WASHINGTON ― The Pentagon’s shared supply chains with battered commercial aviation companies will suffer if Washington doesn’t provide that sector with aid soon, the Aerospace Industries Association warned Wednesday.
The trade group released its recovery plan for the broad aerospace and defense sector as Congress has begun a fierce Supreme Court replacement battle, shifting attention away from passing another stimulus package to defray the impact of the coronavirus pandemic.
But AIA President and CEO Eric Fanning suggested some aviation companies have little time to wait.
“If the commercial side doesn’t get some relief, you are going to see companies in the supply chain go out of business, and that will impact the defense side,” Fanning said in a teleconference with reporters. “We’re going to see bankruptcies, consolidation, closures in the supply chain, and she of them are single points of failure.”
The defense subsector, declared essential at the pandemic’s start, enjoys steady demand from the Pentagon, which has accelerated payments to prime contractors and directed stimulus funds toward its suppliers. However, sagging demand for commercial air travel will fuel a $100 billion revenue loss in the U.S. this year, Fanning said.
AIA’s analysis concluded another 220,0000 civil aviation jobs are at risk beyond 100,000 already lost. The study and its recommendations were prepared by Avascent, Boston Consulting Group, and McKinsey & Company, combined with input from AIA member companies.
Beyond any federal aid, the civil aviation industry, the agency said, can highlight the steps it’s taken to make air travel safer; increase communication between original equipment manufacturers, prime contractors, and suppliers, and support flexibility in the supply chain if private companies offer balance-sheet support and share inventory risk.
The report called for stable Defense Department funding from Congress, but also said DoD can relieve stress on the industrial base by accelerating procurements of systems and services, with a focus on suppliers with notable commercial aerospace exposure. DoD can also keep making increased payments against ongoing contracts as they reach development and production milestones.
AIA also continues to advocate for industry reimbursements for costs incurred during the COVID-19 pandemic, as authorized by Section 3610 of the CARES Act. Defense officials have said they need roughly $10 billion, and that without added funding from Congress, the Pentagon would have to dip into modernization and readiness funds.
AIA’s call comes a day after key House progressives, Reps. Marc Pocan and Barbara Lee, demanded an investigation and public hearings into the use of economic stimulus funding for defense contractors, calling it a “Pentagon misuse of COVID funds.” The Pentagon, which reported its intent to Congress in May, refuted that characterization.
When asked, Fanning said it was important for the Pentagon to shore up previously identified supply chain weaknesses that the pandemic might exacerbate.
“This money was put into contracts, so the war fighter is getting something for that,” Fanning said. “But I think the important thing is the critical nature of this industrial base, not just to the nation’s economy, which is the health and safety of American’s citizens writ large, but also to our nation’s security.”
A larger obstacle to winning further aid for the sector is that Congress has deadlocked over continued stimulus funding overall.
AIA’s report proposed that the government establish an investment fund that would send government-backed capital to civil aerospace suppliers; subsidize the airlines' major maintenance, repair, and overhaul visits, and continue to payroll assistance to support employees.
Fanning told reporters that AIA found bipartisan backing for the idea of a payroll cost-share program, but there has been no legislative vehicle behind it.
“The real problem is there’s no bill,” Fanning said. “Congress hasn’t been able to come together with the administration and itself to get a bill in place.”
Joe Gould is the Congress reporter for Defense News.