospace can help us win the war on terrorismwhile simultaneously strengthening our economy.This can only be done if we unleash the aerospacesector’s full potential.Long-Term Research. Most of our aerospace capabilitiestoday are the result of breakthrough technologiesdeveloped in the 1940-1960s for militaryapplications, including the jet engine, radar, spacelaunch, and satellites. In many cases, these capabilitiesgradually migrated into civil and commercialapplications in the 1960s through the 1990s. Thisincludes commercial jet aircraft, the air traffic controlsystem, telecommunications, and space-basedcommercial remote sensing.Countless breakthrough capabilities are possible overthe next 100 years. But, they will only be of militaryand economic benefit, if the United States maintainsits preeminence in conducting long-term basicresearch that delivers revolutionary, breakthroughaerospace capabilities to market faster than its internationalcompetition. Aerospace research that willenable these breakthrough capabilities include:LONG-TERM AEROSPACE RESEARCH• Information Technology• Propulsion and Power• Noise and Emissions• Breakthrough Energy Sources• Human Factors• NanotechnologyPublic Funding for Long-Term Research andInfrastructure: Insufficient and UnfocusedMany in government and on Wall Street view theaerospace sector as “mature.” They view governmentinvestments in research as “corporate welfare” andnot as an opportunity to make major breakthroughsin aerospace capabilities that could open newmarkets and usher in a new era of U.S. global aerospaceleadership. The lack of sufficient and sustainedpublic funding for research and associated research,development, test and evaluation (RDT&E) infrastructurelimits the nation’s ability to address criticalnational challenges and to enable breakthroughaerospace capabilities.Information Technology. The information revolutionwill ultimately be as important to transportation asthe invention of the automobile and the jet engine. 2High performance computers will enable us tomodel and simulate new aerospace vehicle designs,prototype them and field them quickly. High confidencesystems and high-bandwidth communications,including lasers, will ensure thatcommunication links between space, air and groundelements are secure from cyber attack. Large-scalenetworks will enable the development of system-ofsystemssolutions for defending America, projectingpower globally, and moving aircraft around theworld when and where needed.9-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>revolutionary aerospace capabilities. These advanceswill come in four flight regimes: subsonic and supersonicflight (gas turbine/pulse detonation engines),hypersonic flight (ramjets/scramjets), access-to-space(rocket/combined cycle systems), and travel throughspace (nuclear, plasma, and anti-matter propulsionand power).Advances in propulsion will remain the critical enablingtechnology to revolutionary aerospace capabilities. Antimatterpropulsion holds promise as a means of enablingfaster travel through space.Advanced engineering tools will make software morereliable, robust and fault tolerant. Micro- and nanocomputersand sensors will revolutionize flight systems,enabling them to acquire, process, and automaticallyfly aerospace vehicles. New integrated air,space and ground networks will enable us to acquirelarge volumes of data, process that data andthen make it available to decision makers anywherein the world, in near-real time. Computer andnetwork technologies will revolutionize the workplace,increasing individual and organizationalproductivity.• Subsonic and Supersonic Flight. Advanced airbreathingpropulsion systems will enable a newgeneration of quiet, clean, affordable, and highlycapable military and civil aircraft. Since the 1950s,aggressive gas turbine engine technology effortshave increased production engine performance bya factor of three and improved fuel efficiency by70 percent. Further substantial improvements inthe capability and cost of hydrocarbon-fueled turbineengines are being actively pursued under thenewly formed Versatile, Affordable, AdvancedTurbine Engines (VAATE) Program, whichfocuses Department of Defense (DoD), NationalAeronautics and Space Administration (NASA),and industry investments on a common set ofnational goals.• Hypersonic Flight. Ramjet/scramjet technologyoffers the potential for new classes of aircraft andweapons that can provide the military with globalreach and time critical strike capabilities. In addition,dual-use benefits can be derived within thecivil aviation sector, permitting significantlyreduced transit times around the world. U.S.Propulsion and Power. Advances in aerospace propulsionand power have been foundational in achievingnearly every significant breakthrough in aerospacecapability over the past century. The piston engineenabled the Wright brothers to inaugurate the age ofpowered flight. Development of the turbine engineushered in the jet age. Rocket propulsion openedour access to space. And nuclear generated electricpower made possible our initial exploration of thesolar system.In the next century, advances in propulsion andpower will remain the critical enabling technology toArtist concept of a hypersonic missile.9-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesTHE NATIONAL AEROSPACE INITIATIVE• High-Speed/Hypersonics• Space Access• Space Technologyramjet/scramjet technology efforts over the pastdecade have been limited and unfocused. Anaggressive and sustained investment is needed inthis arena, with the objective of overcoming thecritical technical barriers of high-speed flight andproviding the demonstrations necessary to validatethe operational feasibility of hypersonic systems.The <strong>Commission</strong> supports the joint DoD andNASA National Aerospace Initiative objective ofachieving Mach 12 capability by 2012. This initiativeshould begin as soon as possible.• Access-to-Space. Affordability will be key to seamless,on-demand space access, as well as the futuresuccessful commercialization of space. New familiesof rocket-based and air-breathing propulsiontechnologies are needed to support development ofthe reusable and expendable launch vehicle conceptsthat can provide order-of-magnitude reductionsin payload-to-orbit cost. Single- and twostage-to-orbitconfigurations offer the potential forairline-like operations not achievable with currentlaunch systems.• Travel Through Space. The lengthy transit timesthat result from the use of currently availablepropulsion systems make human exploration ofour solar system difficult, if not infeasible. Whilepropulsion concepts, such as ion and plasma, andpower sources, such as nuclear, offer the potentialof cutting transit times for space explorationby half or more—they are unable to significantlyreduce the duration of deep-space missions. Newpropulsion concepts based on breakthroughenergy sources, such as anti-matter energy systems,could result in a new propulsion paradigm thatwill revolutionize space transportation. See Figure9-1.Noise and Emissions. Quiet and clean aircraftoffer the potential to greatly expand the capacity ofthe national airspace system—making airportssought-after centers of economic activity. With theadvent of the high-bypass turbofan engine, aircraftpropulsion systems noise and emissions have beengreatly reduced. Advanced vehicle concepts—such asblended-wing-body, strutbrace-wing, and noise cancellationtechnologies—could produce furtherreductions. Research investments are needed to furthermitigate jet noise, sonic boom, and emissions.Near zero-emissions aircraft may someday be possiblethrough the introduction of breakthrough energysources, such as hydrogen.Breakthrough Energy Sources. In the 20th century,hydrocarbon-based fuels served as the predominantenergy sources for aerospace applications. In the 21stcentury, new energy sources must be developed inorder to achieve revolutionary new air and spacecapabilities.WeeksTHE COMING HYDROGEN ECONOMY:Hydrogen may be the next breakthrough energy source for aircraft.Hydrogen-fueled engines produce zero emissions of carbondioxide, the primary gas of concern for global warming.Hydrogen-fuel-cell-powered aircraft would eliminate the combustioncycle altogether, thereby producing no combustionemissions and drastically reducing engine noise.Figure 9-1 Transit Time From Earth to Mars403020100Chemical Nuclear /PlasmaAntimatter9-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Ion engines may propel future spacecraft.• Air Applications. In the near term, hydrogen fuelcell technology can be used to provide aircraft auxiliarypower, increasing aircraft safety and propulsionsystem efficiency. Aircraft use of hydrogen canbe an important step in establishing a hydrogeneconomy that could free the U.S. from dependenceon foreign sources of energy. The benefits ofmoving from hydrocarbon-fueled to hydrogenpoweredaircraft clearly justify an expanded andaccelerated program to make aerospace a leader inhydrogen energy research.New cockpits will be radically differentfrom those of today.Advanced engine exhaust nozzles like the one in this NASAtest chamber will help reduce the noise near airports.• Space Applications. In the nearer-term, nuclear fissionand plasma sources should be actively pursuedfor space applications. In the longer-term, breakthroughenergy sources that go beyond our currentunderstanding of physical laws, such as nuclearfusion and anti-matter, must be credibly investigatedin order for us to practically pursue humanexploration of the solar system and beyond. Theseenergy sources should be the topic of a focusedbasic research effort.Human Factors. In the final analysis, all technologyinvolves the human.• Human-Centered Design. Automated systems canincrease capacity and safety of aerospace systems,but not without human factors research. In airtraffic management, for example, one of the mainconstraints on system capacity is human cognitiveworkload limitations. A typical air traffic controllercan only maintain awareness of fourto seven aircraft at a time. Automation couldremove this limitation but would change the controllers’function. This will require human factorsresearch to examine: human-automation interaction;the display, exchange and interpretation ofinformation; the role of the operator; and operatorselection and training.9-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesImproving safety is possible using automation tocompensate for and to assist humans. To achievethis, human factors research is needed to advanceour fundamental understanding of how peopleprocess information, make decisions, and collaboratewith human and machine systems. Theresult will be enhanced performance and situationalawareness of the human—in and out of thecockpit.• Space Radiation Effects. Radiation is a significantlimiting factor for long-duration human spacemissions. Human factors research is needed to betterunderstand and counteract/overcome theeffects of radiation to maximize crew physicalhealth, psychological integrity, protection and survivalduring long-duration space flight.Nanotechnology. Not only did microtechnology leadto computers and the Internet during the second halfof the 20th century, but italso brought us to thebeginning of an excitingscientific revolution wenow call “nanotechnology.”Microtechnologyhelped develop scientificinstruments that make itpossible for the first timeto image, manipulate, andprobe objects that can beNanotechnology is the creation of more than one thousandfunctional devices on the nanometer times smaller than thelength scale (1-100 nanometers). microcircuits of the mostadvanced computers. These objects have dimensionson the scale of nanometers, 1/100,000th the widthof a human hair.Recent discoveries indicate that, at the nano scale,devices and systems have completely different electrical,mechanical, magnetic, and optical propertiesfrom those of the same material in bulk form. Thiscould lead to over an order of magnitude increasein material strength which could revolutionizeaerospace vehicle structural design and performance.See Figure 9-2. In addition, they will enable thedevelopment of miniaturized, inherently radiationhardenedmaterials and electronic components. Theycould also help eliminate aviation noise, providemorphing-capable airframes, reduce the cost of spaceaccess and help bring about a new, highly advancedgeneration of small satellites for surveillance andatmospheric monitoring.The benefits of research may not be realized fordecades but are critical to innovation and to keepingthe nation’s intellectual capital “ever green.”Research needs to be world-class and be increasinglyinterdisciplinary in nature.Infrastructure. Maintaining a world-class nationalaerospace RDT&E infrastructure is needed to ensurethat this country’s research programs can be performedsuccessfully. Testimony before the<strong>Commission</strong> and studies conducted by the federalgovernment over the last decade have found that thenation’s research infrastructure is aging, locally optimized,and unable to meet our future needs.Aging. Much of the U.S. RDT&E infrastructure is40 to 50 years old and marginally maintained. Thenation must properly fund: routine maintenanceand upgrades; the development of advancedcomputational/simulation tools and the integrationinto the research facilities and test processes; thedevelopment of new test technology and associatedinstrumentation; and the implementation of thesenew technologies in national research assets.Figure 9-2 Past and Projected Strength ofMaterials for Air and Spacecraft StructuresStrength Per Unit Mass120010008006004002000Wood Aluminum Composite1860 1900 1940 1980 2020 2060Source: Langley Research Center, NASASingle CrystalCarbon NanotubesCarbonNanotubes9-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Locally Optimized. Government and industry managersoptimize their infrastructure resources locallyand not from a national perspective. The federalgovernment needs a process to ensure that the U.S.aerospace RDT&E infrastructure is right-sized,state-of-the-art, affordable, and supports joint government-industryuse in achieving our nationalobjectives.Unable to Meet Future Needs. The nation needs toidentify and invest in a new infrastructure that supportsU.S. government and aerospace industry needsso our infrastructure does not become a constrainton our country’s technology advancement. Forexample, the nation will need production-orientedwind tunnels, with test capabilities beyond thosecurrently available, to design and test new hypersonicvehicles and systems.The <strong>Commission</strong> believes that the White House andthe Congress must increase and sustain funding inlong-term research and associated RDT&E infrastructureto develop and demonstrate new breakthroughaerospace capabilities.National Technology Demonstration Goals:Do Not ExistLong-term research and the associated RDT&Einfrastructure are the building blocks for developingbreakthrough aerospace capabilities and is an indispensablepart of the U.S. innovation process. Just asthe government invested in aerospace capabilitiesthat transformed the second half of the 20th century(e.g., jets, radar, space launch, satellites), it mustinvest in capabilities that will transform the first partof the 21st century. To focus our aerospace researchinvestments on developing these breakthrough capabilities,the <strong>Commission</strong> suggests the Administrationadopt—as a national priority—the achievement ofthe following aerospace technology demonstrationgoals by 2010.Air Transportation• Demonstrate an automated and integrated airtransportation capability that would triple capacityby 2025;• Reduce aviation noise and emissions by 90percent;• Reduce aviation fatal accident rate by 90 percent;and• Reduce transit time between any two points onearth by 50 percent.Space• Reduce cost and time to access space by 50percent;• Reduce transit time between two points in spaceby 50 percent; and• Demonstrate the capability to continuously monitorand surveil the earth, its atmosphere and spacefor a wide range of military, intelligence, civil andcommercial applications.Wind tunnels at NASA’s Ames Research Center, someof which are over 50 years old.Time to Market and Product Cycle Time• Cut the transition time from technology demonstrationto operational capability from years anddecades to weeks and months.9-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesFigure 9-3 shows how the research areas discussedearlier support the demonstration goals.Transition of Government Research toAerospace Sector: SlowThe <strong>Commission</strong> believes that the U.S. aerospaceindustry must take the leadership role in transitioningresearch into products and services for the nationand the world. To assist them, the government mustprovide industry with insight into its long-termresearch goals and programs. With this information,Figure 9-3 Aerospace Research Areas vs. Demonstration Goalsthe industry needs to develop business strategies thatcan incorporate this research into new products andservices. Industry also needs to provide an input tothe government on its research priorities. Lastly, governmentand industry need to create an environmentthat will facilitate acceleration of technology transitioninto application.Information Transfer. The government hasattempted to transfer technology that it develops forits unique department and agency missions to indus-Aerospace Demonstration Goals for 2010Air Transportation Space Cycle TimePrimary ContributorSupporting ContributorAutomate andintegrate airtransportationto triplecapacity(by 2025)Reduceaviationnoiseandemissionsby90 percentReduceaviationfatalaccidentrateby90 percentReducetransittimebetweentwopointsonearthby halfReducecostandtime toaccessspaceby halfReducetransittimebetweentwopoints inspaceby halfContinuouslymonitor andsurveil theearth,atmosphereand spaceReducetechnology-tosystemtransitiontimefrommonthsto weeksInformation TechnologyModeling and simulationSoftware engineeringHPCCLarge scale networksSmart and brilliantIndividualized instructionPropulsion and PowerSubsonic / SupersonicHypersonicAccess to spaceTravel through spaceResearch AreasBreakthrough Energy SourcesHydrogenNuclear (fusion) / PlasmaAnti-matter, zero-pointHuman FactorsRadiation effects of spaceAutomated systemsAssisting humansNoise and EmissionsNew sources of powerVehicle designActive / passive surface