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The Competitive Status
of the U. S. Civil Aviation
Manufacturing ~nclustry
A Study of the influences of
Technology in Determining
international ~nclustria~
Competitive Aclvantage
Prepared by the U. S. Civil Aviation
Manufacturing Industry Panel,
Committee on Technology and
International Economic and Trade Issues
of the Office of the Foreign Secretary,
National Acaclemy of Engineering
and the Commission on Engineering and
Technical Systems,
National Research Council
Frederick Seitz, Chairman
Lowell W. Steele, Rapporteur
NATIONAL ACADEMY PRESS
WASHINGTON, DC 1985
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NATIONAL ACADEMY PRESS · 2101 Constitution Avenue, NW · Washington, I:)C 20418
NOTICE: The project that is the subject of this report was approved by the
Governing Board of the National Research Council, whose members are drawn
from the Councils of the National Academy of Sciences, the National Academy of
Engineering, and the Institute of Medicine. The members of the committee
responsible for the report were chosen for their special competences and with
regard for appropriate balance.
This report has been reviewed by a group other than the authors according to
procedures approved by a Report Review Committee consisting of members of the
National Academy of Sciences, the National Academy of Engineering, and the
Institute of Medicine.
The National Research Council was established by the National Academy of
Sciences in 1916 to associate the broad community of science and technology with
the Academy's purposes of furthering knowledge and of advising the federal
government. The Council operates in accordance with general policies
determined by the Academy under the authority of its congressional charter of
1863, which establishes the Academy as a private, nonprofit, self-governing
membership corporation. The Council has been the principal operating agency of
both the National Academy of Sciences and the National Academy of Engineering
in the conduct of their services to the government, the public, and the scientific
and engineering communities. It is administered jointly by both Academies and
the Institute of Medicine. The National Academy of Engineering and the Institute
of Medicine were established in 1964 and 1970, respectively, under the charter of
the National Academy of Sciences.
This project was supported by the National Aeronautics and Space Administration
and administered under Master Agreement No. 79-02702 between the National
Science Foundation and the National Academy of Sciences.
Library of Congress Catalog Card Number 84-62636
International Standard Book Number 0-309-03399-3
Printed in the United States of America
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Participants at Meetings of the
U.S. Civil Aviation Manufacturing industry Panel,
Committee on Technology and international
Economic and Trade Issues
Panel
FREDERICK SEITZ (Chairman), Past President, National Academy
of Sciences; President Emeritus, The Rockefeller University
WILLIAM J. ABERNATHY, Professor, Harvard University
Graduate School of Business Administration
JOHN S. BLIVEN, Senior Vice-President, Bankers Trust Company
IRVING BLUESTONE, Professor of Labor Studies, Wayne State
University
FREDERICK W. BRADLEY, Senior Vice-President, Citibank, N. A.
W. PERRY CRADDOCK, Manager, Market Development, Bell
Helicopter Textron
HUGH S. CRIM, Vice-President, Market Assessment and Strategy,
Pratt and Whitney Aircraft Company
WOLFGANG H. DEMISCH, Vice-President, Equity Research
Department, The First Boston Corporation
JAMES J. FOODY, Vice-President, Product Development,
Fairchild Industries, Inc.
CHARLES W. GEORGE, Vice-President and General Manager,
Aircraft Equipment Division, General Electric Company
(retired)
DOUGLAS GINSBURG, Professor, Harvard University Law School
COLIN J. GREEN, Vice-President, Planning and Services,
Sikorsky Aircraft
WILLIS M. HAWKINS, Senior Advisor, Lockheed Corporation
PAUL JOHNSTONE, Vice-President of Operations, Eastern
Airlines (retired)
SIDNEY JONES, American Enterprise Institute
JOHN N. KERR, President, JNK Associates, Inc.
RAY MAJERUS, Secretary-Treasurer, International Union, United
Auto Workers
DAVID C. MOWERY, Assistant Professor of Economics and Social
Science, Carnegie-Mellon University
. . .
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MICHAEL G. NEUBURGER, Vice-President, International
Division, Beech Aircraft Corporation
JOHN NEWHOUSE, Guest Scholar, The Brookings Institution
JAMES BRIAN QUINN, Professor, Amos Tuck School of Business
Administration, Dartmouth College
NATHAN ROSENBERG, Professor, Department of Economics,
Stanford University
ROGER D. SCHAUFELE, Vice-President Engineering, Douglas
Aircraft Company, McDonnell Douglas Corporation
RICHARD S. SHEVELL, Professor, Department of Aeronautics
and Astronautics, Stanford University
MONTGOMERIE C. STEELE, Senior Chief Engineer, Technical
Support, Garrett Turbine Engine Company
JOHN STEINER, Vice-President, Corporate Product Development,
The Boeing Company (retired)
ALAN R. STEPHEN, Vice-President, Operations, Regional
Airlines Association of America
WILLIAM W. WINPISINGER, President, International Association
of Machinists and Aerospace Workers, AFL-CIO
Rapporteur
LOWELL W. STEELE, Consultant-Technology Planning and
Management
Additional Participants
SALLY BATH, Aerospace Trade Specialist, Office of International
Sector Policy, U.S. Department of Commerce
SAMUEL COLWELL, Director, Market Research, Fairchild
Industries, Inc.
