Commercial aerospace set to grow, says expo speaker

Aerospace remains the bedrock of the states manufacturing industry, but growth opportunities abound in other industries and across the border.

That was the message given Wednesday by the head of a state manufacturers group at the Southern Arizona Tech + Business Expo.

Aerospace and defense manufacturers face challenges because of efforts to cut the federal budget, Steve Macias, chairman of the Arizona Manufacturers Council, said in his keynote address at the expo, hosted by the Arizona Technology Council at the Westin La Paloma Resort and Spa.

A lot of it has to do with politics, and politics doesnt always make sense, said Macias, who is president of Phoenix-based Pivot Manufacturing.

Fortunately, commercial aerospace is set to grow, with historic backlogs at aircraft makers like Bombardier Aerospace, he noted.

Arizona is a leader in aerospace particularly for the military, Macias said, noting that the state is among the top eight in Defense Department contracts.

But the state faces challenges from other states looking to boost their aerospace sectors, he said.

We have a target on our backs when it comes to other states in aerospace, Macias said.

To continue to grow, Arizona manufacturers should look to growing sectors including the biosciences, solar energy and the oil and gas industry, he said.

Growth opportunities also await across the border, Macias said, noting that Arizona already enjoys $14 billion in annual trade with Mexico.

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Commercial aerospace set to grow, says expo speaker

Alcoa Maintains Aerospace Push With Opening Of New Aluminum-Lithium Alloy Manufacturing Facility

Alcoa ( AA ) recently announced the opening of a plant producing advanced third-generation aluminum-lithium alloys for the aerospace industry in Lafayette, Indiana. With the opening of the $90 million manufacturing facility, Alcoa hopes to capitalize uponincreasing aerospace demand for aluminum-lithium alloys. These alloys are less expensive than titanium and composites and their application translates into better fuel efficiency and lower maintenance costs.

The deal is the latest in a series of developments for Alcoa in the aerospace sector. Aerospace remains at the center of Alcoa's shift towards value-added products, as it looks to reduce its dependence on its commodity businesses.

See our complete analysis for Alcoa

Alcoa's Increasing Focus on Aerospace

Alcoa offers a wide portfolio of aluminum-lithium products including extruded, forged and rolled parts. The company holds the market-leading position in aluminum-lithium extrusions, supplying these products for aircraft's such as the Airbus A380, Airbus A350, Boeing 787, and Gulfstream G650. The company has $100 million in aluminum-lithium revenues contracted for 2017.(( Alcoa Opens World's Largest Aluminum-Lithium Aerospace Plant in Indiana , Alcoa News Release))

Alcoa is extremely bullish on the aerospace segment. It is banking upon aerospace to drive sales of its value-added products. The company forecasts 8-9% growth for its aerospace end markets this year.The large commercial jet segment is expected to grow at 12.1% this year, driven by a strong commercial jet order book, which represents nine years of production. The strong order book is also reflected on the jet engines side with 23,000 engines on firm order. Demand for regional jets is expected to grow at 13.2% this year. For Alcoa, this represents sustained demand for its aerospace products for the medium term.Hence, it has significantly increased its exposure to the aerospace segment.(( Alcoa's Q2 2014 Earnings Presentation , Alcoa Website))

In 2014 alone, several major developments in the aerospace segment have taken place for Alcoa. The company recently announced the signing of a long-term contract worth$1 billion to supply aluminum sheet and plate products to Boeing.((Alcoa Signs Multiyear Supply Contract with Boeing Valued at More Than $1 Billion, Alcoa News Release))In July, the company announced the signing of a a 10-year agreement worth $1.1 billion to supply jet engine components to jet engine manufacturer Pratt & Whitney, a division of United Technologies Corporation (UTC). (( Alcoa Announces Jet Engine First in $1.1 Billion Supply Agreement with Pratt & Whitney, Alcoa News Release)) In June, the company announced the $2.85 billion acquisition of jet engine components maker Firth Rixson.((Alcoa's Transformation Accelerates, Will Acquire Firth Rixson To Grow Global Aerospace Portfolio, Alcoa News Release)) Prior to that, it had announced a $25 million expansion of the Alcoa Power and Propulsion facility in Hampton, Virginia.((Alcoa Boosting Aerospace Capabilities in Virginia to Meet Demand for Next-Gen Aircraft Engine Parts, Alcoa News Release)) The company had also announced the setting up of a $100 million facility in La Porte, Indiana, for the production of nickel-based superalloy jet engine parts.((Alcoa Expands in Indiana to Capture Growing Aerospace Demand for Advanced Jet Engine Parts, Alcoa News Release)) Alcoa also signed a long term agreement worth $290 million to supply aluminum sheet to Spirit AeroSystems over five years. Spirit isone of thelargest designers and manufacturers of aerostructures for commercial, military, business and regional jets in the world.

Alcoa's aerospace revenue of $4 billion in 2013 accounted for around 17% of its total revenue for the year.((Alcoa's 2013 10-K, SEC)) With several recent developments in the aerospace segment, its share of the company's revenue is set to grow at a rapid pace.

Strategic Shift Towards Value-added Products

Alcoa's aerospace push is central to its shift towards its value-added products, as it looks to reduce its dependence on its commodity businesses. The sale of aluminum and alumina constitutes Alcoa's upstream commodity businesses. Demand for these commodities is broadly correlated with economic growth.These commodities suffered a steep decline in prices as theEuropean debt crisis and slowing Chinese growth contributed to weakness in aluminum demand over the last few years.((LME Aluminum Prices, LME))

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Alcoa Maintains Aerospace Push With Opening Of New Aluminum-Lithium Alloy Manufacturing Facility

Local aerospace industry leads pack for federal funds

A total $1.3 billion in federal money is available to spend on economic development across the nation, and a new designation puts the Cincinnati-Dayton region at the front of the line to receive a slice.

A public-private partnership between Cincinnati and Dayton applied earlier this year for a federal program, known as the Investing in Manufacturing Communities Partnership, and won.

The Southwestern Ohio Aerospace Region, as the collaboration is called, was one of 12 designees named nationwide.

With the new two-year designation, local organizations in the 27-county area including Northern Kentucky and Springfield get preferential treatment when applying for government funding to support the aerospace manufacturing industry.

Millions of dollars are at stake for the local economy.

By having this and getting more federal resources, were hoping to increase the number of trained workers in the region, which will hopefully lead to more jobs in the area, said John Owen, research director for Dayton Development Coalition.

Next steps are for local businesses, governments and institutions to take advantage of the federally-recognized manufacturing community status, and seek out government funding, said Sam Stephens, senior development officer for Cincinnati.

Six priority areas have been identified for spending: workforce, supply chain, research and innovation, infrastructure and site development, international trade assistance, and capital access, according to the Coalition.

The joint application, a first-of-its-kind partnership between southwest Ohios two largest cities, flaunted the regions higher-than-national-average concentration of jobs and businesses in the aerospace parts and products manufacturing sector.

When were looking at how the Cincinnati-Dayton region is known nationally and internationally, this is a huge step towards linking our aviation and aerospace manufacturing expertise in the minds of companies, Stephens said.

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Local aerospace industry leads pack for federal funds

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Vector Aerospace to supply Royal Thai Air Force with engine and component parts

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Vector Aerospace to supply Royal Thai Air Force with engine and component parts