controlNanotechnologyIntrinsically radiation hardenedNew structure (morphing)Energy storageSensors and computers9-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>try through various mechanisms, such as cooperativeagreements. These mechanisms, however, tend to becumbersome and slow, which many times results intechnology being obsolete before the agreements aresigned and the products fielded. In addition, industryhas been slow to utilize technology from federallaboratories as part of their products and services.Government and industry need to develop new waysof transferring research and technology developed infederal laboratories and in academia.In the future, new ideas and knowledge will be translateddirectly into prototype products and servicesfor customer testing. Industrial design, modeling,simulation, and computer-aided manufacturing andsoftware development will become major elements inan integrated and streamlined innovation processthat can apply “tomorrow’s ideas to today’s productsand services.”These opportunities, plus the dramatic improvementsin individual and group productivity throughautomation, networking, and modeling, will radicallyalter the way we apply research to develop newand innovative products and services. Information(and intellectual capital) will become the new “transfer”function of the 21st century. This new functionwill enable industry to transition research into newproducts and services quickly.Public-Private Partnerships. Government, industry,labor and academia need incentives that encouragethem to think and act in the common interest ofthe nation. They need to be motivated and rewardedfor performing world-class research, for reengineeringproduct-development processes, for taking anational perspective and for delivering quality productsand services quickly and affordably. In short,they need incentives for change, sothat they can deliver more for less, quickly andaffordably.For example, to encourage industry and academia towork together, the government should consider providingtax incentives to the industry for bothresearch sponsorship and capital investments thatthey make in universities. This would providetrained technical staff and focused research productsfor the industry, while providing more resources foracademia to perform cutting-edge research.Under the leadership of the White House, the government,industry, labor and academia need to worktogether to transform the way they do business,allowing the nation to capitalize on the best ideasavailable and apply them rapidly to new products,processes and services. Each plays an important rolein the process, but each often has conflicting goalsand objectives. These goals and objectives need to bereconciled and an environment established that permitsjoint governance over the process. The governmentand industry should jointly publish these goalsand objectives with a set of metrics and milestones tomeasure the success of the process.Product Development Process. Government,industry, labor and academia view long-range scienceand technology research as a separate function fromacquisition, rather than an integral part of a largerproduct-development process. Furthermore, theyview science (“S”) and technology (“T”) as separatefunctions, further hindering the application ofnew ideas and concepts to the development andmanufacture of new products and services. SeeFigure 9-4.VAATE: A MODEL FOR PUBLIC-PRIVATE PARTNERSHIPS• Addresses a critical dual-use technology• Has well-defined goals, objectives, and milestones• Integrates a variety of disciplines (e.g., materials and structures,aerodynamics, computational fluid dynamics, etc.)• Coordinates government/industry efforts• Provides near-term payoffs to existing systems and enablingtechnologies for new systems• Possesses strong government (DoD/NASA) leadership/oversight9-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesFigure 9-4 Traditional Linear U.S. Science &Technology and Acquisition ModelTime to Market - DecadesCycle Time - Years to DecadesOversight /ReworkAppliedResearchTechnologyDevelopmentProductManufacturing /DistributionDemonstrationCustomersTechnology Pulland Research PushFigure 9-5 New Innovation Process for theAerospace SectorTime to Market - MonthsCycle Time - Days to WeeksCustomers & Markets(Goals)Public-PrivatePartnerships (CapabilityDemonstration andDeploymentScience, Engineeringand TechnologyResearchCustomer /Market PullCustomer / MarketPull & Capability PushCapability Pull & Research PushBasicResearchThe aerospace sector in the 21st century will bedriven by the need for speed, quality, service, costand innovation. If government is to help industry becompetitive, it must think and act on the same timescale as industry—days, weeks and months asopposed to years and decades.Global competition dictates that the U.S. transitionfrom a research, development and acquisitionprocess that is fragmented, serial, and functionallyorientedto an innovative process that is dramaticallysimpler, integrated, and streamlined. The public andprivate sectors need a processthat enables them to apply thebest ideas available domesticallyand internationally inorder to provide the very bestquality products and servicesto their customers faster andcheaper. See Figure 9-5.The <strong>Commission</strong> believes thatthe nation needs a new, moreflexible and integrated product-development processthat stimulates new ideas and turns them into newaerospace products and services faster than our internationalcompetition. Essential characteristics of thisnew process are:• Coordinated national goals;• The aggressive use of information technologies;Government… must thinkand act on the same timescale as the industry—days,weeks and months as opposedto years and decades.• Incentives for real government, industry, labor andacademia partnering; and• An acquisition process that integrates science andtechnology as part of the acquisition—or productdevelopment—process.ConclusionsThe United States must maintain its preeminence inaerospace research and innovation to be the globalaerospace leader in the 21st century. This can onlybe achieved through proactive government policiesand sustained public investments in long-termresearch and state-of-the-artRDT&E infrastructure that willresult in new breakthroughaerospace capabilities.Over the last several decades,the U.S. aerospace sector hasbeen living off the researchinvestments made primarily fordefense during the Cold War—intercontinental ballistic missiles,the Saturn V, space-based reconnaissance, theglobal positioning system, stealth and unmannedaerial vehicles. The challenges posed by our rapidlychanging world—asymmetric threats, internationalcompetition, environmental awareness, advances intechnology—demand that we, like the Wright brothers100 years ago, look at the challenges as opportunitiesfor aerospace and turn them into reality.9-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Government policies and investments in long-termresearch have not kept pace with the changing world.Our nation does not have bold national aerospacetechnology goals to focus and sustain federal researchand related infrastructure investments. It lacks astreamlined innovation process to transform thoseinvestments rapidly into new aerospace products,processes and services.The United States has unlimited opportunities torevolutionize aerospace in the 21st century, openingup new markets and launching a new era of U.S.global aerospace leadership. The nation needs to capitalizeon these opportunities, and the federal governmentneeds to lead the effort. Specifically, it needsto invest in long-term enabling research and relatedRDT&E infrastructure, establish national aerospacetechnology demonstration goals, create an environmentthat fosters innovation and provide the incentivesnecessary to encourage risk taking and rapidintroduction of new products and services.Increase Public Funding for Long-TermResearch and RDT&E Infrastructure. TheAdministration and Congress need to sustain significantand stable funding in order to achieve nationaltechnology demonstration goals, especially in thearea of long-term research and related RDT&Einfrastructure. Research areas that provide the potentialfor breakthroughs in aerospace capabilitiesinclude:• Information Technology;• Propulsion and Power;• Noise and Emissions;• Breakthrough Energy Sources;• Human Factors; and• Nanotechnology.Establish National Technology DemonstrationGoals. The Administration and Congress shouldadopt the following aerospace technology demonstrationgoals for 2010 as a national priority. Thesegoals, if achieved, could revolutionize aerospace inthe next half century much like the development ofthe jet, radar, space launch, and satellites did over thelast half-century.Air Transportation• Demonstrate an automated and integrated airtransportation capability that would triple capacityby 2025;• Reduce aviation noise and emissions by 90percent;• Reduce aviation fatal accident rate by 90 percent;and• Reduce transit time between any two points onearth by 50 percent.Space• Reduce cost and time to access space by 50percent;• Reduce transit time between two points in spaceby 50 percent; and• Demonstrate the capability to continuously monitorand surveil the earth, its atmosphere and spacefor a wide range of military, intelligence, civil andcommercial applications.Time to Market and Product Cycle Time• Reduce the transition time from technologydemonstration to operational capability from yearsand decades to weeks and months.Accelerate the Transition of GovernmentResearch to the Aerospace Sector. The U.S. aerospaceindustry must take the leadership role in transitioningresearch into products and services for thenation and the world. Government must assist byproviding them with insight into its long-termresearch programs. The industry must aggressivelydevelop business strategies that can incorporate thisresearch into new products and services. Industryalso needs to provide input to government on itsresearch priorities. Together industry and governmentneed to create an environment that will acceleratethe transition of research into application. TheDepartments of Defense, Transportation, Commerceand Energy, NASA, and others need to work withindustry and academia to create new partnershipsand transform the way they do business.9-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Chapter 9 – Research: Enable Breakthrough Aerospace CapabilitiesRECOMMENDATION #9The <strong>Commission</strong> recommends that the federalgovernment significantly increase its investmentin basic aerospace research, which enhances U.S.national security, enables breakthrough capabilities,and fosters an efficient, secure and safeaerospace transportation system. The U.S. aerospaceindustry should take a leading role inapplying research to product development.9-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

NotesNotesN-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Chapter 1No notesChapter 21. Department of Transportation, Bureau of Transportation Statistics (www.bts.gov).2. Aircraft Owners and Pilots Association (www.aopa.org). Assumes an average of 2.5 passengersper GA departure.3. DRI.WEFA, Inc. (in collaboration with the Campbell-Hill Group), The National Impact of CivilAviation, (July 2002).4. Air Transport Association, Office of Economics.5. Ibid.6. Federal Aviation Administration, Operational Evolution Plan, Version 4.0, (December 2001).7. RTCA Inc., Final Report of RTCA Task Force 4 Certification, (February, 1999).8. Statement by the American Association of Airport Executives and Airports Council International– North America, before the Committee on Transportation and Infrastructure, Subcommitteeon Aviation, U.S. House of Representatives, May 24, 2001.9. Russ Shaver, Rand Corporation, presentation to <strong>Commission</strong> on the Future of the U.S.Aerospace Industry staff.10. NASA Langley Research Center, Small Aircraft Transportation System Program Office.11. DRI.WEFA. Inc.12. Ibid.13. Ibid.14. Federal Aviation Regulations, Section 121.195.15. George Donohue, George Mason University, report to <strong>Commission</strong> on the Future of the U.S.Aerospace Industry.16. FAA Office of Environment and Energy.17. General Accounting Office Report GAO-01-1053, Aviation and the Environment, September2001.18. National Aeronautics and Space Administration, NASA Aeronautics Blueprint, February 2002.19. NASA Office of Aerospace Technology.N-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

NotesChapter 31. NASA Office of Space Flight, Electronic Mail message, November 20, 2001.2. Singer, Jeremy, “U.S. Air Force Planning Space Surveillance System,” Space News, August 12,2002, p. 11 and Leonard David “SAIC Report Envisions Earth Impact Warning Center,” SpaceNews, August 12, 2002, p. 26.3. Kennedy Space Center/Cape Canaveral Air Force Station presentation to <strong>Commission</strong> on theFuture of the U.S. Aerospace Industry staff, March 2002.4. Ibid.5. Federal Aviation Administration, Commercial Space Transportation: 2001 Year in Review, U.S.Department of Transportation, January 2002.6. Federal Aviation Administration, 2002 Commercial Space Transportation Forecasts, May 2002, pp.1-3.7. Caceres, Marco, Teal Group, “Industry Insight, Drop in Planned Payloads Reflects StagnantMarket,” Aerospace America, July 2002, pp. 44-46.8. Weber, Derek, “New Study Data Identifies Commercial Growth Sector,” Electronic Mail message,August 28, 2002.Chapter 41. In their 1993 book, War and Anti-War, the authors, Alvin and Heidi Tofler noted that “the waywe make war reflects the way in which we create wealth,” (New York: Warner Books, 1993),p. 2. The question of whether advanced technology, especially IT, contributes to economicgrowth or is simply a reflection of it has been an intensely studied empirical controversy in economics.A recent review of the data by the Federal Reserve Bank of New York suggests that theevidence now supports the hypothesis that a positive and causal link exists between informationintensity and productivity. See K. J. Stiroh, “Investing in Information Technology; ProductivityPayoffs for US Industries,” Current Issues in Economics and Finance, Federal Reserve Bank of NewYork, June 2001. A recent study by Brian Harding of the Warwick Business School reported ina survey of 46 UK and 184 US high tech firms (including aerospace) from 1987-2000, that totalshareholder returns were strongly correlated with R&D intensity. The study findings are summarizedin C. Cookson, “R&D Scoreboard: Spending rises despite steep fall in profits,”Financial Times, 14 October 2002, p. 10.2. President’s National Security Strategy, www.whitehouse.gov/nsc, September 20, 2002.3. Statement of the Honorable Donald Rumsfeld, Secretary of Defense, before the DefenseSubcommittee of the Appropriations Committee, U.S. House of Representatives, “Fiscal 2003Defense Budget Testimony,” February 14, 2002.N-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>4. Statement of General Thomas S. Moorman, USAF (Retired), Vice President, Booz-Allen &Hamilton, before the <strong>Commission</strong> on the Future of the U.S. Aerospace Industry, “The Healthof the Space Industrial Base – An Update,” May 14, 2002.5. Statement of Dr. Thomas Kochan, Co-director, Labor Aerospace Research Agenda, MIT, beforethe <strong>Commission</strong> on the Future of the U.S. Aerospace Industry, “Developing and Maintainingthe 21st Century Workforce,” May 14, 2002.6. National Opinion Research Center, University of Chicago, Doctorate Recipients from UnitedStates Universities: Summary Report, 2000, 2001.7. “Space Research and Development Industrial Base Study,” Booz-Allen & Hamilton under thedirection of Deputy Undersecretary of Defense, Industrial Policy (DUSD/IP) and the NationalReconnaissance Office, Advanced Systems and Technology Directorate(NRO/AS&T), February2002, McLean Virginia.8. Statement by the Honorable Donald Rumsfeld, Secretary of Defense, before the NationalDefense University, Washington D.C., “21st Century Transformation of the U.S. ArmedForces,” January 31, 2002.9. Aerospace Industries Association, “Total Employment in the Aerospace Industry,” Statistics: 02-31, Series 12-03, August 7, 2002.10. Statement of the Honorable Donald Rumsfeld, Secretary of Defense, before the Armed ServicesCommittee, United States Senate, “Fiscal 2003 Defense Budget Testimony,” February 5, 2002.11. The Honorable Donald Rumsfeld, Secretary of Defense, Legislative Priorities for Fiscal Year 2004,September 17, 2002.Chapter 5No notesChapter 61. U.S. Department of Commerce.2. General Aviation Manufacturers Association.3. Aerospace Industries Association, “Worldwide Space Launchings Which Attained Earth Orbit orBeyond”, Aerospace Facts & Figures 2001/2002.4. U.S. Department of Commerce U.S. Industrial Outlook 2000, p. 29-2.5. “World Military Aircraft Census”, Flight International 12-18 Feb, 2002; based on 2001 WorldAir Forces Directory.6. U.S. Industrial Outlook 2000, p. 29-4.7. Directorate General for Research, European <strong>Commission</strong>.N-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Notes8. European <strong>Commission</strong> Decision to approve France’s application for EU State Aid approval for25 million ECU aid to Sextant issued December 3, 1997 (N 584/97).9. U.S. Department of Commerce, Office of Aerospace, From analysis drawn on multiple sources.10. European <strong>Commission</strong> State Aid N 120/01, C(2001)3266 fin [EC notification of aid approval].11. U.S. Department of Commerce, Office of Aerospace, from analysis drawn on multiple sources.12. Status Report of the Presidential <strong>Commission</strong> on Offsets in International Trade, January 18, 2001.13. U.S. Department of Commerce, Office of Aerospace, from analysis drawn on multiple sources.Chapter 71. Budget of the U.S. Government, FY 2003, Historical Tables.Chapter 81. Aerospace Industries Association. “Total Employment in the Aerospace Industry,” Statistics: 02-31, Series 12-03, August 7, 2002.2. Aerospace Industries Association. Aerospace Facts and Figures, 2001-2002, (2001).3. Statement of Phil Odeen before the <strong>Commission</strong> on the Future of the U.S. Aerospace Industry,May 14, 2002.4. Aerospace Industries Association. “Aerospace Industry Sales by Customer, Calendar Years 1986-2002” Statistics 01-63, Series 02-01.http://aia-aerospace.org/stats/yr_ender/tables/2001/table2.cfm.5. Aerospace Industries Association. Aerospace Facts & Figures, 2001/2002, (2001).6. Chilinguerian, Maryan, “The Changing Employment Picture,” www.WashingtonPost.com,(2002); and Bernard Hodes Group, (2002).7. “Recent Trends in U.S. Aeronautics Research and Technology,” Committee on StrategicAssessment of U.S. Aeronautics, Aeronautics and Space Engineering Board, <strong>Commission</strong> onEngineering and Technical Systems, and National Research Council, (1999).8. Aerospace Industries Association, Statistics Series 23-01, (2001).9. Scott, Robert E., The Effects of Offsets, Outsourcing, and Competition on Output andEmployment in the U.S. Aerospace Industry.10. Lean Aerospace Research Agenda and Lean Aerospace Initiative, Developing a 21st CenturyAerospace Workforce: Policy White Paper, (Massachusetts Institute of Technology, 2001), p. 26.