ROBERT V. GARVIN, Manager, International Strategic Planning,
Aircraft Engine Business Group, General Electric Company
CHARLES H. IDE, Manager, Engineering Resources, Aircraft
Equipment Division, General Electric Company
JACK L. KERREBROCK, Former Associate Administrator,
Aeronautics and Space Technology, NASA; R.C. Maclaurin
Professor and Head, Department of Aeronautics and
Astronautics, MIT
VIRGINIA LOPEZ, Director, Aerospace Research Center,
Aerospace Industries Association of America
LOUISE MONTLE, Manager, Industry and Technical Policy, The
Boeing Company
1V
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LOUIS T. MONTULLI, Senior Policy Analyst, Deputy to the
Assistant Director for National Security, Office of Science
and Technology Policy, Executive Office of the President
ROBERT NYSMITH, Deputy Director, Office of Aeronautics and
Space Technology, National Aeronautics and Space
Administration
ROLF PIEKARZ, Senior Policy Analyst, Division of Policy
Research and Analysis, Scientific, Technological, and
International Affairs, National Science Foundation
W. STEPHEN PIPER, Coordinator, Aerospace Trade Policy, Office
of Industrial Trade Policy
ALAN RAPOPORT, Policy Analyst, Division of Policy Research
and Analysis, Scientific, Technological, and International
Affairs, National Science Foundation
THEODORE W. SCHLIE, Director, Office of Competitive
Assessment, U.S. Department of Commerce
ALLEN SKAGGS, Vice-President, Civil Aviation, Aerospace
Industries Association of America
JOHN SLOWIK, Vice-President, Citibank, N. A.
JOSEPH SNODGRASS, Director, Aviation Programs, Civil
Aviation Division, Aerospace Industries Association of America
EDWARD STIMPSON, President, General Aviation Manufacturers
Association
RON SWANDA, Manager, System Operations, General Aviation
Manufacturers Association
JOHN WARD, Manager, Rotorcraft Office, Office of Aeronautics
and Space Administration, National Aeronautics and Space
Administration
GEORGE WHITE, Professor, Graduate School of Business
Administration, Harvard University
ROGER L. WINDBLADE, Manager, Subsonic Aircraft Office,
Office of Aeronautics and Space Technology, National
Aeronautics and Space Administration
Staff
HUGH H. MILLER, Executive Director, Committee on Technology
and International Economic and Trade Issues
MARLENE R.B. BEAUDIN, Study Director, Committee on
Technology and International Economic and Trade Issues
BERNARD MAGGIN, Project Manager, Committee on Technology
and International Economic and Trade Issues
STEPHANIE ZIERVOGEL, Secretary, Committee on Technology
and International Economic and Trade Issues
v
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Committee on Technology and international
Economic and Trade issues (CTIET~)
Chairman
N. BRUCE HANNAY, National Academy of Engineering Foreign
Secretary and Vice-President, Research and Patents,
Bell Laboratories (retired)
Members
WILLIAM J. ABERNATHY, Professor, Harvard University
Graduate School Qf Business Administration and Chairman,
CTIETI Automobile Panel (deceased)
JACK N. BEHRMAN, Luther Hodges Distinguished Professor of
International Business, University of North Carolina
CHARLES C. EDWARDS, President, Scripps Clinic and Research
Foundation and Chairman, CTIETI Pharmaceutical Panel
W. DENNEY FREESTON, JR., Associate Dean, College of
Engineering, Georgia Institute of Technology and Chairman,
CTIETI Fibers, Textiles, and Apparel Panel
JERRIER A. HADDAD, Vice-President, Technical Personnel
Development, IBM Corporation (retired)
MILTON KATZ, Henry L. Stimson Professor of Law Emeritus,
Harvard University Law School
RALPH LANDAU, Chairman, Listowel Incorporated* and
Vice-President, National Academy of Engineering
JOHN G. LINVILL, Professor, Department of Electrical
Engineering, Stanford University and Chairman, CTIETI
Electronics Panel
*Retired Chairman, Halcon-SD Group, Inc.
V1
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RAY McCLURE, Program Leader, Precisions Engineering
Program, Lawrence Livermore Laboratory and Chairman,
CTIETI Machine Tools Panel
BRUCE S. OLD, President, Bruce S. Old Associates, Inc. and
Chairman, CTIETI Ferrous Metals Panel
MARKLEY ROBERTS, Economist, AFL-CIO
LOWELL W. STEELE, Consultant-Technology Planning and
Management*
MONTE C. THRODAHL, Vice-President, Technology, Monsanto
Company
~ _ .
*Formerly Staff Executive, Corporate Technology Planning'
General Electric Company
. .
