ExecutiveReportA Quarterly Digest from the Aerospace Industries Association 4th Quarter 2015

Inside this IssueQ & A with Marillyn Hewson

Board of Governors Fall Meeting Recap

Aerospace Innovation

Marillyn Hewson, Chairman, Aerospace Industries Association

Chairman, President and Chief Executive Officer, Lockheed Martin Corporation

2016 OFFICERS

Marillyn Hewson, ChairmanDennis A. Muilenburg, Vice ChairmanDavid F. Melcher, President & Chief Executive OfficerGinette C. Colot, Secretary & Treasurer

2016 EXECUTIVE COMMITTEEWilliam M. Brown Chairman, President & Chief Executive Officer Harris Corporation

Wes Bush Chairman, Chief Executive Officer & President Northrop Grumman Corporation

Gerard J. DeMuro President & Chief Executive Officer BAE Systems, Inc.

Scott C. Donnelly Chairman & Chief Executive Officer Textron Inc.

David P. Hess Senior Vice President, Aerospace Business Development United Technologies Corporation

Marillyn Hewson Chief Executive Officer, President & Chairman of the Board Lockheed Martin Corporation

David L. Joyce President & Chief Executive Officer GE Aviation

Thomas A. Kennedy Chairman and Chief Executive Officer Raytheon Company

Roger Krone Chief Executive Officer Leidos Corporation

Tim O. Mahoney President & Chief Executive Officer Honeywell Aerospace

Dennis A. Muilenburg Vice Chairman, President & Chief Operating Officer The Boeing Company

Phebe Novakovic Chairman & Chief Executive Officer General Dynamics Corporation

Kelly Ortberg Chief Executive Officer & President Rockwell Collins

Mike Petters President & Chief Executive Officer Huntington Ingalls Industries

Anne D. Shybunko-Moore President GSE Dynamics, Inc.

Robert D. Strain President Ball Aerospace Technologies

Michael T. Strianese Chairman, President & Chief Executive Officer L-3 Communications

President’sMessageAs we begin what promises to be an eventful election year, I was struck how both President Obama in his final State of the Union Address and South Carolina Governor Nikki Haley, in the Republican Party’s response, both focused on how central innovation is to our nation’s future well-being.

Indeed, the President stated, “many of our best corporate citizens are also our most creative,” and listed as a major question “we have to answer as a country: how do we reignite that spirit of innovation to meet our biggest challenges?”

The President went on to cite as exemplars of the spirit of discovery imbedded in the American DNA such figures as Thomas Edison, the Wright Brothers, George Washington Carver, Grace Hopper, Katherine Johnson and Sally Ride. Among this honor roll of heroes of invention some may not be aware that Grace Hopper was the Navy WAVE who invented the basis for computer coding and that Katherine Johnson is the physicist who helped NASA calculate the trajectory for the Apollo 11 moon landing. So five of the seven people the President mentioned as representing this significance of innovation in American life have an aerospace and defense pedigree. I’m not surprised that our community and its titans would be so recognized, although I must admit some disappointment that when the subject of space came up in the President’s remarks, it was to recognize past iconic achievements, not to announce ambitious goals for the future.

In her response to the State of the Union Address, Governor Haley said that key to the Republican vision for America would be policies that “encourage American innovation and success instead of demonizing them, so our economy would truly soar and good jobs would be available across our country.” At AIA, we’ve held strongly to the conviction that in order to make America stronger, safer and more prosperous we must maintain a bipartisan consensus in favor of making essential investments in the Aerospace and Defense industry and its people, to help keep one of our nation’s greatest streams of innovative creativity flowing strong. So we welcome the thematic thrusts of both speeches, which align with this basic point.

In the months ahead, our staff will visit with members of Congress and candidates for federal office, discussing our key issues and providing white papers, fact sheets and brochures that demonstrate the significance of innovation coming out of our industry. We will note that if policy makers truly want to boost our industry’s potential to develop the next game changing innovation in defense, civil aviation and space, which often

A Year for Innovation

Cover Photo: Eric Schulzinger/Lockheed Martin

E X E C U T I V E R E P O R T 3

have cascading beneficial effects throughout the economy, there is a direct link to our 2016 strategic goals: 1) promoting policies and budgets that strengthen aerospace and defense and grow the U.S. economy; 2) improve U.S. aerospace and defense infrastructure and retain U.S. industrial base capability; 3) achieve a level playing field for U.S. industry in the global marketplace; and 4) enhance safety and security and protect the environment.