(Attributed to David Mowery of the University of California, Berkeley).N-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>11. Pritchard, David, The Global Decentralization of Commercial Aircraft Production: Implications forU.S. Based Manufacturing Activity, May 2002.12. Statement of Dr. Thomas Kochan, Co-Director, Labor Aerospace Research Agenda, MIT beforethe <strong>Commission</strong> on the Future of the U.S. Aerospace Industry, “Developing and Maintainingthe 21st Century Workforce,” May 14, 2002.13. Written statement of Elliot G. Pulham, presented to the <strong>Commission</strong> on the Future of the U.S.Aerospace Industry, “Space and the Workforce of the Future,” May 14, 2002.14. Aerospace Industries Association, Attracting and Retaining Qualified Personnel in the AerospaceIndustry, 2001.15. Lean Aerospace Research Agenda and Lean Aerospace Initiative. p. 11.16. Hastings, Roberts, Ross, Saleh, Myles, and Weigel, The Job Seeker’s Report Card on the AerospaceIndustry: A College Student’s Perspective, (Massachusetts Institute of Technology, 2001).17. A Report to Congress, “Unlocking Our Future: Toward a New National Science Policy,”September 24, 1998, p. 42. See also Harold W. Stevenson, Thomas B. Fordham Foundation.“ATIMSS Primer: Lessons and Implications for U.S. Education,” (July 1998).18. National <strong>Commission</strong> on Mathematics and Science Teaching for the 21st Century. Before It’s TooLate: A Report to the Nation (Washington, D.C.: September 2000), p. 19. See also Harold W.Stevenson, Thomas B. Fordham Foundation. “ATIMSS Primer: Lessons and Implications forU.S. Education,” July 1998.19. U.S. <strong>Commission</strong> on National Security/21st Century, Road Map for National Security: Imperativefor Change (Washington, D.C.: February 2001), p. 35.20. U.S. Council on Competitiveness, U.S. Competitiveness 2001: Strengths, Vulnerabilities and LongTerm Priorities, (2001), p. 46.21. National Science Foundation, Science and Engineering Indicators, (2002), p. 5.22. Quoted in National <strong>Commission</strong> on Mathematics and Science Teaching for the 21st Century,p. 13. See also Ohio Mathematics and Science Coalition, Finding the Solution: A Call forCollaboration (Bringing Mathematics and Science Education in Ohio into the 21st Century),(2001), p. 5.23. U.S. Department of Labor, ATELS, Review of Aerospace Apprenticeship and Vocational EducationPrograms, (Summer 2002).24. U.S. Department of Labor, Bureau of Apprenticeship Training. “Registered Apprenticeship: ASolution to the Skills Shortage,” Fact Sheet, (1995).25. Statement by Dr. Bernard Grossman, Executive Director, Aerospace Department ChairsAssociation, before the <strong>Commission</strong> on the Future of the U.S. Aerospace Industry, May 14,2002.N-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Notes26. National Opinion Research Center, University of Chicago, Doctorate Recipients from UnitedStates Universities: Summary Report, 2000, (2001).27. Ibid.28. Ibid.29. Ibid.30. National Science Foundation, Survey of Federal Funds for Research and Development for FY 1998,1999, 2000 (2001), p. 42.31. National Opinion Research Center, University of Chicago, Doctorate Recipients from UnitedStates Universities: Summary Report, 2000, (2001), p. 42.32. Ibid, p. 42.33. U.S. Council on Competitiveness. U.S. Competitiveness 2001: Strengths, Vulnerabilities and LongTerm Priorities, (2001), p. 45.Chapter 91. Group of Personalities, European <strong>Commission</strong>, European Aeronautics: A Vision For 2020,(January 2001).2. The Federal Transportation Advisory Group, Vision 2050: An Integrated National TransportationSystem, (Washington, D.C.: February 2001).N-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Additional <strong>Commission</strong>er ViewsAdditional <strong>Commission</strong>erViewsV-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong><strong>Commission</strong>er R. T. Buffenbarger – Dissenting ViewsThis <strong>Commission</strong> was formed to address a variety of issues facing the future of the United States aerospaceindustry. Among them, the <strong>Commission</strong> was directed to “study the issues associated with the future of the U.S.aerospace industry in the global economy…; and assess the future importance of the domestic aerospace industryfor the economic and national security of the United States.” 1 The <strong>Commission</strong> was also required to make“recommendations for actions by federal departments and agencies to support the maintenance of a robustaerospace industry in the United States in the 21st Century…” 2Despite the <strong>Commission</strong>’s mandate, its final report fails to adequately address the current crisis facing U.S.aerospace workers. While the Report acknowledges that several hundred thousand jobs have been lost in thisindustry over the past decade, this statistic captures only part of the problem. In states like Washington, Texasand California, that contain high concentration levels of the aerospace industry, the loss of aerospace jobs hasbeen devastating. In Washington, more than 30% of jobs in the aircraft and parts sectors, almost 36,000, werelost between July 1992 and July 2002. In California, more than half the jobs, over 67,000, have been lost inthis sector; and in Texas, over 30%, almost 20,000, jobs have been lost in the same sector. 3 The failure toaddress these job losses in a meaningful way signals an ominous future for U.S. aerospace workers. It is estimatedthat nearly 180,000 additional aerospace workers could lose their jobs by 2010. 4The Report does not contain comprehensive and “immediate solutions” to the job crisis in the U.S. aerospaceindustry. Its failure to sufficiently recognize and provide meaningful solutions for the aerospace employmentcrisis is a serious and glaring omission. Without well-thought out, practical recommendations for increasingthe number of jobs in this industry in the short, medium, and long term, the future of the U.S. aerospaceindustry is in doubt. If U.S. aerospace workers have no future, the U.S. aerospace industry has no future.I am particularly troubled by the number of proposals contained in the Report that, if implemented, wouldlead to further erosion of U.S. aerospace jobs and increase the economic pain currently being experienced bya generation of U.S. aerospace workers. While this dissent does not provide a comprehensive list of my objections,I would like to note some particular concerns.• The <strong>Commission</strong>’s Report encourages privatization, competitive sourcing, and public-private partnershipswith respect to “Business: A New Model for the Aerospace Sector.” However, it fails to recognize that privatesector business goals do not always coincide with the public interest or governmental program goals. Asa result, proposals in this area would result in layoffs and the erosion of basic wage and benefit standards forworkers and a concomitant loss of service to the public.• If not closely restricted, provisions regarding the “shared savings” initiative have a great potential to furtherdamage the employment situation in the U.S. by using the government to encourage private sector contractorsto layoff workers or hold down wages and benefits. Some contractors could receive great windfalls, at agreat cost to their workers, with U.S. taxpayers paying the bill. This is not the way to improve cost-effectiveness.1 Public Law 106-3982 Id.3 U.S. Department of Labor, Bureau of Labor Statistics, data extracted on October 17, 2002, Series ID:SAU5300003372031 (not seasonally adjusted).4 Testimony of Jeff Faux, <strong>Commission</strong>on the Future of the United States Aerospace Industry, Public Meeting, May 14, 2002;hereinafter, referred to as “Public Meeting May 14, 2002.V-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Additional <strong>Commission</strong>er Views• Provisions that encourage the U.S. aerospace industry to transfer work and/or technology to other countriesand to utilize foreign sourcing through a variety of means (e.g., procurement, international collaboration,mergers and teaming, global partnerships, joint ventures, and other proposals contained throughout theReport) are shortsighted. The U.S. aerospace industry should be encouraged to maintain production at homeand to use U.S. suppliers (and products made and assembled in the U.S.) whenever possible. While the“globalization” of the aerospace industry is a reality, the impact of globalization on U.S. jobs and our securitymust be taken seriously.• Other proposals and comments which I take issue with include, but are not limited to, export controlreform, “open skies,” and references to labor relations issues concerning the air traffic system.I am also deeply troubled that three of my recommendations were “tabled” by the <strong>Commission</strong> without a fulldiscussion on the substance of the recommendations. 5 These recommendations involved common sense proposalsthat would assist our Nation’s policymakers in formulating meaningful solutions to the current andfuture crisis facing the industry and its workforce. I am particularly disappointed that they were not substantivelyconsidered by the <strong>Commission</strong>. As a result, the <strong>Commission</strong> missed a valuable opportunity to discuss,exchange ideas, and deliberate on three important workforce related proposals.My first recommendation concerned the issue of offsets and outsourcing—both of which are significant in theU.S. aerospace industry. These activities threaten the U.S. workforce and our nation’s economy and nationalsecurity by, among other things, transferring production and technology to other countries. To facilitate a constructivedialogue on these points, I recommended that the <strong>Commission</strong> support the “establishment of a permanent,high-level <strong>Commission</strong> consisting of representatives of industry, government, labor, and academia todevelop a comprehensive policy to address the numerous issues related to offsets and outsourcing.” The purposeof such a <strong>Commission</strong> would be to “advance a policy that will mitigate the negative impact that offsetspose for U.S. aerospace workers now and in the future.” The <strong>Commission</strong> tabled my proposal and rejected myefforts to “remove” the recommendation from being tabled.The second recommendation I offered regarded the use of economic impact statements. It is my firm beliefthat various agencies of the U.S. Government must be accountable to the taxpayers. This means that taxpayersshould know whether their hard-earned dollars are going to support good jobs at home or are going to createjobs in other countries. Unfortunately, as I explained to the <strong>Commission</strong>, information gathered by the U.S.Government with respect to the number of aerospace and aerospace-related jobs that are created (or lost) byGovernment programs is often imprecise. Accordingly, I urged the <strong>Commission</strong> to recommend the adoptionand implementation of more effective methods of gathering data to evaluate the impact of Government programson jobs in the U.S. The <strong>Commission</strong> also tabled this proposal and rejected my efforts to “remove” therecommendation from the table—thus barring substantive discussion of this important matter.Finally, I proposed that the <strong>Commission</strong> recommend that internationally recognized labor standards be honoredand enforced. The need to recognize and enforce international labor standards implicates significant socialand economic issues. It also raises the related trade issue of “fairness”. U.S. aerospace workers should not haveto compete with workers in other countries where basic human rights are neither recognized nor respected. Thefundamental rights to freedom of association and collective bargaining do not exist in many foreign countries.Moreover, it should be no surprise, decent wages and rules to ensure even moderately safe and healthy work-5 See, Public Meetings of May 14, 2002 and September 17, 2002.V-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ing conditions are nonexistent in these countries. Even basic prohibitions on child labor, discrimination, andthe use of forced or prison labor often fail to be recognized or effectively enforced.I fear that if these internationally recognized labor standards are not uniformly respected, there will be a rapidrace to the bottom as labor standards in the United States are dragged down towards the labor standards in faroff lands. The aerospace industry should be a model for lifting the standard of living up for workers everywhere.It was my hope that this <strong>Commission</strong> in devising its proposals for the future of the U.S. aerospaceindustry, would at least discuss these very important standards. Sadly, a majority of the <strong>Commission</strong> tabled therecommendation and left it to die on the table, along with my other two recommendations.I am heartened by the words of people like Denny Lee-Si Reyes, a high school student who testified before the<strong>Commission</strong> that “[U]ltimately my dream is to not only become part of the team that designs the travel of thefuture, but to become part of the dream that redefines it. 6 I am pleased that the future of the U.S. aerospaceindustry rests with Mr. Lee-Si Reyes and others like him but fear that unless work is done to ensure that theaerospace workforce remains strong and healthy here in the U.S., they will see their dreams disappear alongwith the aerospace jobs in the U.S.This is not acceptable. The U.S. aerospace industry is about more than corporate profits. It is about the workersand their communities that have made this industry so successful. It is the workers and their communities,after all, that are key to our nation’s economic security and our nation’s national security. Today, aerospaceworkers are in a deep, deep crisis. We urgently need effective solutions for resolving this state of affairs and preventingfuture crises in this industry. This <strong>Commission</strong> wasted a valuable opportunity to meet this great need.6 Testimony of Denny Lee-Si Reyes, Public Meeting, May 14, 2002V-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Additional <strong>Commission</strong>er Views<strong>Commission</strong>er John W. DouglassASSURING THE SECURITY OF OUR AVIATION SYSTEM PROPERLY RESTS WITH THE UNITED STATES GOVERNMENTI am submitting these additional views to the commission in recognition of the fact that the crisis in civil aviationhas intensified as the commission is writing its final report. They should not be construed as opposed toany recommendation of the commission.The attacks on the United States that took place on September 11, 2001, were just that -attacks on our countryand all that it stands for around the world. Although the instruments of the attacks were highjacked aircraft,the purpose and effect were no different than an attack on our nation by hostile foreign forces. In myopinion, defending against such attacks—defending against foreign aggression and providing for our commondefense—is the responsibility of the United States government, a responsibility expressly provided for in theConstitution.For over thirty years, international terrorists, intent upon attacking the United States, have, unfortunately,selected and utilized our airlines and their customers as surrogate targets. Throughout this period, the aviationindustry, working cooperatively with the government, has attempted to do its part to counteract this threat.Fundamentally, however, the United States government has within its sole discretion and unique competencevirtually all of the means available to counteract the threat of aviation terrorism—diplomacy, intelligence gathering,economic sanctions, military action, covert action and general law enforcement powers all reside exclusivelywith the government.In addition to the inherent responsibility of the Federal government for security, the government controls orregulates many of the costs associated with air travel.Under normal conditions the relationship between the government and the industry has yielded an ever moreefficient air transportation system for our nation. Safe, secure, reliable, and affordable air transportation hasbecome a key ingredient in the American standard of living and the international competitiveness of our economy.The commission report deals correctly with the developing challenges of the air transportation system concerningair traffic management, airport construction, safety regulation, and research and development.However, in my view the ongoing economic crisis warrants further action.There is no question that the airline industry was in poor economic condition prior to the 9/11 attacks as aconsequence of the softened economy. The industry has survived similar economic downturns in the past, butthe meltdown that has occurred since 9/11 is without precedent. The combination of the economic downturnand post 9/11 government policy decisions produced an untenable situation for the industry. Looking just atestimated industry pre-tax costs for 2002, airline industry executives have testified that those well-intentionedpolicies have resulted in billions in post 9/11 costs and lost revenues, and account for a great majority of theprojected $9 billion in 2002 industry losses. These massive and mounting losses reveal the absence of pricingpower within the airline industry and the fallacy of government assumptions concerning customer absorptionof additional security fees and costs.V-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The economic downturn and the substantial added security burden have combined to disrupt the economicbalance of the airline industry. As a result, the airlines have been forced to borrow on a massive scale just tofund their continuing operations. The nine largest passenger airlines now carry over $100 billion in debt ontheir balance sheets, but only have a total market capitalization of approximately $15 billion. As the forcedcontraction of the industry continues, smaller and midsize communities across the country are being disconnectedfrom the national air transportation system that is vital to their economies. In addition, manufacturersand aviation suppliers have been seriously affected by the crisis in the airline industry. The impact is now ripplingthrough the rest of the economy.The effects of the terrorist threat are not limited to the airline industry. General aviation has been seriouslyaffected as well. Fixed base operators of all sizes have suffered in varying degrees, some being forced out of business.As in the case of the airlines, measures have been imposed without a thorough analysis of whether or notspecific measures will be effective in helping to achieve security objectives, and whether the incremental benefitof a specific measure is commensurate with its incremental cost. The long term consequences of onerousrestrictions on general aviation that do not produce a corresponding increase in national security will be a furtherisolation of towns and regions that have lost commercial air service.Further, the traditional source of new pilots for the airlines—former U.S. military pilots—is increasingly beingsupplemented if not replaced by civilian training organizations. Actions that reduce or destroy the economicviability of the general aviation community, including small airport operators and flight school operators, willhave a long term impact on the ability of airlines to find qualified pilots.If we are to avoid the economic dislocations that are virtually certain to result from the continuing meltdownof the airline industry, decisive action must be undertaken immediately in two vital areas:• First, the airline industry must continue to eliminate unnecessary costs and deal aggressively with the vastarray of critical business issues. Only the airline industry with the cooperation of labor can address these matters.