V11
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Preface
In August 1976 the Committee on Technology and Inter-
national Economic and Trade Issues examined a number of
technological issues and their relationship to the potential
entrepreneurial vitality of the U.S. economy. The committee was
concerned with:
· Technology and its effect on trade between the United
States and other countries of the Organization for Economic
Cooperation and Development (OECD);
· Relationships between technological innovation and U.S.
productivity and competitiveness in world trade; impacts of
technology and trade on U.S. levels of employment;
· Effects of technology transfer on the development of the
less-developed countries (LDCs) and the impact of this transfer on
U.S. trade with these nations; and
· Trade and technology exports in relation to U.S. national
security.
In its 1978 report, Technology, Trade, and the U.S. Economy,*
the committee concluded that the state of the nation's compet-
itive position in world trade is a reflection of the health of the
domestic economy. The committee stated that, as a consequence,
the improvement of our position in international trade depends
primarily upon improvement of the domestic economy. The
committee further concluded that one of the major factors
affecting the health of our domestic economy is the state of
industrial innovation. Considerable evidence was presented during
the study to indicate that the innovation process in the United
States is not as vigorous as it once was. The committee recom-
mended that further work be undertaken to provide a more
*Available from the National Academy Press, 2101 Constitution
Avenue, N.W., Washington, DC 20418.
i:
.x
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detailed examination of the U.S. government policies and prac-
tices that may bear on technological innovation.
The first phase of study based on the original recommenda-
tions resulted in a series of published monographs that addressed
government policies in the following areas:
· The International Technology Transfer Process.*
· The Impact of Regulation on Industrial Innovation.*
· The Impact of Tax and Financial Regulatory Policies on
Industrial Innovation.*
· Antitrust, Uncertainty, and Technological Innovation.*
This report on the civil aircraft manufacturing industry is one
of seven industry-specific studies, conducted as the second phase
of work by this committee. The other panels set up by the com-
mittee addressed automobiles, electronics, ferrous metals,
machine tools, pharmaceuticals, and fibers, textiles, and apparel.
The objectives of these studies were to (1) identify global shifts of
industrial technological capacity on a sector-by-sector basis, (2)
relate those shifts in international competitive industrial
advantage to technological and other factors, and (3) assess
further prospects for technological change and industrial
development.
As part of these studies, each panel developed (1) a brief
historical description of the industry, (2) an assessment of the
dynamic changes that have occurred and are anticipated in the
next decade, and (3) policy options and scenarios to describe
alternative futures for the idustry. The primary charge to the
panel was to develop a series of policy options for consideration
by public and private policymakers.
The methodology of the studies included a series of panel
meetings involving discussion between (1) experts named to the
panel, (2) invited experts from outside the panel, and (3) govern-
ment agency and congressional representatives presenting current
governmental views and deliberations.
The drafting work on this report was done by Lowell S. Steele,
formerly of General Electric and now a private consultant.
Bernard Maggin was responsible for assisting Dr. Steele by
providing research and resource assistance as well as assisting in
producing drafts of report material, based on the panel
deliberations, that were reviewed and critiqued by the panel
members at their meetings.
*Available from the National Academy of Engineering, 2101
Constitution Ave., N.W., Washington, D.C. 20418.
x
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Contents
SUMMARY
1 OVERVIEW OF THE U.S. CIVIL AVIATION
MANUFACTURING INDUSTRY
The Industry and Its Importance to the Economy, 19
Economics of the Industry, 21
Technology Base, 22
Contribution of the Industry to National Security, 24
Reasons for Past Success of the Industry, 26
THE PRESENT ENVIRONMENT
Changes in U.S. Air Transportation, 29
Financial Status of the Airlines, 37
Emergence of Foreign Competition, 43
Growing Importance of International Markets, 54
Escalating Risk, 58
Internationalization of Aircraft Manufacturing, 61
Financial Performance of the Industry, 67
Management Challenges, 68
Preserving Human Resources, 70
3 GROWING GOVERNMENT INVOLVEMENT IN TRADE
Impact of Government Involvement, 75
Implications for International Trade Agreements, 77
Financing, 81
Strengthening Eximbank's Role, 90
4 INTERNATIONAL TRADE, TECHNOLOGY
TRANSFER, NATIONAL SECURITY, AND DIPLOMACY
Controlling Technology Transfer, 92
Synergy Between National Security and Civil Aviation, 100
x
1
18
29
75
92
Hi
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COMPETITIVE ASSESSMENT OF TECHNOLOGY
Airframe and Fully Assembled Aircraft, 106
Propulsion Technology, 121
Maintaining Momentum in Research and Development, 134
6 KEY POLICY ISSUES
Trade Policy, 142
Balancing Economic and Security Interests in
Technology Transfer, 146
Maintaining Momentum in R&D, 147
Achieving Synergy Between National Security
and Civil Aviation, 148
Managing in the New Environment, 149
Managing Human Resources, 151
. .
X11
105
141
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The Competitive Status
of the U. S. Civil Aviation
Manufacturing ~nclustry
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