Also worth noting is that the national discussion about innovation often features the geographic shorthand used by the President in his speech, mentioning entrepreneurs from “Boston to Austin to Silicon Valley racing to shape a better world.” It is incumbent upon industry to remind folks that incredible innovations in everything from composite materials to advanced robotics and 3-D printing are occurring in the Aerospace and Defense industry throughout the broad scope of our nation, not just in discrete technological hubs, thus creating jobs and economic opportunities in all 50 states. Additionally, in a recent Brookings Institute report, 50 advanced industries were identified that are characterized by deep involvement with R&D and STEM workers. Among these are 14 manufacturing industries and six service industries directly tied to Aerospace and Defense businesses. With these point in mind, to help educate our Defense Department leaders about the wide-ranging nature of Aerospace and Defense industry innovation, AIA has invited Secretary of Defense Ash Carter to visit a number of our leading companies engaged in innovative activities so he can see first-hand how our industry is operating at the top of our game. Although the Secretary obviously has an extremely busy schedule, we hope that he takes advantage of this opportunity.

In addition to communicating how the Aerospace and Defense industry is one of our nation’s best bets for

advancing innovative products and services, we’ll be pushing in the year ahead for improvements to policies that relate to innovation. We’ll keep engaging the Defense Department in dialogue on how acquisition practices and processes can be improved to encourage Independent Research and

Development expenditures, and to free our creative companies from unnecessarily burdensome audit and reporting requirements. If we can help our DoD customer and other agencies we work with to become more agile and expedient buyers, both traditional Aerospace and Defense companies, and new entrants from ‘Silicon Valley’ and elsewhere will be encouraged to innovate and do business with the government.

You will hear more about Aerospace and Defense innovation throughout the year in these pages and in our communications with elected officials and the broader community we serve. And I can’t wait to report on some truly ground breaking innovations that will change our world for the better.

David F. MelcherPresident & Chief Executive Officer

“…in order to make America stronger, safer and more prosperous we must maintain a bipartisan consensus in favor of making essential investments in the Aerospace and Defense industry and its people, to help keep one of our nation’s greatest streams of innovative creativity flowing strong.”

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Sierra Nevada’s folded-wing Dream Chaser Cargo System which will use non-toxic propellants and consumables and the Sikorsky CH-53 Super Stallion helicopter, which features composite rotor blades, are examples of innovation occurring throughout the Aerospace and Defense industry.

4 A E R O S P A C E I N D U S T R I E S A S S O C I A T I O N

AIA: A new strategic goal for AIA is to be the community of choice for aerospace and defense stakeholders. Why was this goal adopted?

Hewson: We work in a global industry with unique challenges, so it’s essential that we speak with one voice to policy makers about the issues that are crucial to our collective success. While there are many associations that represent the different individual priorities of our diverse industry, only AIA represents the entire industry’s interests. AIA leads the conversation on a number of important issues, including trade promotion, defense acquisition reform, environmental regulations and technology investments.

The goal is to ensure that all players in our industry recognize the value AIA brings. Whether you’re a large or small business, I’m confident that AIA is well positioned to be the community of choice for every segment of the aerospace and defense industry.

AIA: How can AIA best advance its strategic priorities in 2016?Hewson: There are several areas where AIA can advance our industry’s interests this year.

The first is to work with Congress and the Administration to build on the progress we made last year on budgets. While the recent bipartisan budget agreement provided relief from the budget caps, we need to keep advocating for stability in defense spending to ensure our men and women in uniform have the best equipment and training to address today’s dynamic global security challenges and to stay ahead of evolving threats. It’s the combination of today’s best equipment and investments in advanced technologies that will ensure our nation’s continued security.

A second priority is to work with our lawmakers to invest in upgrading our space capabilities, weather monitoring systems, and civil aviation infrastructure. As the internet of things rapidly expands and our reliance on information technology grows, these critical systems must be enhanced and expanded to keep up with the increasing demand.

Another priority for AIA is to ensure that our interests are represented in the 2016 election cycle. Working together, we’ll educate the candidates on the importance of our industry to our economy and to our national security.

AIA: Industry has long been concerned about helping to improve STEM education in order to help replenish our workforce. Where do you think we should be focusing our efforts on this important topic?

Hewson: Developing the workforce of the future is a critical priority for our industry and our nation. The fact is, there simply aren’t enough students pursuing degrees in the STEM fields to meet our needs.