• Second, and just as importantly, the United States government must assume the full costs and responsibilityfor assuring the protection of our aviation system against terrorist attack. At the same time, the governmentmust adopt rational security measures that facilitate public access to the system and thereby encouragerather than discourage air travel. The government must reject the false premise that the airlines and their customerscan or should bear this national defense burden, if for no other reason than to maintain the healthof our broader, transportation-dependent economy.Finally, the government must work with the aviation community to develop a framework to enable cooperativereal-time analysis of security threats and effective means to defeat them. The FAA Safer Skies program hasdeveloped such a framework, which enables the government and private sector to work together to identifyand implement the most effective ways to improve aviation safety. The government should also establish a securityforum based on this model. Aviation is complex. Those who use the aviation system and make it work arethe ones who have the greatest understanding of that complexity. They can provide the insight that will enablethe government to develop measures that can improve security while ensuring the economic viability of theaviation industry in the United States.V-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Additional <strong>Commission</strong>er Views<strong>Commission</strong>er Tillie K. FowlerI commend the hard work and deliberations of the <strong>Commission</strong> on the Future of the United States AerospaceIndustry and particularly the dedication and vision of Chairman Robert Walker. I strongly believe the<strong>Commission</strong> has fulfilled its statutory mandate to examine the role of the domestic aerospace industry as partof the nation’s overall economic and national security.While I agree with the majority of the <strong>Commission</strong>’s findings and recommendations contained in this finalreport, I am concerned with several assertions that have a direct impact on our armed forces. In particular, inChapter 6, the report states that “current export controls are increasingly counter-productive to our nationalsecurity interests in their current form and under current practices of implementation.” I agree that the economicand national security environment has changed radically since Congress passed the 1979 ExportAdministration Act and believe a thorough revision of our export control policies is warranted. At minimum,I support a regular review of the Munitions List and a more expeditious license review process. However, Ifirmly believe that national security interest must always take precedence over economic or foreign policy considerationsin application of the export control process.While the United States should not, as a matter of course, seek to control commodities with wide foreign availabilityor mass-market penetration, the export control system must focus on sophisticated technologies andequipment that have limited foreign availability and pose a potential threat to the U.S. and its allies. For thesereasons, the Department of Defense must continue to be a full partner in the process to guarantee that nationalsecurity equities are considered when approving, denying or conditioning an export license.In Chapter 7, the report states there are “many opportunities for redefinition and prioritization of routine noninherentlygovernmental activities currently performed by government agencies.” While the government mustcontinuously examine cost savings to be derived from outsourcing, I believe it is essential that risks associatedwith the process of shifting functions to the private sector are properly weighed. Notably, in the mid 1990s,the Department of Defense endorsed outsourcing of its commercial functions as a means to fund modernization.At that time, DoD adopted the procedures contained in OMB Circular A-76 to accomplish this task andcontended that, irrespective of the public/private outcome of the competitions, there would be substantial savings.Unfortunately, these savings never fully materialized and modernization and readiness suffered as a result.The <strong>Commission</strong>’s call for a comprehensive review to identify functions and services that are not “core” to theeffective execution of the government’s mission raises a number of significant questions. Congress has repeatedlyvoiced concern that the military services have not adequately or uniformly applied criteria to determinethe definition of “core” with respect to warfighting capability. I am also concerned with the process by whichcompetitive sourcing decisions can be authoritatively made by the Department of Defense. In particular, themilitary services have struggled to provide dependable technical data on the performance of military depotworkloads. Accordingly, using such unreliable data as the basis for public-private competitions may jeopardizethe nation’s military readiness and surge capability. As recent history has demonstrated, combat is not a “justin-timebusiness,” and adequate stocks of munitions, parts, and spares are essential to achieving mission success.The remaining military depot facilities are unique in their workforce flexibility, capability, and commitmentto the warfighter and must be sustained as an integral part of the nation’s critical defense infrastructure.V-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong><strong>Commission</strong>er John J. HamreAny commission report is necessarily the product of compromises and cannot reflect totally the views of anyone commissioner. I agree with the general thrust of this report and the bulk of its findings and recommendations.There are some findings and recommendations (e.g. mining asteroids, anti-gravity propulsion, etc)that would not be in this report, were I its single author. But commission products are stronger by the collectivejudgment that informs its work, and I endorse this report.My larger concern, however, is that this report is too general and diffuse to have the impact that I believe isneeded. I believe that the American aerospace industry is in deep trouble. Satellite and space-launch manufacturersare in serious financial difficulty and the industry is near collapse. The entire aerospace industry is chokingunder a blanket of ineffective and increasingly obsolete export control and technology regulations.Government regulations are now effectively isolating American industry and limiting its competitiveness. TheAmerican airline industry is near collapse, with operations unprofitable and service in decline. These are fundamentalissues, yet too much of our report is devoted to secondary and tertiary concerns.I still commend the reader to the report because I believe it does touch on some of the central challenges facingthis critical industry. My purpose in filing additional views is to highlight the exceptional challenges theAmerican aerospace industry is facing and the need for urgent action on behalf of the government to deal withthem. This report offers a starting point.V-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Additional <strong>Commission</strong>er Views<strong>Commission</strong>er Robert J. StevensAlthough I agree with and support virtually every aspect of the commission’s report, there are a number ofissues raised in Chapter 3 that I believe require additional clarification. Although the chapter on space doeshighlight the continuing decline in expected launch service demand, I believe that the situation is actually moreserious than depicted in the report. Additionally, the report does not address critical steps that must be takenin the near-term to address these problems.I am concerned that Chapter 3 does not fully address the continuing deterioration of the space launch industrybase. An estimate published in May 2002 by the Commercial Space Transportation Advisory Committee(COMSTAC), forecasts that only 30 commercial payloads in total are available for launch in 2003, amountingto only 24 worldwide commercial launches (including all payload classes to all orbits). Even this estimatemay be overly optimistic, based on trends that we are seeing as we approach the end of 2002 (See Figure 1).To date, there have been only two commercial satellite sales during 2002, with limited prospects for additionalsales before the end of the year. This reinforces my concern that the trend is getting worse. As the FederalAviation Administration and others have documented, during 2001, there were only 16 commercial launchesworldwide, with little hope for reversal of this trend in the near or intermediate future (10 years).Chapter 3 correctly points out that decreasing launch costs has been a fundamental goal for the space launchindustry. The Air Force’s Evolved Expendable Launch Vehicle (EELV) program established a goal of reducinglaunch costs by 25-50 percent, a goal that Atlas V has already met. I am concerned, however, by the view statedin the report that lowering cost to orbit would reverse negative trends in launch demand. While this may betrue over an extended period of time (perhaps decades), there is no evidence that recent reductions in launchcosts have in any way altered deteriorating demand. The market conditions that prevail today appear to be relativelyinsensitive to reductions in launch costs (See Figure 2). Of course, as the commission correctly indicates,it is possible that a new launch paradigm, involving affordable, reusable launch vehicles, could ultimatelyhelp usher in a new paradigm in the satellite sector that would entail significant increases in launch demand.In the near-term, however, the United States must address the critical state of the existing launch industrialbase. In particular, the United States government must take steps to sustain our assured and reliable access tospace for critical national security missions.Figure 1 Decline in Annual Forecasts for2002 – 2007 Launches Figure 2 Launch Market Prices ($/lb to GTO)Average Launches/Year7060504030201998 1999 2000Forecast Year2001 20020*Compilations of Government, Industry and Research Analyst data 1990 1995 2000YearLaunch Market Prices ($/lb to GTO)$20K15K10K5KDelta IIIEntrySea LaunchEntry*Based on actual launch vehicle transactionsDelta IVEntryAriane 5Failure/Price Cut>50%DeclineV-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The EELV program is the Defense Department’s assured access solution for the foreseeable future. EELV isdesigned to be more responsive and affordable than current launch vehicles. With EELV, the Air Force hasadopted a commercial launch services approach, with the contractors financing the majority of the developmentcosts associated with the next generation launch vehicles (Atlas V and Delta IV). In 1997, at a time whenworldwide projections envisioned 70 launches per year, the Air Force decided to retain both EELV contractorsrather than selecting a single provider. The commercial satellite marketplace, it appeared, would provide adequatesustainment for the U.S. space launch industrial base, thereby justifying the large contractor investmentsin EELV, and providing the DOD a more robust assured access capability for a relatively modest investment.As indicated above, since 1997, such launch projections have deteriorated by approximately 65 percent. Thecurrent market situation is inadequate to sustain two healthy U.S. launch providers in a globally competitivemarket (See Figure 3). Therefore, in the interest of U.S. national security, it is imperative that the United Statesgovernment address this problem immediately.Figure 3 Launch Market Capacity/DemandLaunch Vehicles20%Under-CapacityCapacity1998DemandCapacity Demand2002*Based on actual launch transactions and industry capacity analysis>50%Over-CapacityFortunately, the Department of Defense is in factdeveloping an assured access program to help sustainthe U.S. launch infrastructure and industrialbase, while preserving the principal tenets of theEELV program. The key to this effort is the maintenanceof two financially stable launch serviceproviders to keep the U.S. competitive in the globalmarket and provide backup for any technical oroperational problems that may be encounteredwith either of the EELV systems. This effort is alsoessential for preserving the technological andindustrial base needed to bring about furtherimprovements in the flexibility and affordability ofspace launch. The Defense Department’s assured access to space initiative is the single most important neartermelement of a broader strategy for preserving U.S. competitiveness and innovation in the space launcharena.V-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

NotesV-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

AppendicesAppendicesA. <strong>Commission</strong> Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1B. <strong>Commission</strong> Interim Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1B1 – Interim Report #1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3B2 – Interim Report #2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5B3 – Interim Report #3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25C. Aerospace Sector Breakout (Office of Management and Budget). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1D. Scoping Aerospace (RAND) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1E. U.S. Aerospace and Aviation Industry: A State-by-State Analysis (Content First). . . . . . . . . . . . . . . . . E-1F. Federal Departments and Agencies with Aerospace Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1G. Congressional Committees with Aerospace Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1H. Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1I. Summary of <strong>Commission</strong> Activities and Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1J. Aerospace-related Websites—Partial List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-1K. Acknowledgements and <strong>Commission</strong> Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix A – <strong>Commission</strong> CharterAppendix A<strong>Commission</strong> CharterA-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>A-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix A – <strong>Commission</strong> CharterA-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>A-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix A – <strong>Commission</strong> CharterA-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>A-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsAppendix B<strong>Commission</strong> InterimReportsB1 – Interim Report #1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3B2 – Interim Report #2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5B3 – Interim Report #3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25B-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB1 – Interim Report #1B-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB2 – Interim Report #2B-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-16FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-17FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-18FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-19FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-20FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-21FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-22FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-23FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-24FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB3 – Interim Report #3B-25FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-26FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-27FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-28FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-29FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-30FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-31FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-32FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-33FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-34FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-35FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-36FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-37FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-38FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-39FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-40FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-41FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-42FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-43FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-44FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-45FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-46FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix B – <strong>Commission</strong> Interim ReportsB-47FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>B-48FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix C – Aerospace Sector Breakout (Office of Management and Budget)Appendix CAerospace SectorBreakoutPrepared by: Office of Management and BudgetC-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>C-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix D – Scoping Aerospace (RAND)Appendix DScoping AerospacePrepared by: RANDFull report available at www.ita.doc.gov/aerospace/aerospacecommissionD-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Unpublished RAND research and analysis of federal aerospaceprocurements and personnel expenditures for the past ten years wereconducted in support of Aerospace <strong>Commission</strong> deliberations byDr. Donna Fossum and Mr. Lawrence Painter in 2001.”D-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix D – Scoping Aerospace (RAND)D-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>D-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix D – Scoping Aerospace (RAND)D-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>D-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix D – Scoping Aerospace (RAND)D-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>D-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix E – U.S. Aerospace and Aviation Industry: A State-by-State Analysis (Content First)Appendix EU.S. Aerospace and AviationIndustry: A State-by-StateAnalysisPrepared by: Content FirstFull report available at: www.ita.doc.gov/aerospace/aerospacecommissionE-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>E-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix E – U.S. Aerospace and Aviation Industry: A State-by-State Analysis (Content First)E-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>E-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix F – Federal Departments and Agencies with Aerospace ResponsibilitiesAppendix FFederal Departments andAgencies with AerospaceResponsibilitiesF-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Agencies of the Executive Office of the President• Central Intelligence Agency (e.g., communications, intelligence)• Council of Economic Advisors• Council on Environmental Quality• Domestic Policy Council• National Economic Council• National Security Council• Office of Management and Budget• Office of Science and Technology Policy– National Science & Technology Council– President’s Advisory Council on Science & Technology• Office of the U.S. Trade RepresentativeExecutive Departments• Department of Agriculture (e.g., remote sensing for agricultural, rangeland and forestry resources; precisionfarming using GPS; positive train control for expedited shipment of crops to market)• Department of Commerce (e.g., weather services, trade promotion, telecommunication and informationadministration)– National Oceanic and Atmospheric Administration• Department of Defense (e.g., space support, force enhancement, space control, force applications)– Office of the Secretary• Defense Advanced Research Projects Agency• Missile Defense Agency• National Reconnaissance Office• National Security Agency– Joint Chiefs of Staff• U.S. Strategic Command– U.S. Air Force– U.S. Army– U.S. Marine Corps– U.S. Navy• Department of Education (e.g., distance learning, individualized instruction)• Department of Energy (e.g., non-proliferation, nuclear energy, energy and material sciences, spaceradiation effects on human and materials)• Health and Human Services (e.g., distance medicine, research on new medicines and drugs)• Housing and Urban Development (e.g., regional and urban planning)• Department of Interior (e.g., geodetics, fish and wildlife preservation, mining reclamation andenforcement, national park surveys)– U.S. Geological SurveyF-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix F – Federal Departments and Agencies with Aerospace Responsibilities• Department of Justice (e.g., law enforcement, immigration, border patrol)• Department of Labor (e.g., aerospace apprenticeship programs)• Department of State (e.g., international treaty and standards development, transportation of foreignservice professionals and dignitaries)• Department of Transportation (e.g., civil air navigation, commercial space transportation, ground andsea transportation applications, law enforcement)– Federal Aviation Administration– Federal Highway Administration (e.g., intelligent transportation system)– Federal Motor Carrier Safety Administration (e.g., truck safety)– Federal Railroad Administration (e.g., positive train control)– Federal Transit Administration (e.g., intelligent transportation system)– Maritime Administration (e.g., maritime commerce)– National Highway Traffic Safety Administration (e.g., automobile safety)– Research and Special Programs Administration (e.g. pipelines and hazardous material safety)– Transportation Security Administration (e.g., security, law enforcement)– U.S. Coast Guard (e.g., search and rescue, law enforcement)• Department of Treasury (e.g., customs, secret service)• Department of Veteran Affairs (e.g., telecommunication)Independent Agencies• Environmental Protection Agency (e.g., environmental monitoring for developing regulations and forenforcement)• Federal Emergency Management Agency (e.g., emergency response)• General Services Administration (e.g., government aircraft services)• NASA (e.g., space science, space transportation, aeronautics research and development)• National Science Foundation (e.g., aerospace-related research)• Tennessee Valley Authority (e.g., flood control, river way management, environmental research,forestry and wildlife management)F-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix G – Congressional Committees with Aerospace ResponsibilitiesAppendix GCongressional Committees withAerospace ResponsibilitiesG-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Full Committees of the SenateAppropriationsArmed Services• Aeronautical and space activities peculiar to development of weapon systems or military operations• Departments of the Army, Navy, Air Force• Military Research and DevelopmentBanking, Housing, and Urban Affairs• Economic stabilization and defense production• Export and Foreign Trade• Export Controls• Financial aid to commerce and industry• Renegotiation of government contractsBudgetCommerce, Science and Transportation• Interstate commerce• Non-military aeronautical and space sciences• Oceans, weather and atmospheric activities• Regulation of interstate common carriers, including civil aviation• Science, Engineering, Technology research, development, and policy• TransportationEnergy and Natural Resources• Energy research and development• Nuclear energy• Solar energyEnvironment and Public Works• Air pollution• Noise pollution• Regional Economic DevelopmentFinance• Customs and ports of entry• Reciprocal trade agreements• Tariffs and import quotas• Transportation of dutiable goodsForeign Relations• Measures to foster commercial intercourse with foreign nations and to safeguard American businessinterests abroadG-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix G – Congressional Committees with Aerospace ResponsibilitiesGovernmental Affairs• Census and collection of statistics, including economic statistics• Intergovernmental relations• Organization of the Executive Branch• Government efficiency, economy, effectiveness• Relationships between the US, states, and municipalitiesHealth, Education and Labor• Measures relating to education and labor• Labor standards and statistics• Labor disputes• Pension plans• Student loansJudiciary• Patents, trademarks and copyrights• Protection of trade and commerce against unlawful restraint and monopoliesSmall Business and EntrepreneurshipSelect Committees of the SenateIntelligenceFull Committees of the House of RepresentativesAppropriationsArmed Services• Army, Navy, Air Force generally• Intelligence related activities of DoD• Scientific research and development pertaining to the militaryBudgetEnergy and Commerce• Interstate and foreign commerce• Energy generally• Travel and tourismEducation and the Workforce• Labor• Education• Mediation of disputesG-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Financial Services• Economic stabilization and defense production• Financial aid to commerce and industry [other than transportation]Government Reform• Government management and accounting generally• Economy and efficiency of government• Transportation of mail• Public information and records• Organization of the Executive BranchInternational Relations• Export controls and trading with the enemy• Commercial intercourse abroad and safeguarding American business interests abroad• International economic policyJudiciary• Patents, trademarks and copyrights• Protection of trade and commerce against unlawful restraints and monopoliesScience• Energy research• Astronautical research and development, including resources, personnel, equipment, and facilities;Outer space exploration and control• Civil aviation research and development• Environmental research and development• NASA• National Space Council• National Science Foundation• National Weather Service• Science scholarships• Scientific research and development, demonstrations and projectsSmall BusinessTransportation and Infrastructure• Public works in support of navigation• Transportation, including civil aviation, safety and infrastructure• Transportation regulatory agenciesWays and Means• Customs and ports of entry• Reciprocal trade agreements• Transportation of dutiable goodsG-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix H – AcronymsAppendix HAcronymsH-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ATAAIR-21ADS-BAFBASCMATCATMATOSCBOCCAFSCISCNSCOCOMCPFFCRVDARPAdBDELGDISCDNLDoDDOEDOTDSBDSRDWCFEADSECECAEELVELVAir Transport AssociationAviation Investment and Reform Actfor the 21st CenturyAutomatic Dependent Surveillance-BroadcastAir Force BaseAgreement on Subsidies andCountervailing MeasuresAir Traffic ControlAir Traffic ManagementAir Transportation Oversight SystemCongressional Budget OfficeCape Canaveral Air Force StationCommonwealth of Independent StatesCommunications, Navigation andSurveillanceCoordinating Committee of NATOCost Plus Fixed FeeCurrent Replacement ValueDefense Advanced Research ProjectsAgencyDecibelDefense Export Loan GuaranteeDomestic International SalesCorporationDay-Night LevelU.S. Department of DefenseU.S. Department of EnergyU.S. Department of TransportationDefense Science BoardDisplay System ReplacementDefense Working Capital FundEuropean Aeronautic Defense andSpace CompanyEuropean <strong>Commission</strong>Export Credit AgencyEvolved Expendable Launch VehicleExpendable Launch VehicleEPA Environmental Protection AgencyETI Extra Territorial IncomeEU European UnionEx-Im Bank Export-Import BankFAA Federal Aviation AdministrationFAR Federal Aviation RegulationsFederal Accounting RegulationsFederal Acquisition RegulationsFMS Foreign Military SalesFP Framework ProgramFSC Foreign Sales CorporationFTM Freight and Express Ton MilesFY Fiscal YearFYDP Future Year Defense ProgramGAO Government Accounting OfficeGATT General Agreement on Tariffs andTradeGDP Gross Domestic ProductGPRA Government Performance and ResultsActGPS Global Positioning SystemGSA General Services AdministrationHPCC High Performance Computing andCommunicationsIAM International Association ofMachinistsICAO International Civil AviationOrganizationICGS International Coast Guard SystemINAS International Airspace SystemIR&D Independent Research andDevelopmentIRS Internal Revenue ServiceISS International Space StationISSA Inter-Service Support AgreementITAR International Traffic in ArmsRegulationsJSF Joint Strike FighterH-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix H – AcronymsJTIDS Joint Tactical InformationDistribution SystemK-12 Kindergarten through Twelfth GradeKSC Kennedy Space CenterLCA Large Civil AircraftLEO Low Earth OrbitLOI Letter of IntentMEO Medium Earth OrbitNAI National Aerospace InitiativeNATO North Atlantic Treaty OrganizationNASA National Aeronautics and SpaceAdministrationNEO Near-Earth ObjectNFTC National Foreign Trade CouncilNOAA National Oceanic and AtmosphericAdministrationNOx Nitrogen OxideNSC National Security CouncilNSF National Science FoundationO&S Operations and SupportOECD Organization for EconomicCooperation and DevelopmentOEP Operational Evolution PlanOMB Office of Management and BudgetOSTP Office of Science and TechnologyPolicyPCC Policy Coordinating CounselPFC Passenger Facility ChargeP.L. Public LawPOC Percent of CompletionPPBS Planning, Programming andBudgeting SystemQRE Qualified Research ExpenditureR&D Research and DevelopmentR&D Research and ExperimentationRDT&E Research, Development, Test andEvaluationRLV Reusable Launch VehicleRNPRPMS&TSLISSAsS&PSTARSUKUNU.S.USAFUSCUSMLVAATEVATWTOAirport AcronymsATLBWICLTDENDFWDTWEWRIADJFKLASLAXRequired Navigation PerformanceRevenue Passenger MilesScience and TechnologySpace Launch InitiativeSpecial Security AgreementsStandard and PoorsStandard Terminal AutomationReplacement SystemUnited KingdomUnited NationsUnited StatesU.S. Air ForceU.S. CodeU.S. Munitions ListVersatile, Affordable, AdvancedTurbine Engine ProgramValue-Added TaxWorld Trade OrganizationHartsfield Atlanta InternationalAirportBaltimore-Washington InternationalAirportCharlotte/Douglas InternationalAirportDenver International AirportDallas-Ft. Worth InternationalAirportDetroit Metropolitan Wayne CountyAirportNewark International AirportWashington Dulles InternationalAirportNew York John F. KennedyInternational AirportLas Vegas McCarran InternationalAirportLos Angeles International AirportH-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>LGAMEMMSPNew York LaGuardia AirportMemphis International AirportMinneapolis-St. Paul InternationalAirportPITSEASFOGreater Pittsburgh InternationalAirportSeattle-Tacoma International AirportSan Francisco International AirportORDChicago O’Hare International AirportSLCSalt lake City International AirportPHLPHXPhiladelphia International AirportPhoenix Sky Harbor InternationalAirportSTLLambert St. Louis InternationalAirportH-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and ContractsAppendix ISummary of <strong>Commission</strong>Activities and ContactsI-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>During the period from September 2001 through November 2002, the <strong>Commission</strong>: held six (6) publichearings and nine (9) administrative/preparatory meetings; conducted fact-finding trips to the KennedySpace Center and Cape Canaveral Air Force Station, various U.S. aerospace companies, Europe, and Asia;received informational briefings and issue papers from over 100 companies, government organizations, andaerospace interest groups; heard testimony from over 60 witnesses; met with over 50 government and industryorganizations from seven (7) foreign countries; briefed over 45 groups on <strong>Commission</strong> activities andprogress; and had over 150,000 “hits” on the <strong>Commission</strong>’s website. Based on the extensive inputs receivedfrom these activities and contacts, the <strong>Commission</strong> issued three (3) Interim Reports and its Final Report tothe President and the Congress. A listing of these contacts is provided, by category, below:I. INFORMATIONAL BRIEFINGS/DISCUSSIONS/MEETINGS IN THE U.S.A. U.S. Aerospace Industry and Financial OrganizationsAerospace CorporationAnalytical Graphics InternationalThe Boeing CompanyCessnaCredit Suisse First BostonEclipse AviationGeneral Electric CompanyHoneywellKistler Aerospace Corporation Lockheed Martin CorporationMicrocosmMorgan StanleyNorthrop GrummanOrbital Science CorporationRaytheonRolls-Royce North AmericaSpectrum AstroThe Teal GroupTRWVoughtUnited Technologies CorporationB. Federal and State Government OrganizationsCalifornia Space AuthorityCentral Intelligence Agency (CIA)Department of Commerce (DOC)Department of Defense (DoD)– Acquisition Reform– Ballistic Missile Defense Organization (BMDO)– Defense Advanced Research Projects Agency (DARPA)– Defense Intelligence Agency (DIA)– Defense Science Board (DSB)– Defense Technology Security Agency (DTSA)– Director, Defense Research and Engineering (DDR&E)– Industrial Affairs– Joint Aeronautical Commanders Group (JACG)– Joint Strike Fighter (JSF) Program Office– National Reconnaissance Office (NRO)I-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and Contracts– National Security Space Architect (NSSA)– Office of Net Assessment– Operational Test and Evaluation (OT&E)– U.S. Army– U.S. Navy– U.S. Air ForceDepartment of State (DOS)Federal Aviation Administration (FAA)National Aeronautics and Space Administration (NASA)National Oceanic and Atmospheric Administration (NOAA)National Research Council (NRC) Aerospace RoundtableOffice of Management and Budget (OMB) (the White House)Spaceport Florida AuthorityTexas Aerospace <strong>Commission</strong>U.S. Congress– House of Representatives Members/Staffs– Senate Members/StaffsC. Foreign Governments And IndustryAirbus IndustriesArianespaceCNES (French Space Agency)European Aerospace Defense Systems (EADS)European <strong>Commission</strong>French EmbassyInternational Civil Aviation Organization (ICAO)NAV CanadaUK Ministry of DefenceD. Labor And Industry OrganizationsAerospace Industries Association (AIA)Advisory Group on Electronic Devices (AGED)Aircraft Electronics AssociationAircraft Owners and Pilots