Aerospace Business is Big for Ohio

More than a century after Dayton's Wright brothers gave birth to flight, innovation is driving employment for more than 100,000 Ohioans directly involved in all facets of aviation.

Now, the No. 2 technical industry in Ohio needs a new coordinated, statewide focus to counter growing international competition, budget cuts and shifting priorities. That's the central conclusion of a year-long analysis by 75 industry leaders from across the state.

"It's incredibly important we don't take our aerospace industry for granted," says Gary Conley, president of Bond Hill-based TechSolve, an industry consulting center. "Every other country in the world wants what we have."

Conley is part of the Ohio Aerospace and Business Aviation Advisory Council, created under former Gov. Ted Strickland and preparing to present its findings to new Gov. John Kasich.

Building on the state's aviation heritage and expertise, the panel concluded that Ohio needs to pursue emerging markets such as unmanned systems while continuing to invest in aviation infrastructure, advanced materials and high-skill worker training.

Council member Charles Dutch, director of Boeing Co.'s electronic guidance and repair center, which employs 518 workers east of Columbus, says panel members all "came away surprised at the breadth and depth of the capabilities we have in Ohio."

But, he adds, "a lot of other states do a better job of coordinating the aerospace industry."

Obama's call for a "Sputnik moment" to mobilize the nation's education, technology and investment for the future also could accelerate aerospace research and development in Ohio, industry leaders say.

"Anything the federal government does in terms of a national goal in that regard will benefit Ohio," Conley says.

A growing market
Only motor-vehicle manufacturing employs more highly skilled workers than aerospace, the panel says.

It estimated that an Ohio aerospace worker earns an average $76,600 a year compared to $46,300 for manufacturing as a whole.

"It has everything you want in an industry," Conley says. "It's a growing market, and it pays well."

GE Aviation, based in Evendale, is the world's largest jet engine maker and the state's largest exporter. It employs 8,000 in Ohio, most of them at the sprawling local complex.

Wright-Patterson Air Force Base in Dayton is Ohio's largest single aerospace employer with more than 27,000 workers. It's a center for Air Force aerospace systems, material procurement and a main research lab.

Cleveland's NASA Glenn Research Center has one-of-a kind testing and research capabilities in propulsion and space systems. It employs 1,600.

The state also counts a strong university network that includes the University of Cincinnati, which offers advanced degrees in aerospace technology and engineering. Leading aerospace component makers include Goodrich Corp., Parker-Hannifin Corp. and Eaton Corp.

European aircraft-maker Airbus says it buys more than $4 billion of its $10 billion in U.S. purchases annually from Ohio companies. The other leading aircraft-maker, Boeing Co., says Ohio represents its second largest supplier base approaching $5 billion annually.

Yet challenges are growing.

Global competition
Aerospace development and manufacturing are increasingly global - in many ways, an opportunity.

China, for example, "is going to need tens of thousands of airline jets, and we have the opportunity to provide parts for those here in Ohio," says Michael Heil, president of the Ohio Aerospace Institute in Cleveland.

But globalization also poses potential competition as other nations develop their own aerospace infrastructures.

Canada, for example, "is doing a phenomenal job with tax policy and research and development investing," says Dale Carlson, manager of advanced engine systems at GE Aviation. He says creation of one research and development job in Canada generates an 18 percent tax credit for the job creator for the life of that job.

One of Ohio's key aerospace opportunities, identified by the panel, is claiming the emerging market for unmanned systems. That includes not just drones used by the U.S. military to pursue al-Qaeda in Afghanistan, but new commercial applications as well.

Ultimately, unmanned, controlled devices are expected to have a wide array of applications from farm crop forecasting to border security in the years ahead. The panel says unmanned systems currently represents a $4.9 billion market, expected to grow to $11.5 billion by 2019.

Unmanned systems are a key area of expertise at Wright-Pat. The state already has played a strong role in sensor technology development, propulsion systems and composite structures. "Those are all things you need for unmanned vehicles," Conley says.

Consideration also is being given to testing unmanned systems at DHL's former Wilmington Air Park hub or at a former Springfield air base.

Budget cuts
Just as daunting is the $1.5 trillion federal deficit and push for budget cuts.

GE Aviation is waging an ongoing battle to maintain federal funding for an engine it's developing with Rolls Royce for the military's next-generation Joint Strike Fighter jet.

It's called an "alternative" engine because Pratt & Whitney, part of United Technologies Corp., is the primary engine manufacturer for the fighter, being developed under the Air Force's largest single-weapons program.

Defense Secretary Robert Gates maintains GE's alternative engine is a waste of scarce budget dollars - about $400 million last year.

But GE and its supporters in Congress argue an engine competition with Pratt will help cut costs in the long run.

The engine development also supports 1,000 jobs in Evendale and could give GE access to a potential $100 billion engine market. GE's new engine uses new technologies such as composite components, which are key features of GE's next-generation commercial engines.

NASA led the nation's first "Sputnik moment" 50 years ago when the Soviets launched the first Earth-orbiting satellite and started the Space Race. Today, the agency is at another crossroads, facing not only budget cuts but the pending retirement of the nation's space shuttle fleet.

The extent of proposed NASA budget cuts won't be known until next month, when the administration releases its proposed budget. Conley says initial indications are that NASA Glenn, because of its focus on propulsion technologies, may not be significantly affected.

But fallout from those cuts could slow growth plans at Cincinnati Electronics, the Mason-based unit of L-3 Communications Holdings Inc. The business, which employs 600, produces infrared detection systems and space electronics.

New administration
Meanwhile, Ohio is undergoing a transition as a new governor takes over.

Gov. John Kasich wants to create jobs through greater reliance on private industry and less on government economic development efforts.

The advisory panel expects to present its report to Kasich in the next few weeks. Next steps will be up to the governor; the panel would like to see its work continue in some permanent fashion.

Heil says the panel's recommendations fit perfectly with Kasich's job-creation goals.

"I've talked to his staff about how aerospace is a big economic driver in the state. I have a sense he appreciates the importance of aerospace," Heil says.

The industry's impact was underscored in November. GE Aviation announced that its growing electronic systems unit will build a $51 million research and development center at the University of Dayton in part because of its proximity to Wright-Pat and the Air Force Research Lab there.

By September, the Air Force is expected to complete the transfer of 1,200 employees to Wright-Pat from other air bases. The employees will staff a new center for human performance research, part of the Air Force's base realignment and closure decisions announced six years ago.

The $332 million project, the largest construction project at the base since World War II, includes a four-building complex that will be home to the Air Force School of Aerospace Medicine to train air force surgeons and do an array of research on how troops interact with military systems.

Advisory panel member Carlson says policy makers can't lose sight of the fact that aerospace is a long-cycle business. Investments today won't pay off for decades, he says.

When it comes to technology investments, he says, "You can't think tactically. You've got to think strategically."

5 areas for growth
A panel of 75 Ohio aerospace and aviation leaders identified these areas for expansion:

Unmanned, remote systems that do myriad jobs from security monitoring to crop forecasting. The $4.9 billion industry is expected to more than double in a decade.

Advanced materials research and manufacturing. Purchases of aerospace composite materials are growing 10.6 percent every year and expected to reach $5.1 billion by 2018.

Aerospace research and development. Currently, $9 billion a year is spent in Ohio.

Aircraft maintenance repair and overhaul. More than 100 Ohio companies have sales exceeding $1.7 billion a year.

General aviation. This sector contributes nearly $6 billion a year to Ohio's economy.

 By Mike Boyer • mboyer@enquirer.com of the Cincinnati Enquirer