That’s why the entire industry is focused on inspiring and encouraging the next generation of innovators, and AIA has the opportunity to play a leadership role. For example, the Team America Rocketry Challenge that AIA sponsors annually, is a proven initiative that engages and excites students from all backgrounds, while encouraging them to pursue STEM education and careers.

In 2016, AIA will conduct a rigorous external evaluation of the program’s impact on participating students. This will allow us to quantify its success and look for ways to improve the program.

We’ll also work to get more AIA member companies involved in the Rocketry Challenge and other STEM outreach efforts. With more companies engaged, we’ll expand our reach and get more students involved—including those from underserved communities.

Q&A with Marillyn Hewson, incoming Chairman of AIA

Celebrating the Littoral Combat Ship (LCS).

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Marillyn Hewson, Chairman, President and Chief Executive Officer,

Lockheed Martin Corporation

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E X E C U T I V E R E P O R T 5

AIA: What are the prospects for continued government-industry cooperation on aerospace and defense trade promotion?

Hewson: We’ve made excellent progress on trade promotion of our industry and I’m confident we can do even more. Over the past several years, we’ve seen strong cooperation with our government partners on advancing this important issue. As global competition increases, the support and cooperation of our government is critical to ensuring we’re well-positioned to compete and offer U.S. aerospace and defense technologies to our partners and allies around the world. AIA will continue to work with U.S. Government agencies to support new processes that facilitate even more defense trade.

AIA: What emerging trends do you see that are relevant to the current and future work of our industry?Hewson: As I look around the world, it is clear that our landscape is being re-shaped by a series of megatrends that will

affect our industry—and our world—in the decades ahead.First, we’re experiencing a changing global power dynamic and dynamic security environment. To address this

trend, our industry must be innovative and agile to keep up with evolving challenges and emerging threats. We need to continue deliver advanced air strike, missile defense and unmanned capabilities to help our nation and our allies keep their citizens safe.

Second is the rise of digital technology and the need for more advanced infrastructure. While this brings great opportunities for our industry with the need for more satellite technology and air traffic solutions, we must also be investing in systems to protect our sensitive data and infrastructure from cyber-attacks.

A third megatrend is the expansion of our planet’s population growth and the impact of climate change. Our industry provides the tools and technologies needed to understand, monitor and address environmental challenges. And we’re developing sustainable solutions that will reduce the environmental impact of our products and operations.

Finally, worldwide economic uncertainty is a megatrend that will continue to have an impact on our industry. The AIA team continues to work with our lawmakers to ensure there is more flexibility and stability in our government’s budgeting and trade processes, so that government leaders, federal agencies, and industry partners can plan, invest, and execute their critical programs with confidence.

As long as we continue to speak with one voice, I’m confident that every member will benefit from AIA’s efforts to promote a strong, secure and economically sound strategy for our industry and our nation.

“…it’s essential that we speak with one voice to policy makers about the issues that are crucial to our collective success. While there are many associations that represent the different individual priorities of our diverse industry, only AIA represents the entire industry’s interests.”

The K-MAX Unmanned Aircraft System.Crew Chief Lou O’Brien with F-35 aboard the USS Nimitz.

Exploring New Frontiers with Orion.

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6 A E R O S P A C E I N D U S T R I E S A S S O C I A T I O N

Fall Board of Governors Meeting in San Diego

AIA’s Fall Board of Governors and Membership meeting

in San Diego featured a robust discussion on the state of the industry, featuring member compnay executives David Joyce (GE Aviation), Jerry DeMuro (BAE Systems), Raanan Horowitz (Elbit Systems of America), John Langford (Aurora Flight Sciences) and John Harris (Raytheon). Also on tap was a lively presentation by AIA’s Vice Presidents on the association’s strategic plan and priorities, and a session on making Washington work led by GE Aviation’s Peter Prowitt that included company Washington representatives Robert Rangel (Lockheed Martin), Tania Hanna (Harris), and Mitch Waldman (Huntington Ingalls).