Association (AOPA)Air Transportation Association (ATA)General Aviation Manufacturers Association (GAMA)International Association of Machinists and Aerospace Workers (IAM&AW)National Air Transportation Association (NATA)National Business Aircraft Association (NBAA)I-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>National Center for Advanced Technologies (NCAT)National Defense Industry Association (NDIA)National Science Teachers Association (NSTA)Radio Technical <strong>Commission</strong> for Aeronautics, Inc. (RTCA)Space Transportation Association (STA)Space FoundationE. AcademiaGeorge Mason UniversityIndustrial College of the Armed Forces (IDAF)/National Defense University (NDU)Massachusetts Institute of Technology (MIT)F. The MediaAviation WeekDefense NewsSpace NewsG. Professional SocietiesAmerican Helicopter Society (AHS)American Institute of Aeronautics and Astronautics (AIAA)American Society of Mechanical Engineers (ASME)Society of Automotive Engineers (SAE)H. OthersBooz-Allen & HamiltonCentennial of Flight <strong>Commission</strong>Content FirstCenter for Strategic & International Studies (CSIS)Institute for Creative TechnologiesInstitute for Defense Analyses (IDA)Jet Propulsion Laboratory (JPL)JSA AssociatesLunar Exploration, IncNASA Aero Support TeamEric NewsomJim ObergRand CorporationScience Applications International Corporation (SAIC)I-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and ContractsSynthesis PartnersTeam Vision CorporationWill TraftonCEF Mission AerospaceII. INTERNATIONAL BRIEFINGS/DISCUSSIONS/MEETINGS ABROADA BelgiumEuropean <strong>Commission</strong>Euro-ControlForeign NATO RepresentativesU.S. Ambassador to NATOB. ChinaAmerican Chamber of Commerce Aerospace ForumAviation Industry Corporation IAviation Industry Corporation IICivil Aviation Administration of ChinaChina National Aero-Technology Import and Export Corporation<strong>Commission</strong> on Science and Technology for National DefenseU.S. EmbassyC. FranceArianespaceCentre National d’Etudes Spatiales (CNES)European Aerospace Defense Systems (EADS)European Space Agency (ESA)French Transport MinisterGroupement Des Industries Francaises Aeronautiques et Spatiales (GIFAS)U.S. EmbassyD. JapanAmerican Chamber of Commerce in JapanCouncil for Science and Technology PolicyJapanese Association of Defense IndustriesJapanese Defense AgencyMinistry of Economy, Trade and IndustryMinistry of Education, Culture, Sports, Science and TechnologyMinistry of Land, Infrastructure and TransportI-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Ministry of Public Management, Home Affairs, Posts and TelecommunicationsSpace Activities <strong>Commission</strong>Society of Japanese Aerospace CompaniesTechnical Research & Development InstituteU.S. EmbassyE. RussiaAmerican Chamber of Commerce in RussiaAviation and Space Agency (Rosaviakosmos)Boeing Engineering Design CenterKhrunichev Research and Production CenterNational Investment Council (NIC)Star City Astronaut Training CenterU.S. EmbassyF. United KingdomBAE SystemsCivil Aviation AuthorityDefense Procurement AgencyDepartment of TransportThe Economist Technology/Defense WritersEuropean Association of Aerospace IndustriesForeign Office (Aviation Section)National Air Traffic Services (NATS)Treasury Office (Defense, Diplomacy and Intelligence)U.S. EmbassyIII. PUBLIC TESTIMONYA. Public Hearing November 27, 20011. Administration TestimonyDr. John H. Marburger, III, Director, OSTP, Executive Office of the President2. Congressional TestimonyThe Honorable Dave Weldon (R-FL)3. Executive Branch TestimonyJoseph Bogosian, Deputy Assistant Secretary (Transportation and Machinery),Commerce DepartmentRalph Braibanti, Director, Office of Space and Advanced Technology,State DepartmentI-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and ContractsThe Honorable Edward C. “Pete” Aldridge, Jr., Under Secretary of Defense(Acquisition Technology & Logistics), Department of DefenseSamuel L. Venneri, Associate Administrator, Office of Aerospace Technology, NASASteven Zaidman, Associate Administrator for Research and Acquisitions, FAAB. Public Hearing February 12, 20021. Air Transportation Capacity/Infrastructure DiscussionsMr. Charles Keegan, Operational Evolution Plan Program Manager, FAAMr. Charles Barclay, Executive Director, American Association of Airport ExecutivesDr. Linton Wells, Principal Deputy to the Assistant Secretary of Defense(Command, Control, Communications and Intelligence)Mr. Vern Raburn, President, Eclipse AviationMr. John Hayhurst, President, Boeing ATM2. Export Control DiscussionsGovernmentMatthew Borman, Deputy Assistant Secretary (Export Administration), Commerce DepartmentGregory Suchan, Principal Deputy Assistant Secretary (Political-Military Affairs),State DepartmentLisa Bronson, Deputy Under Secretary (Defense for Technology Security Policy and CounterProliferation), DoDIndustryLGEN (ret.) Larry Farrell, President & CEO, NDIAHon. David McCurdy, President, Electronic Industries AllianceRobert Bauerlein, Chairman, International Council, AIAC. Public Hearing May 14, 20021. Space DiscussionsThe Hon. Sean O’Keefe (NASA)The Hon. Peter Teets (Under Secretary of the Air Force-NRO)GEN Ed Eberhart, USAF, CINCSPACECOMThe Hon. Ron Sega (DoD/DDR&E)GEN (ret.) Tom Moorman, Space Industrial BaseThe Hon. Bill Nelson (D-FL)2. Space Vision for 2050Mr. W. David Thompson, President & CEO, Spectrum AstroDr. Wesley Huntress, Director, Geophysical Laboratory, Carnegie Institute of WashingtonThe Hon. Tidal McCoy, Chairman of the Board, Space Transportation AssociationMr. Martin P. Kress, Chair, Public Policy Committee, AIAAI-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Ms. Lori Garver, President, American Astronautical SocietyDr. John Lewis, Professor of Planetary Science, University of Arizona3. Industrial Base DiscussionsThe Hon. Norm Dicks (D-WA)Jeff Foote, President, ATK AerospaceDain Hancock, President, Lockheed Martin Aerospace CoJerry Daniels, President & CEO, Military Aircraft & Missile Systems, Boeing4. 21st Century Aerospace Workforce DiscussionsLabor PanelDr. Jeff Faux, Economic Policy InstituteDr. Tom Kochan, MIT/Sloan School of ManagementGovernment PanelDr. John Bailey, Director of Education Technology, Department of EducationEmily DeRocco, Assistant Secretary for Employment and Training Administration,Department of LaborGEN (ret.) Sam Armstrong, NASAEducators PanelDr. Bernard Grossman, Exec. Dir., Aerospace Department Chairman’s AssociationDr. Albert Koller, Exec. Dir., Aerospace Programs at Brevard Community CollegeDr. Abe Nisanci, Program Director for Engineering, Division of Undergraduate Education,National Science FoundationStudent PanelMs. Sandra Goins, Apprentice, Seattle, WAMr. Denny Reyes, Aviation High School, New YorkMs. Annalisa Weigel (Ph.D. Candidate, Aerospace Engineering), MITD. Public Hearing August 22, 20021. Aviation (Airlines, Pilots, Controllers) DiscussionsDuane Woerth, President, Airline Pilots AssociationJohn Olcott, President, National Business Aircraft AssociationJohn Carr, President, National Air Traffic ControllersMac Armstrong, Executive VP, Air Transportation Assoc. of America2. Aeronautics and Space Engineering Board (National Academy of Science)GEN (ret.) Ronald R. Fogleman, Chairman, Committee on Aeronautics Research andTechnology3. Suppliers DiscussionsMs. Judy Northup, Vice President, Vought Aircraft IndustriesMr. Mike Grosso, CEO, DynaBil IndustriesMr. Joe Murphy, Chairman of the Board, Ferco Tech CorporationI-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and ContractsMr. Peter Rettaliata, President, Air Industries Machining Corp.4. Space/Planetary DiscussionsThomas F. Rogers, Chairman, The Sophron FoundationBGEN Simon “Pete” Worden, Deputy Director of Operations, US Space Command5. RDT&E Infrastructure DiscussionsDavid Swain, Senior VP of Engineering and Chief Technology Officer, BoeingPhilip Coyle, former Director, Operational Test & Evaluation, DoDJames Beggs, former NASA AdministratorThomas Christie, Director, Operational Test & Evaluation, DoDGeneral Lester L. Lyles, Commander, Air Force Materiel CommandIV. BRIEFINGS BY COMMISSIONERS AND STAFFA. Federal/State GovernmentAir Force Aeronautical Systems Center Corporate BoardAST Forecast ConferenceDOC Aerospace Industry Sector Advisory CommitteeFAA Commercial Space Transportation ConferenceNational Academies Space Studies BoardNational Academies Air and Space Engineering BoardNational Security CouncilNAASC Air Surveillance Data Sharing Working GroupNASA Administrator Sean O’KeefeNASA Project Management Shared Experience ProgramNRO/AIAA ForumOhio Aerospace and Defense Advisory CouncilPEO/Systems Command Commanders’ ConferenceSmall Payload Rideshare ConferenceTransportation Research Board/FAA Forecasting WorkshopTri-Service Turbine Engine Technology SymposiumU.S. Space CommandU.S. Congress (Members and Staff)Vice President Richard CheneyWhite House Office of Science & Technology Policy (Dr. Marburger)White House StaffB. Labor/Industry OrganizationsAIA Annual Fall Conference (<strong>Commission</strong> Panel)AIA Compensation Practices CommitteeI-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>AIA Communications CouncilAIA Space CouncilAIA Annual Spring Conference (<strong>Commission</strong> Panel)IAM&AWSpace Foundation (<strong>Commission</strong> Panel)C. Professional Groups/SocietiesAHS Chapter MeetingAIAA Aerospace Sciences Meeting Fast-Track TutorialAIAA Congressional Visits DayAIAA Global Air & Space 2002 SymposiumAIAA Speakers DayAir Traffic Controllers Association ConferenceASME International WorkshopASME Inter-Council Committee on Federal R&DCalifornia Space AuthorityInternational Space University 7th Annual SymposiumInternational Space GroupMaryland Space Business RoundtableNational Space Club – Florida ChapterNational Space Society Governors MeetingSmall Launch Vehicle ConsortiumSociety of Satellite Professionals International MeetingSpace Foundation SymposiaSpace Transportation AssociationU.S. Chamber Workshop (Market Opportunities in Space: The Near-Term Roadmap)U.S. Chamber Space Enterprise CouncilWashington Space Business RoundtableWestern Ohio Senior Executives AssociationWomen and Aerospace SymposiumD. U.S. IndustryAerospace CorporationSAIC Managers MeetingSchafer Corporation Innovations in Space SymposiumI-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix I – Summary of <strong>Commission</strong> Activities and ContractsE. The MediaAtlantic MonthlyAviation News Today (TV Show)Business WeekFlight Daily InternationalIEEE USA Policy PerspectivesMcGraw-Hill Editorial BoardNewsweekPopular ScienceSt. Louis Post-DispatchUSA TodayWashington PostF. AcademiaMITI-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>I-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListAppendix JAerospace-relatedWebsites—Partial ListAcademiaU.S. Colleges & Universities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-2Foreign Colleges & Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-4The National Academies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-5Air Carriers and Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-6Associations & Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-6Directories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-8Foreign Governments, Agencies & Multinational Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-9News and Print Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-10U.S. Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-10U.S. GovernmentAgencies of the Executive Office of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-14Executive Branch Departments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-14Executive Branch Independent Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-19Congress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-19State Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-21J-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>AcademiaU.S. Colleges & UniversitiesArizona State University –College of Engineering & Applied ScienceAuburn University –Department of Aerospace EngineeringBrown University – Center for Fluid Mechanics,Turbulence and ComputationCalifornia Institute of TechnologyCalifornia Institute of Technology –Graduate Aeronautical LaboratoriesCalifornia State Polytechnic University, Pomona –Aerospace EngineeringCase Western Reserve University – Department ofMechanical & Aerospace EngineeringColumbia University – School of Engineeringand Applied SciencesCornell University – Sibley School of Mechanical& Aerospace EngineeringEmbry-Riddle (Arizona)Embry-Riddle (Florida)Florida Institute of Technology – Division ofEngineering SciencesGeorge Mason UniversityGeorgia Institute of Technology – School ofAerospace EngineeringHarvard University – Division of Engineering &Applied SciencesIowa State University – Department of AerospaceEngineering and Engineering MechanicsJohn Hopkins University – School of EngineeringLansing Community College – Aviation CenterLouisiana Tech – Department of ProfessionalAviationMassachusetts Institute of Technology –Department of Aeronautics and AstronauticsMassachusetts Institute of Technology –School of EngineeringMississippi State University –Engineering Research CenterNorth Carolina State University –Mechanical & Aerospace EngineeringWebsite Addresseshttp://www.eas.asu.eduhttp://www.eng.auburn.edu/aerohttp://www.cfm.brown.edu/http://www.caltech.eduhttp://www.galcit.caltech.eduhttp://www.aro.csupomona.eduhttp://mae1.cwru.edu/mae/http://www.columbia.edu/cu/mechanicalhttp://www.mae.cornell.eduhttp://www.pr.erau.edu/http://www.db.erau.eduhttp://www.fit.edu/AcadRes/engsci/http://www.gmu.eduhttp://www.ae.gatech.eduhttp://www.deas.harvard.eduhttp://www.aeem.iastate.eduhttp://www.wse.jhu.eduhttp://alpha.lansing.cc.mi.us/~whitehead/avmaint.htmlhttp://www.aviation.latech.edu/http://web.mit.edu/aeroastro/www/http://web.mit.edu/engineering/http://www.erc.msstate.eduhttp://www.mae.ncsu.eduJ-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListOhio State University – Department of AerospaceEngineering & AviationOld Dominion University – College ofEngineering & TechnologyPenn State University – Aerospace EngineeringPolytechnic University – Department ofMechanical EngineeringPrinceton University –Mechanical & Aerospace EngineeringPurdue University – School of Aeronautical andAstronautical EngineeringSan Diego State University – Department ofAerospace EngineeringSan Jose State University –College of EngineeringStanford University- Department of Aeronauticsand AstronauticsState University of New York – FarmingdaleTexas A&M University – Department ofEngineeringUnited States Naval AcademyUnited States Air Force AcademyUniversity of Akron – School of EngineeringUniversity of Alabama –Aerospace Engineering & MechanicsUniversity of Alaska, Anchorage –Aviation Technology DivisionUniversity of Arizona – Department of Aerospace& Mechanical EngineeringUniversity of California, Berkeley –Mechanical EngineeringUniversity of California, Irvine –Henry Samueli School of EngineeringUniversity of California, San Diego –Department of Mechanical &Aerospace EngineeringUniversity of Cincinnati –Aerospace Engineering & EngineeringMechanicsUniversity of Colorado at Boulder –Aerospace Engineering Scienceshttp://www.aerospace.ohio-state.edu/http://www.odu.eduhttp://www.aero.psu.eduhttp://media.poly.edu/mechanical/page/template/HomeBody.cfmhttp://www.princeton.eduhttp://roger.ecn.purdue.edu/AAE/http://www.engineering.sdsu.edu/aerospacehttp://www.engr.sjsu.edu/http://aa.stanford.eduhttp://www.farmingdale.eduhttp://aggieengineer.tamu.edu/http://www.usna.navy.milhttp://www.usafa.af.milhttp://www.ecgf.uakron.eduhttp://aem.eng.ua.edu/http://www.uaa.alaska.edu/aviation/http://www.ame.arizona.eduhttp://www.me.berkeley.eduhttp://mae.eng.uci.eduhttp://maeweb.ucsd.edu/index.htmlhttp://www.ase.uc.eduhttp://aerospace.colorado.eduJ-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>University of Illinois (Urbana-Champaign) –Dept. of Aeronautical & AstronauticalEngineeringUniversity of Kansas – School of EngineeringUniversity of Maryland –Department of Aerospace EngineeringUniversity of Michigan – College of EngineeringUniversity of Minnesota – Department ofAerospace Engineering & MechanicsUniversity of Missouri-Rolla – Mechanical &Aerospace Engineering and EngineeringMechanicsUniversity of North Dakota –School of Aerospace SciencesUniversity of Notre Dame –Aerospace and Mechanical EngineeringUniversity of Southern California – Departmentof Aerospace & Mechanical EngineeringUniversity of Texas – Aerospace Engineering &Engineering MechanicsUniversity of Texas, Arlington – Department ofMechanical & Aerospace EngineeringUniversity of Washington – Department ofAeronautics and AstronauticsVirginia Tech – Department of Aerospace andOcean EngineeringWichita State University – Department ofAerospace EngineeringForeign Colleges & UniversitiesAustralia – Royal Melbourne Institute ofTechnology – Department of AerospaceEngineeringAustralia – University of New South Wales –School of Mechanical & ManufacturingEngineeringAustralia – University of Queensland –Department of Mechanical EngineeringAustralia – University of Sydney – Aerospace,Mechanical & Mechatronic EngineeringBelgium – Katholieke Universiteit LeuvenBelgium – Universite de Liege –Aerodynamics Grouphttp://www.aae.uiuc.eduhttp://www.engr.ku.eduhttp://www.enae.umd.eduhttp://www.engin.umich.eduhttp://www.aem.umn.eduhttp://web.umr.edu/~maeem/http://www.aero.und.edu/http://www.nd.eduhttp://ae-www.usc.edu/http://www.ae.utexas.eduhttp://www-mae.uta.eduhttp://www.aa.washington.eduhttp://www.aoe.vt.edu/http://www.engr.twsu.edu/aehttp://www.aero.rmit.edu.auhttp://www.eng.unsw.edu.au/research/schools/mech.htmhtpp://www.uq.edu.au/mecheng/http://www.ae.su.oz.auhttp://www.mech.kuleuven.ac.be/default_en.phtmlhttp://www.ulg.ac.be/aerodyn/J-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListCanada – Carleton University – Department ofMechanical & Aerospace EngineeringCanada – Ryerson UniversityCanada – University of Toronto –Institute for Aerospace StudiesFinland – Helsinki University of Technology –Aeronautical EngineeringFrance – ENSICAFrance – International Space UniversityFrance – SUPAEROGermany – Institut fur Luft- und RaumfahrGermany – University of Stuttgart –Institute for Statics & DynamicsJapan – Civil Aviation CollegeJapan – Tokyo Metropolitan College ofAeronautical