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Aerospace companies look to diversify
ST. LOUIS POST-DISPATCH

Pressure is building on the local defense industry.

Profits are still strong at Boeing Integrated Defense Systems, but revenue has been flat in recent quarters. And the high-profile loss to Northrop Grumman and European plane maker EADS of a contract for aerial refueling tankers stung perception, if not necessarily in the pocketbook.

And though little tanker work was to have been done in St. Louis, the loss highlights a challenge being felt here: Boeing is selling few military planes these days.

Each platform with lots of work in St. Louis — the C-17, the F-15, the T-45 and the F/A-18 — is nearing the end of production. The last C-17 is scheduled to roll off the line next year, and Congress has been slow to fund new ones. The F-15 will run into 2012, but on relatively small foreign contracts. And while Boeing and the Navy are discussing a new order for dozens of Super Hornets, nothing is certain. Meanwhile, the competition to build a new, advanced bomber, which Boeing has said it would like to assemble here, is still years away.



In the meantime, Boeing has placed more emphasis on complex network projects like Future Combat Systems and the Secure Border Initiative, integrating work from a host of subcontractors.

But early stumbles have brought SBInet under fire on Capitol Hill, and some are concerned that a new administration may cut funding to the $200 billion Future Combat Systems. So neither project is yet a cash cow.

Like Boeing, local suppliers have diversified into the commercial side of the plane-making industry, hoping balance will sustain their business.

LMI Aerospace, for instance, is trying to win more work on Boeing's 787, and hopes its recent acquisition of design firm D3 Technologies will translate to more front-end work designing carbon parts for fuel-conscious commercial airlines. GKN Aerospace also is trying to profit from the demand to conserve, constructing winglets that make older jetliners more fuel efficient.

But even carbon and winglets are not insulating U.S. airlines from the fuel-cost crunch. Most carriers saw worsening financials early this year and merger talks abound, with a Delta-Northwest union already in the works.

None of the proposed mergers would have the kind of impact on St. Louis that TWA's did earlier this decade — neither American nor Southwest, the two biggest airlines at Lambert-St. Louis International Airport is in significant talks — but the trend toward consolidation means schedule-trimming is likely, and any new flights to St. Louis will be doled out sparingly.

Perhaps the biggest deal on the airline front is talks between local officials and the Chinese government about establishing an Air China cargo hub at Lambert. Studies on that are expected to continue through the year.

tlogan@post-dispatch.com | 314-340-8291
 
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