EngineeringNetherlands – Delft University of Technology –Aerospace EngineeringSweden – Chalmers University –Department of Thermo & Fluid DynamicsSweden – Lulea University of Technology –Division of Fluid MechanicsSweden – Royal Institute of Technology –Department of AeronauticsTurkey – Middle East Technical UniversityUK – Bristol University – Department ofAerospace EngineeringUK – Cambridge University –Department of EngineeringUK – Cranfield University –Computational Fluid DynamicsUK – Imperial College of Science,Technology, and Medicine –Department of AeronauticsUK – Loughborough University – Department ofAeronautical and Automotive EngineeringUK – University of Glasgow –Department of Aerospace EngineeringThe National AcademiesAeronautics and Space Engineering BoardNational Academy of Engineeringhttp://www.mae.carleton.cahttp://www.ryerson.cahttp://www.utias.utoronto.cahttp://www.aeronautics.hut.fi/http://www.ensica.fr/index2fr.htmhttp://www.isunet.eduhttp://www.supaero.fr/http://keynes.fb12.tu-berlin.dehttp://www.isd.uni-stuttgart.de/http://www.kouku-dai.ac.jp/http://www.kouku-k.ac.jp/index_e.htmlhttp://www.delftaerospace.comhttp://www.tfd.chalmers.se/http://www.luth.se/depts/mt/strl/http://www.flyg.kth.se/http://www.metu.edu.tr/http://www.aer.bris.ac.uk/http://www.eng.cam.ac.ukhttp://www.cranfield.ac.uk/sme/cfd/http://www.ae.ic.ac.uk/http://info.lut.ac.uk/departments/tt/index.htmlhttp://www.aero.gla.ac.uk/http://www7.nationalacademies.org/aseb/http://www.nae.edu/J-5FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>National Academy of SciencesNational Research CouncilSpace Studies BoardTransportation Research Boardhttp://www4.nationalacademies.org/nas/nashome.nsfhttp://www.nas.edu/nrc/http://www.nas.edu/ssb/ssb.htmlhttp://www.nas.edu/trb/Air Carriers and AirportsAir Carriers & Airports – Aerolink DirectoryAssociations & SocietiesAeronautical Repair Station AssociationAerospace Department Chairman's AssociationAerospace Industries Association of AmericaAerospace Industries Association of CanadaAir Force AssociationAir Line Pilots AssociationAir Traffic Control AssociationAir Transport AssociationAircraft Electronics AssociationAircraft Owners and Pilots AssociationAirline Dispatchers FederationAirports Council InternationalAmerican Association for theAdvancement of ScienceAmerican Association of Airport ExecutivesAmerican Astronautical SocietyAmerican Bar AssociationAmerican Helicopter Society, InternationalAmerican Institute of Aeronautics andAstronauticsAmerican Museum of Natural History –Rose Center for Earth & SpaceAmerican Society of Mechanical Engineers,InternationalAmerican Society of Travel AgentsArmy Aviation Association of AmericaAssociation for Women in Aviation MaintenanceAviation Distributors and ManufacturersAssociationBusiness Executives for National SecurityWebsite Addresshttp://www.aerolink.com/catairports.htmlWebsite Addresseshttp://www.arsa.org/http://www.princeton.edu/~asmits/ADCA/adca.htmlhttp://www.aia-aerospace.org/http://www.aiac.ca/http://www.afa.org/https://www.alpa.org/home/index.htmlhttp://www.atca.org/http://www.air-transport.orghttp://www.aea.net/http://www.aopa.org/http://www.dispatcher.org/http://www.aci-na.orghttp://www.aaas.org/http://www.airportnet.org/Index.htmhttp://www.astronautical.org/http://www.abanet.org/scitech/home.htmlhttp://www.vtol.org/http://www.aiaa.org/http://www.amnh.org/rosehttp://www.asme.org/offices.shtmlhttp://www.astanet.com/http://www.quad-a.org/http://www.awam.org/http://www.adma.org/http://www.bens.org/J-6FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListCanadian Aeronautics and Space InstituteElectronic Industries AllianceEuropean Association of Aerospace Industries(AECMA)FAA Council of African American EmployeesFAA National Coalition of Federal AviationEmployees with DisabilitiesFAA National Native American/Alaska NativeCoalition of Federal Aviation EmployeesFAA Technical Women's OrganizationFederal Managers AssociationFederation of American ScientistsFlight Safety FoundationGeneral Aviation Manufacturers AssociationHelicopter Association InternationalInstitute of Electrical and Electronics EngineersInternational Air Transport AssociationInternational Association of Machinists andAerospace WorkersInternational Civil Aviation Organization (ICAO)International Council of Aircraft Owner andPilot AssociationInternational Council of the Aeronautical SciencesInternational Society of Women Airline PilotsNational Aeronautic AssociationNational Agricultural Aviation AssociationNational Air Traffic Controllers AssociationNational Air Transportation AssociationNational Association of Air Traffic SpecialistsNational Association of Flight InstructorsNational Association of State Aviation OfficialsNational Business Aviation AssociationNational Center for Advanced Technologieshttp://www.casi.ca/http://www.eia.orghttp://www.aecma.orghttp://www.faa.gov/acr/cae.htmhttp://www.faa.gov/acr/ncfaed.htmhttp://www.faa.gov/acr/naan.htmhttp://two.faa.govhttp://www.fedmanagers.org/http://www.fas.org/http://www.flightsafety.org/home.htmlhttp://www.generalaviation.org/main.shtmlhttp://www.rotor.com/http://www.ieee.org/http://www.iata.orghttp://www.iamaw.orghttp://www.icao.orghttp://www.iaopa.org/http://www.icas.orghttp://www.iswap.org/http://www.naa-usa.org/website/http://www.agaviation.org/http://www.natcadc.org/http://www.nata-online.org/http://www.naats.org/http://www.nafinet.org/who/contactus.htmlhttp://www.nasao.orghttp://www.nbaa.org/http://www.ncat.comNational Council for Science and the Environment http://www.cnie.org/NLE/National Defense Industrial AssociationNational Education AssociationNational Hispanic Coalition of Federal AviationEmployeesNational Science Teachers AssociationNavy League of the United Stateshttp://www.adpa.org/http://www.nea.org/http://www.nhcfae.com/http://www.nsta.org/http://www.navyleague.org/index_flash.phpJ-7FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Professional Airways Systems SpecialistsProfessional Women Controllers, Inc.Radio Technical <strong>Commission</strong> for AeronauticsRegional Airline AssociationRoyal Aeronautical SocietySmithsonian Institution – National Air & SpaceMuseumSociety of Airway PioneersSociety of Automotive Engineers, InternationalSociety of Women EngineersSpace FoundatioonSpace Frontier FoundationSpace Transporation AssociationWomen in AviationWorld Air Sports Federation (FederationAeronautique International)DirectoriesAERADE Aerospace and Defense ResourcesAero Images Military LibraryAerolink – the Internet's Commercial AviationDirectoryAeroseek – Aviation Search EngineAstronomical Pictures & AnimationAstronomy.comAviation Image ArchivesDictionary of Technical TermsEmbry Riddle Virtual LibrariesFederal Agencies DirectoryGateway to U.S. Government Science &Technology WebsitesGreat Aviation QuotesInternational Aviation DirectoryInternet Aerospace LinksJane's Information GroupLandings Pages databaseLibrary of CongressRussian Space Science Internethttp://www.passnational.orghttp://www.pwcinc.orghttp://www.rtca.org/http://www.raa.org/http://www.raes.org.uk/http://www.nasm.si.edu/http://www.airwaypioneers.com/http://www.sae.org/servlets/indexhttp://www.swe.org/http://www.spaceconnection.orghttp://www.space-frontier.orghttp://www.spacetransportation.orghttp://www.womeninaviation.comhttp://www.fai.orgWebsite Addresseshttp://www.aerade.cranfield.ac.ukhttp://www.aeroimages.com/imagmili.htmhttp://www.aerolink.comhttp://www.aeroseek.comhttp://graffiti.u-bordeaux.fr/MAPBX/roussel/astro.htmlhttp://www.astronomy.comhttp://www.landings.com/_landings/pages/images.htmlhttp://roland.lerc.nasa.gov/~dglover/dictionary//content.htmlhttp://www.erau.edu/libraries/virtual/Aerospace/http://www.lib.lsu.edu/gov/fedgovhttp://www.scitech.govhttp://www.skygod.com/quotes/index.htmlhttp://www.infomart.net/av/http://www.alumni.caltech.edu/~padam/htmls/AeroLinks.htmlhttp://www.janes.comhttp://www.landings.comhttp://lcweb.loc.govhttp://www.rssi.ru/J-8FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListScience, Technology & Engineering –Kennedy Space CenterSpace Jobs, Inc.U.S. Space Walk of FameWWW Virtual Library of Logisticshttp://ftp.ksc.nasa.govhttp://www.spacejobs.comhttp://www.spacewalkoffame.comhttp://www.logisticsworld.com/logisticsForeign Governments, Agencies, andMultinational OrganizationsAeronautics for EuropeAustralia – Defense Science &Technology OrganizationBelgium – Office of Scientific, Technical andCultural AffairsBrasil National Institute for Space ResearchCanadian Herzberg Institute of AstrophysicsCanadian Space AgencyChina National Space AdministrationCNES – Centre National d'Etudes SpatialesCSIRO Australia – Scientific & IndustrialResearch OrganizationEuroconsultEuropean Aeronautic Defence and Space Company(EADS)European <strong>Commission</strong>European Space AgencyGIFAS – Groupement Des Industries FrancaisesAeronautiques et SpatialesIndian Space Research OrganizationInternational Astronautical FederationInternational Civil Aviation OrganizationNational Space Development Agency of JapanNorth Atlantic Treaty Organization (NATO)NATO Research & Technology OrganizationNetherlands – National Aerospace LaboratoryRussian Aviation PageRussian Space AgencyRussian Space Research InstituteUK Ministry of DefenceWebsite Addresseshttp://europa.eu.int/comm/research/growth/aeronautics/enhttp://www.dsto.defence.gov.au/http://www.belspo.behttp://www.inpe.br/englishhttp://cadcwww.dao.nrc.cahttp://www.space.gc.ca/http://www.cnsa.gov.cnhttp://www.cnes.frhttp://www.csiro.auhttp://www.euroconsult-ec.comhttp://www.eads.com/eads/index_nof.htmhttp://europa.eu.inthttp://www.esa.inthttp://www.gifas.asso.frhttp://www.isro.orghttp://www.iafastro.comhttp://www.icao.inthttp://www.nasda.go.jp/index_e.htmlhttp://www.nato.int/http://www.rta.nato.int/http://www.nlr.nlhttp://aeroweb.lucia.it/~agretch/RAP.htmlhttp://www.rosaviakosmos.ru/english/eindex.htmhttp://www.iki.rssi.ruhttp://www.mod.ukJ-9FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>United NationsInternational Telecommunications UnionWorld Meteorological Organizationvon Karmen Institute for Fluid Dynamicshttp://www.un.int/http://www.itu.int/home/index.htmlhttp://www.wmo.ch/index-en.htmlhttp://www.vki.ac.beNews and Print MediaAerospace Online – Marketplace for IndustryProfessionalsAeroSpaceNewsAerotech News and ReviewAeroWorldNet – Daily Aerospace Magazineon the InternetAir & Space Smithsonian MagazineAviation TodayAviation Week and Space TechnologyAviation Week's AviationNowAvwebDefence Systems DailyDefense NewsDoD DefenseLINK NewsFinancial Times News and AnalysisGlobal Defence ReviewWebsite Addresseshttp://www.aerospaceonline.com/http://www.aerospacenews.com/http://www.aerotechnews.com/http://www.aeroworldnet.com/http://www.airspacemag.com/http://www.aviationtoday.com/index.htmlhttp://www.awgnet.com/aviationhttp://www.aviationnow.com/http://www.avweb.com/http://www.defence-data.com/index2/index2.shtmlhttp://www.defensenews.comhttp://www.defenselink.mil/news/http://news.ft.com/home/us/http://www.global-defence.comGlobalAir.com – Connecting the Aviation Industry http://www.globalair.com/Key Publishing, Ltd.Space NewsSpace.comWorld Spaceflight Newshttp://www.keypublishing.com/flash.htmlhttp://www.space.com/spacenews/http://www.space.com/http://members.aol.com/wsnspace/index.htmU.S. IndustryAAI CorporationAerojetAerospace CorporationAeroVironment, Inc.Aircraft Technical PublishersAirtechnics, Inc.Alaska Aerospace Development CorporationAlliant Techsystems IncorporatedAmerican Pacific CorporationAnalytical Graphics InternationalWebsite Addresseshttp://www.aaicorp.comhttp://www.aerojet.comhttp://www.aero.orghttp://www.aerovironment.comhttp://www.atp.comhttp://www.airtechnics.comhttp://www.akaerospace.comhttp://www.atk.comhttp://american-pacific-corp.comhttp://www.analyticalgraphics.comJ-10FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListAndrews Space and TechnologyArete AssociatesArgo-Rech CorporationAstroVision International, IncorporatedATK-ThiokolAtlantic Research CorporationAviall IncorporatedAvidyne CorporationAXA SpaceB.H. Aircraft Company, IncorporatedB/E AerospaceBAE Systems, North America IncorporatedBall Aerospace & Technologies CorporationBarnes AerospaceBattelleBF Goodrich AerospaceBoeingBoeing Business JetsBombardier Learjet, Inc.CAE SunyFlite Training International, Inc.Century Flight SystemsCessnaCommander Aircraft CompanyComputer Sciences CorporationCordiem, LLCCrane AerospaceCubic CorporationCurtiss-Wright CorporationDassault Falcon Jet CorporationDeCrane Aircraft Holdings, Inc.DRS Technologies, IncorporatedDucommun IncorporatedDukes AerospaceDupont CompanyEclipse AviationEDO CorporationEFW IncorporatedEmbraer Aircraft Holding, Incorporatedhttp://www.spaceandtech.comhttp://www.arete.comhttp://www.aero-tech.comhttp://www.astrovision.comhttp://www.thiokol.comhttp://www.atlantic-research.comhttp://www.aviall.comhttp://www.avidyne.comhttp://www.axa.comhttp://www.bhaircraft.comhttp://www.beaerospace.comhttp://www.na.baesystems.comhttp://www.ball.com/aerospacehttp://www.barnesaero.comhttp://www.battelle.org/http://www.goodrich.comhttp://www.boeing.comhttp://www.boeing.com/commercial/bbjhttp://www.aerospace.bombardier.comhttp://www.simuflite.comhttp://www.centuryflight.comhttp://www.cessna.comhttp://www.commanderair.comhttp://www.csc.comhttp://www.cordiem.comhttp://www.craneaerospace.comhttp://www.cts-nordic.dkhttp://www.curtisswright.comhttp://www.dassaultfalcon.comhttp://www.decraneaircraft.comhttp://www.drs.comhttp://www.ducommun.comhttp://www.dukesaerospace.comhttp://www.dupont.comhttp://www.eclipseaviation.comhttp://www.edocorp.comhttp://www.efw.comhttp://www.embraer.comJ-11FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>ESIS IncorporatedEsterline TechnologiesExostar LLCFairchild CorporationFlightSafety InternationalGARMIN InternationalGeneral Atomics Aeronautical SystemsIncorporatedGeneral Dynamics CorporationGeneral Electric – Aircraft EnginesGKN Aerospace ServicesGoodrich CorporationGroen Brothers Aviation, IncorporatedGulfstream Aerospace CorporationHamilton-Sundstrand CorporationHarris CorporationHartzell Propeller, Inc.HEICO CorporationHexcel CorporationHoneywellHughesi2 TechnologiesITT Industries Defense Electronics & ServicesJeppesenKAMAN Aerospace CorporationKelly AerospaceKistler Aerospace Corporationhttp://www.esis.comhttp://www.esterline.comhttp://www.exostar.comhttp://www.fairchildcorp.comhttp://www.flightsafety.comhttp://www.garmin.com/http://www.ga.com/asi/aero.htmlhttp://www.generaldynamics.comhttp://www.geae.comhttp://www.aero.gknpic.comhttp://www.aerospace.goodrich.comhttp://www.gbagyro.comhttp://www.gulfstream.comhttp://www.hamiltonsundstrand.comhttp://www.harris.comhttp://www.hartzellprop.comhttp://www.heicocorp.comhttp://www.hexcel.comhttp://www.honeywell.comhttp://www.hughes.comhttp://www.i2.comhttp://www.ittind.com/businesshttp://www.jeppesen.comhttp://www.kamanaero.comhttp://www.kellyaerospace.comhttp://www.kistleraerospace.comL-3 Communications http://www.l-3com.comLockheed MartinLockheed Martin Space SystemsMartin-Baker America IncorporatedMatrixOne IncorporatedMD Helicopters, IncorporatedMeggitt Avionics/S-TECMicrocosm, Inc.MOOG IncorporatedNorthrop Grumman CorporationOmega Air, IncorporatedOmega Airline Softwarehttp://www.lockheedmartin.comhttp://lmms.external.lmco.comhttp://www.martin-baker.comhttp://www.matrix-one.comhttp://www.mdhelicopters.comhttp://www.s-tec.comhttp://www.smad.comhttp://www.moog.comhttp://www.northgrum.com/http://www.omegaair.iehttp://www.omegaair.caJ-12FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListOrbital Sciences CorporationParker AerospaceParker Hannifin CorporationPerkinElmer Fluid SciencesPPG Industries AerospacePratt & WhitneyPrecision Aerospace CorporationRaytheonRaytheon Aircraft CompanyRemmele Engineeering, IncorporatedRockwell Collins, Inc.Rockwell InternationalRolls-Royce North AmericaSabreliner CorporationSafe Flight Instrument CorporationSea Launch Company LLCSikorsky AircraftSilicon Graphics, IncorporatedSmiths AerospaceSmiths Aerospace Actuation Systems – YakimaSmiths Group Actuation SystemsSpace Systems/LoralSpectrum AstroSpirent Systems Wichita, Inc.Stellex Aerostructures, IncorporatedTeledyne Continental MotorsTeledyne TechnologiesTeleflex IncorporatedTextron LycomingThe Aerostructures CorporationThe New Piper Aircraft, Inc.The NORDAM GroupThe Purdy CorporationTriumph Group, IncorporatedTRW IncorporatedUnison IndustriesUnited DefenseUnited Technologies Corporationhttp://www.orbital.comhttp://www.parker.com/aghttp://www.parker.comhttp://wwwl.perkinelmer.comhttp://www.ppg.comhttp://www.pratt-whitney.com/http://www.prec-aero.comhttp://www.raytheon.comhttp://www.raytheon.com/rachttp://www.remmele.comhttp://www.collins.rockwell.comhttp://www.rockwell.comhttp://www.rolls-royce.comhttp://www.sabreliner.comhttp://www.safeflight.comhttp://www.sea-launch.comhttp://www.sikorsky.comhttp://www.sgi.comhttp://www.smiths-aerospace.comhttp://www.dowty.comhttp://www.si-act-sys.comhttp://www.ssloral.comhttp://www.specastro.comhttp://www.spirent-systems.comhttp://www.stellex.comhttp://www.tcmlink.comhttp://www.teledyne.comhttp://www.telflex.comhttp://www.lycoming.textron.comhttp://www.theaerocorp.comhttp://www.newpiper.comhttp://www.nordam.comhttp://www.purdycorp.comhttp://www.triumphgroup.comhttp://www.trw.comhttp://www.unisonindustries.comhttp://www.uniteddefense.comhttp://www.utc.com/index1.htmJ-13FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Universal Avionics SystemsUPS Aviation Technologies, Inc.Vertical Aeronautics InternationalVought Aircraft IndustriesVought Aircraft IndustriesW.L. Gore & Associates, IncorporatedWilliams InternationalWoodward Governor CompanyU.S. GovernmentAgencies of the Executive Office of the PresidentCentral Intelligence AgencyCouncil of Economic AdvisorsCouncil on Environmental QualityNational Economic CouncilNational Security CouncilOffice of Management and BudgetOffice of Science and Technology PolicyNational Science & Technology CouncilPresident's Advisory Council on Science &TechnologyOffice of the U.S. Trade RepresentativeExecutive Branch DepartmentsDepartment of AgricultureDepartment of CommerceInternational Trade AdministrationNational Oceanic & AtmosphericAdministration – SatellitesCritical Infrastructure Assurance OfficeDepartment of DefenseSecretary & Deputy Secretary of DefenseUnder Secretary of Defense (Acquisition,Technology & Logistics)Deputy Undersecretary of Defense,Acquisition ReformDeputy Undersecretary of Defense,Industrial AffairsDirector, Defense Research andEngineeringhttp://www.uasc.comhttp://www.upsat.comhttp://www.heliports.comhttp://www.vought.com/http://www.vought.com/http://www.wlgore.comhttp://www.williams-int.com/http://www.woodward.comWebsite Addresseshttp://www.odci.gov/http://www.whitehouse.gov/ceahttp://www.whitehouse.gov/ceqhttp://www.whitehouse.gov/nec/http://www.whitehouse.gov/nsc/http://www.whitehouse.gov/omb/budgethttp://www.ostp.gov/http://www.ostp.gov/NSTC/html/NSTC_Home.htmlhttp://www.ostp.gov/pcast/pcast.htmlhttp://www.ustr.govhttp://www.usda.govhttp://www.commerce.govhttp://www.ita.doc.govhttp://www.noaa.gov/satellites.htmlhttp://www.ciao.gov/http://www.dod.mil/http://www.defenselink.mil/osd/topleaders.htmlhttp://www.acq.osd.mil/http://www.acq.osd.mil/ar/http://www.acq.osd.mil/ia/http://www.dod.mil/ddre/J-14FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListDirector, Operational Test and EvaluationDirector, Defense ProcurementNational Security Space ArchitectUnder Secretary of Defense (Comptroller)http://www.dote.osd.mil/http://www.acq.osd.mil/dp/http://www.acq.osd.mil/nssa/http://www.dtic.mil/comptroller/Assistant Secretary of Defense (Command,Control, Communications & Intelligence) http://www.c3i.osd.mil/Assistant Secretary of Defense (C3I)Space Policy DirectorUnder Secretary of Defense (Policy)Assistant Secretary of Defense(International Security Affairs)Defense Technology SecurityAdministrationAdvisory CommitteesAdvisory Committee to Assess DomesticResponse to Terrorism Involving WMD –CharterBallistic Missile Defense AdvisoryCommittee – CharterDefense Policy Board AdvisoryCommittee – CharterDefense Science BoardDefense AgenciesMissile Defense AgencyNational Imagery & Mapping AgencyDefense Intelligence AgencyDefense Advanced Research ProjectsAgencyDARPA Tactical Technology OfficeNational Security AgencyNational Reconnaissance OfficeJoint Service SchoolsNational Defense UniversityJoint Chiefs of StaffJoint Vision 2020Program Executive OfficesJoint Strike Fighter Program OfficeUnified CommandsUnited States Strategic CommandUnited States Transportation Commandhttp://www.c3i.osd.mil/org/c3is/spacepol/http://www.defenselink.mil/policyhttp://www.defenselink.mil/policy/isa/http://www.dtra.mil/http://www.odam.osd.mil/omp/pdf/5277.pdfhttp://www.odam.osd.mil/omp/pdf/2.pdfhttp://www.odam.osd.mil/omp/pdf/412.pdfhttp://www.acq.osd.mil/dsbhttp://www.acq.osd.mil/bmdo/http://www.nima.mil/http://www.dia.mil/http://www.arpa.mil/http://www.darpa.mil/tto/http://www.nsa.gov/http://www.nro.gov/http://www.ndu.eduhttp://www.dtic.mil/jcs/http://www.dtic.mil/jv2020/http://www.jast.mil/IEFrames.htmhttp://www.stratcom.mil/http://www.transcom.mil/J-15FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>United States Air ForceUS Air Force Vision 2020Office of the Secretary of the Air Force –Acquisition (SAF/AQ)Assistant Secretary of the Air Force –Space Operations (SAF/USI)Air Force Scientific Advisory Board –CharterOffice of Scientific ResearchAir Combat CommandAir Education and Training CommandAir Force Space Command HeadquartersAir Force Link – LibraryAir Force Research LaboratoryArnold Engineering DevelopmentCenterAir National GuardAir War CollegeAir Force Institute of TechnologyUS Air Force – ThunderbirdsUnited States ArmyUS Army VisionUS Army Science Board – CharterUS Army Materiel CommandUS Army Parachute TeamUnited States NavyUS Navy Vision – From the SeaCNO Executive Panel – CharterCNO Space, Information Warfare,Command & Control Directorate (N6)Office of Naval ResearchNaval Research LaboratoryNaval Research Advisory Council –CharterNaval Air Systems CommandNaval Air Warfare Center –Aircraft DivisionNaval Air Warfare Center –Weapons Divisionhttp://www.af.mil/http://www.af.mil/vision/http://www.safaq.hq.af.mil/http://www.asaf.space.hq.af.mil/http://www.odam.osd.mil/omp/pdf/439.pdfhttp://www.afosr.af.milhttp://www.af.mil/sites/acc.shtmlhttp://www.aetc.randolph.af.mil/http://www.spacecom.af.mil/hqafspc/Default2.asphttp://www.af.mil/lib_af/index.shtmlhttp://www.afrl.af.milhttp://www.arnold.af.mil/http://www.ang.af.mil/http://www.au.af.mil/au/awc/awchome.htmhttp://www.afit.eduhttp://www.airforce.com/thunderbirds/http://www.army.mil/http://www.army.mil/vision/default.htmhttp://www.odam.osd.mil/omp/pdf/389.pdfhttp://www.amc.army.mil/http://www.usarec.army.mil/hq/goldenknights/http://www.navy.mil/http://www.chinfo.navy.mil/navpalib/policy/fromsea/forward.txthttp://www.odam.osd.mil/omp/pdf/401.pdfhttp://cno-n6.hq.navy.milhttp://www.onr.navy.mil/http://www.nrl.navy.mil/http://www.odam.osd.mil/omp/pdf/425.pdfhttp://www.navair.navy.mil/http://www.nawcad.navy.mil/http://www.nawcwpns.navy.mil/J-16FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListUS Navy – Flight TestNaval Center for Space TechnologyNaval Facilities Engineering CommandNaval Network & Space OperationsCommandNaval Sea Systems CommandSpace & Naval Warfare SystemsCommandNaval Test Pilot SchoolNaval Postgraduate SchoolUS Navy – Blue AngelsUS Navy – Leap FrogsUnited States Marine CorpsUSMC VisionDepartment of EducationDepartment of EnergyNational Nuclear Security AdministrationNational SecurityOffice of Defense Nuclear Non-ProliferationNational LaboratoriesAmes LaboratoryArgonne National LaboratoryBrookhaven National LaboratoryErnest Orlando Lawrence BerkeleyNational LaboratoryFermi National Accelerator LaboratoryIdaho National Engineering &Environmental LaboratoryLawrence Livermore National LaboratoryLos Alamos National LaboratoryNational Energy Technology LaboratoryNational Renewable Energy LaboratoryOak Ridge National LaboratoryPrinceton Plasma Physics LaboratorySandia National LaboratoryStanford Linear Accelerator CenterDepartment of Health and Human ServicesCenters for Disease Control & Preventionhttp://flighttest.navair.navy.mil/http://www.ncst.nrl.navy.mil/http://www.navfac.navy.mil/http://www.nnsoc.navy.milhttp://www.navsea.navy.mil/http://enterprise.spawar.navy.mil/spawarpublicsite/http://www.usntps.navy.mil/http://www.nps.navy.milhttp://www.navy.com/blueangels/index.jsp?hasFlash=truehttp://www.sealchallenge.navy.mil/leapfrogs.htmhttp://www.usmc.mil/http://www.usmc.mil/templateml.nsf/25241abbb036b230852569c4004eff0e/$FILE/strategy.pdfhttp://www.ed.gov/index.jsphttp://www.energy.gov/http://www.nnsa.doe.gov/http://www.energy.gov/security/index.htmlhttp://www.nnsa.doe.gov/na-20/http://www.energy.gov/aboutus/org/natlabs.htmlhttp://www.ameslab.gov/http://www.anl.gov/http://www.bnl.gov/world/http://www.lbl.gov/http://www.fnal.gov/http://www.inel.gov/http://www.llnl.gov/http://www.lanl.gov/worldviewhttp://www.netl.doe.gov/http://www.nrel.gov/http://www.ornl.gov/http://www.pppl.gov/http://www.sandia.govhttp://www.slac.stanford.edu/http://www.hhs.govhttp://www.cdc.gov/J-17FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>National Institute for OccupationalSafety & HealthDepartment of Housing and Urban DevelopmentDepartment of InteriorU.S. Geological SurveyDepartment of JusticeDepartment of LaborDepartment of StateBureau of Political-Military AffairsDepartment of TransportationAssistant Secretary for Aviation &International AffairsOffice of IntermodalismTransportation Science & TechnologyFederal Aviation AdministrationFAA Associate Administrator forResearch and Acquisitions (ARA)FAA Office of Aviation Research (AAR)FAA Office of Intelligence & Security(OIS)FAA William J. Hughes Technical CenterFAA Air Traffic Services (ATS)FAA Associate Administrator forCommercial Space TransportationFAA Civil Aviation SecurityFAA Office of AirportsFAA Office of Regulation andCertification (AVR)Federal Highway AdministrationFederal Railroad AdministrationFederal Transit AdministrationResearch and Special ProgramsAdministrationVolpe National Transportation SystemsCenterTransportation Security AdministrationUnited States Coast GuardUS Coast Guard – Vision 2020Department of the TreasuryDepartment of Veteran Affairshttp://www.cdc.gov/niosh/homepage.htmlhttp://www.hud.govhttp://www.doi.govhttp://www.usgs.govhttp://www.usdoj.gov/ag/index.htmlhttp://www.dol.gov/http://www.state.gov/http://www.state.gov/t/pm/http://www.dot.govhttp://ostpxweb.dot.gov/aviation/http://www.dot.gov/intermodal/http://scitech.dot.gov/http://www.faa.gov/http://www.faa.gov/ARA/INDEX.htmhttp://research.faa.gov/aar/http://152.122.41.10/http://www.tc.faa.gov/http://www.faa.gov/ats/http://ast.faa.gov/http://cas.faa.gov/http://www.faa.gov/arp/arphome.htmhttp://www.faa.gov/avr/index.cfmhttp://www.fhwa.dot.govhttp://www.fra.dot.gov/site/index.htmhttp://www.fta.dot.gov/http://www.rspa.dot.govhttp://www.volpe.dot.govhttp://www.tsa.dot.govhttp://www.uscg.mil/uscg.shtmhttp://www.uscg.mil/Commandant/2020/contents.htmhttp://www.ustreas.gov/http://www.va.govJ-18FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial ListExecutive Branch Independent AgenciesEnvironmental Protection AgencyFederal Emergency Management AgencyGeneral Services AdministrationNational Aeronautics and Space AdministrationNASA HeadquartersNASA Technology PlanNASA CentersNASA Ames Research CenterNASA Dryden Flight Research CenterNASA Glenn Research Centerhttp://www.epa.gov/http://www.fema.gov/http://www.gsa.gov/http://www.nasa.gov/http://www.hq.nasa.gov/http://technologyplan.nasa.gov/default.cfm?id=frontendhttp://www.nasa.gov/hqpao/nasa_centers.htmlhttp://www.arc.nasa.gov/http://www.dfrc.nasa.gov/http://www.lerc.nasa.gov/NASA Goddard Institute for Space Studies http://www.giss.nasa.gov/NASA Goddard Space Flight CenterNASA Independent Verification &Validation FacilityNASA Jet Propulsion LaboratoryNASA John C. Stennis Space CenterNASA Johnson Space CenterNASA Kennedy Space CenterNASA Langley Research CenterNASA Marshall Space Flight CenterNASA Wallops Island Flight Test FacilityNASA White Sands Test FacilityCenter for AeroSpace InformationNASA Library DocumentsTechnical BriefsGreat Images in NASANational Science FoundationNational Transportation Safety BoardTennessee Valley Authorityhttp://www.gsfc.nasa.gov/http://www.ivv.nasa.gov/index.shtmlhttp://www.jpl.nasa.gov/http://www.ssc.nasa.gov/http://www.jsc.nasa.gov/http://www.ksc.nasa.govhttp://www.larc.nasa.gov/http://www1.msfc.nasa.gov/http://www.wff.nasa.govhttp://www.wstf.nasa.gov/http://www.sti.nasa.gov/RECONselect.htmlhttp://www.aero-space.nasa.gov/library/index.htmhttp://www.nasatech.com/http://grin.hq.nasa.govhttp://www.nsf.gov/http://www.ntsb.gov/http://www.tva.govCongressUnited States SenateSenate Committee on AppropriationsSenate Committee on Armed ServicesSenate Committee on Banking, Housing& Urban AffairsSenate Committee on Commerce, Science& Transportationhttp://www.senate.govhttp://appropriations.senate.gov/http://www.senate.gov/~armed_services/http://www.senate.gov/~banking/http://www.senate.gov/~commerce/J-19FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>Senate Committee on Energy & NaturalResourcesSenate Committee on Environment &Public WorksSenate Committee on FinanceSenate Committee on Foreign RelationsSenate Committee on Governmental AffairsSenate Committee on Health, Education,Labor & PensionsSenate Committee on Small Business &EntrepreneurshipSenate Committee on the BudgetSenate Committee on the JudiciarySenate Select Committee on IntelligenceUnited States House of RepresentativesHouse Committee on AppropriationsHouse Committee on Armed ServicesHouse Committee on Education and theWorkforceHouse Committee on Energy and CommerceHouse Committee on Financial ServicesHouse Committee on Government ReformHouse Committee on International RelationsHouse Committee on ScienceHouse Committee on Small BusinessHouse Committee on the BudgetHouse Committee on the JudiciaryHouse Committee on Transportation &InfrastructureHouse Committee on Ways and MeansJoint Committees, Offices and Agencies ofCongressCongressional Budget OfficeGeneral Accounting OfficeGovernment Printing OfficeLibrary of Congresshttp://www.senate.gov/~energy/http://www.senate.gov/~epw/http://www.senate.gov/~finance/http://www.senate.gov/~foreign/http://www.senate.gov/~gov_affairs/http://www.senate.gov/~labor/http://sbc.senate.gov/http://www.senate.gov/~budget/http://www.senate.gov/~judiciary/http://intelligence.senate.govhttp://www.house.govhttp://www.house.gov/appropriationshttp://www.house.gov/haschttp://edworkforce.house.gov/http://www.house.gov/commerce/http://www.house.gov/financialservices/http://www.house.gov/reform/http://www.house.gov/international_relations/http://www.house.gov/science/welcome.htmhttp://www.house.gov/smbiz/http://www.house.gov/budget/http://www.house.gov/judiciary/http://www.house.gov/transportationhttp://waysandmeans.house.gov/http://www.cbo.govhttp://www.gao.govhttp://www.access.gpo.gov/http://www.loc.gov/J-20FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix J – Aerospace-related Websites—Partial List<strong>Commission</strong>s and ReportsCentennial of Flight <strong>Commission</strong><strong>Commission</strong> on Domestic Response toTerrorism Involving Weapons of MassDestruction<strong>Commission</strong> on National Security in the21st Century<strong>Commission</strong> on the Future of the U.S.Aerospace Industry<strong>Commission</strong> on United States NationalSecurity Space Management & OrganizationState GovernmentCalifornia Department of Transportation –Division of AeronauticsCalifornia Space AuthorityFlorida Spaceport AuthorityTexas Aerospace <strong>Commission</strong>Virginia Space Flight Centerhttp://www.centennialofflight.govhttp://www.rand.org/nsrd/terrpanel/http://www.nssg.govhttp://www.ita.doc.gov/aerospace/aerospacecommissionhttp://www.defenselink.mil/pubs/spaceabout.htmlhttp://www.dot.ca.gov/hq/planning/aeronaut/http://www.californiaspaceauthority.orghttp://www.spaceportflorida.com/http://www.tac.state.tx.ushttp://www.vaspace.orgJ-21FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix K – Acknowledgements and <strong>Commission</strong> StaffAppendix KAcknowledgementsand <strong>Commission</strong> StaffK-1FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>The <strong>Commission</strong>ers would like to acknowledge thecontribution of the following federal departmentsand agencies who provided support to the<strong>Commission</strong>: The Department of Commerce, TheDepartment of Defense, the Department ofEducation, the Department of Labor, theDepartment of State, the Department ofTransportation and its Federal AviationAdministration, and the National Aeronautics andSpace Administration. Particular thanks goes to theDepartment of Defense for its generous contributionsof funding, personnel, facilities and administrativesupport, and to the National Aeronauticsand Space Administration for its generous contributionof personnel and funding. Following are theindividual staff members, and their organizations,that played an important part in the work of the<strong>Commission</strong>.Designated Federal OfficialMr. Charles H. Huettner, Executive DirectorExecutive Office of the President/National Science& Technology CouncilSenior StaffMr. Paul F. Piscopo, Staff DirectorDepartment of Defense/Office of the Director,Defense Research & EngineeringMs. Melissa A. Sabatine, Deputy Staff Director andCommunications DirectorDepartment of Defense/Washington HeadquartersServicesDr. E. Fenton Carey, Deputy Director forProductionDepartment of Transportation/Federal AviationAdministrationPermanent StaffMr. William J. Bihner, Jr., Space Chapter LeadNational Aeronautics and SpaceAdministration/HeadquartersMr. Douglas L. Bowers, Investments Team LeaderDepartment of Defense/Air Force ResearchLaboratoryDr. Allen P. Cissell, Human Capital TeamCo-Leader, Department of EducationMr. Blair B. Gloss, Infrastructure Team Co-LeaderNational Aeronautics and SpaceAdministration/Langley Research CenterMr. Charles A. Gorton, Global Issues TeamCo-Leader, Department of Defense/Naval AirSystems CommandMr. Theron A. Gray, General CounselDepartment of Transportation/Federal AviationAdministrationCDR Sue E. Hegg, Technology Team Co-LeaderDepartment of Defense/U.S. Naval ReserveMr. Joseph P. Jolley, Chief Financial OfficerDepartment of Defense/Army Aviation & MissileCommandMr. Michael S. Lewis, Technology Team Co-LeaderNational Aeronautics and SpaceAdministration/Langley Research CenterMr. Jon N. Montgomery, Global Issues TeamCo-Leader, Department of CommerceMs. Lee A. Olson, Infrastructure Team Co-LeaderDepartment of Transportation/Federal AviationAdministrationMr. Peter J. Ouzts, Government Chapter LeadNational Aeronautics and SpaceAdministration/Glenn Research CenterMs. Cynthia W. Waters, Meetings and ArchivingCoordinatorDepartment of Defense/Washington HeadquartersServicesK-2FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Appendix K – Acknowledgements and <strong>Commission</strong> StaffNon-Resident StaffMs. Sue Allison, Human Capital Team Co-LeaderDepartment of LaborMr. Evan FosterDepartment of CommerceMs. Laura GinsburgDepartment of LaborMs. Thuy HiaDepartment of StateMr. Mark LoganHicks and Associates, Inc.Ms. Mona LushDepartment of Defense/Office of the Director,Acquisition Resources and AnalysisDr. Frances SherertzDepartment of Transportation/Federal AviationAdministrationDr. John StubstadDepartment of Defense/National Missile DefenseAgencyMr. Steve ThompsonDepartment of Defense/Office of the DeputyUnder Secretary (Industrial Policy)Ms. Dawn VehmeierDepartment of Defense/Office of the DeputyUnder Secretary (Industrial Policy)Administrative Support StaffMs. Karen BarbourWashington Headquarters Services/ContractorSupportMs. Diane C. LongWashington Headquarters Services/ContractorSupportMs. Elizabeth C. OwenDepartment of Defense/Washington HeadquartersServicesMs. Carole PortisWashington Headquarters Services/ContractorSupportComputer Support Contractor Team - AffiliatedComputer Services, Inc. (ACS)Mr. Lamonica BellMr. Al GardnerMr. Sam NayarMs. Angela PruittThe <strong>Commission</strong>ers would also like to acknowledgethe following contractors who contributed theirtime and talent in support of the <strong>Commission</strong>:Hicks and Associates, Inc., DFI International, Inc.and The Flowers Group, RAND Corporation,Content First, Massachusetts Institute ofTechnology, Aviation Systems Engineering,Dr. Marianne Pietras, Biznews24, andLiveWire Corporate Communications, Inc.K-3FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY

Aerospace <strong>Commission</strong>K-4FINAL REPORT OF THE COMMISSION ON THEFUTURE OF THE UNITED STATES AEROSPACE INDUSTRY