Adding to the substance of a very intensive BOG were

remarks by senior government officials, including: Stephanie O’Sullivan, the Principal Deputy Director of National Intelligence; Brigadier General Steven Basham, the Pentagon’s Joint Staff Deputy Director for Requirements and leaders from major military commands; NASA Jet Propulsion Laboratory Deputy Director Larry

James; and FAA Deputy Administrator Michael Whitaker. Finally, attendees were treated to presentations on executive leadership by Yale Professor Jeffrey Sonnenfeld, on U.S.-Russian relations by our recent Ambassador to Moscow Michael McFaul and about the historic Reagan-Gorbachev Reykjavik Summit that changed the trajectory of the Cold War by Ambassador Ken Adelman.

AIA’s Team America Rocketry Challenge (TARC), which for 13 years has engaged thousands of middle school

and high school aged youth across America in an exciting skills and teamwork building path to careers in Science, Technology, Engineering and Math (STEM) fields, is the 2015 recipient of the National Coalition for Aviation and Space Education’s Mervin K. Strickler Jr. Aerospace Education Leadership Award. AIA shares the honor with its TARC partner, the National Association of Rocketry (NAR). The prestigious award recognizes individuals or organizations that share the personal commitment and lifelong contributions to aerospace education of Dr. Mervin K. Strickler, who served as director of aviation education for the Civil Air Patrol-U.S. Air Force and director of the FAA’s aviation education program. Strickler passed away last September.

This year’s Strickler award nomination form states: “Google Team America Rocketry Challenge and you will get over 7 million results. Browse the related site offerings and you will find a host of STEM rocketry curriculum packages, student team websites, internships and scholarship opportunities that clearly illustrate the contribution that the program has provide

to aerospace education in the United States. There are now rocketry clubs or activity groups in hundreds more secondary schools across the U.S. than there were prior to 2003, giving young students opportunities that they did not have before to engage in challenging and fun hands-on aerospace activities.”

Miles Lifson, AIA’s TARC manager says the award “illustrates TARC’s power to inspire and motivate students to pursue study and careers in aerospace and other STEM fields. TARC’s model of hands-on learning builds on students’ coursework and allows them to experience firsthand the challenge and excitement of a career in our industry.”

TARC Program Honored by National Coalition for Aviation

and Space Education

David Joyce, Jerry DeMuro and Raanan Horowitz during CEO session at BOG.

The Elena Christian Junior High School in the U.S. Virgin Islands participated in the 2015 TARC competition.

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E X E C U T I V E R E P O R T 7

A E R O S P A C E A N D D E F E N S E I N N O V A T I O N I N 2 0 1 6

The successful Federal Aviation Administration/industry Continuous Lower Energy, Emissions, and Noise (CLEEN

II) program to develop next generation aviation technologies is moving forward into its second phase. Last fall, the FAA awarded $100 million in contracts to eight companies, including AIA members Aurora Flight Science, The Boeing Co., General Electric Aviation, Honeywell Aerospace, Pratt & Whitney, Rolls-Royce Corp.; Rohr, Inc./UTC Aerospace Systems as well as Delta TechOps/MDS Coating Technologies/America’s Phenix. The participating companies will match or exceed the FAA’s investment, bringing the total to at least $200 million.

The five-year CLEEN II program is building on the success of the original CLEEN program, a public-private partnership that began in 2010, and is a key part of the FAA’s NextGen national airspace system modernization program to make aviation more safe, efficient and environmentally friendly. While the CLEEN I program focused on projects in the area of energy efficient aircraft technologies and sustainable alternative fuels CLEEN II awardees will work to develop a variety of airframe and engine technologies. The FAA is targeting 2026 for the introduction of CLEEN II aircraft technologies into commercial aircraft.

Leslie Riegle, AIA’s Director for Environmental Policy applauded the FAA-industry partnership, saying, “The CLEEN program is one of the best industry examples of how government and private entities can work together and gain tremendous progress in research and development. The continued support in the Agency’s budget and on the Hill proves how successful it has worked from this standpoint as well.”

CLEEN II: The Next Generation of Aviation Technologies

Since AIA was founded in 1919, our organization has been at the forefront in promoting innovation in aviation, and related fields. Throughout 2016 the Executive Report will be highlighting significant Aerospace and Defense industry innovations.

While satellites used in Low Earth Orbit and to investigate the inner solar system have long used solar power, the

idea of using the sun’s energy to power planetary spacecraft operating hundreds of millions of miles from Earth would initially appear preposterous. At least until now. But on July 4th, when NASA’s Juno Jupiter spacecraft begins orbiting the planet, on its mission to investigate Jupiter’s origins, structure, atmosphere and magnetosphere, it will be powered by three solar array wings, the largest ever deployed on a planetary probe.

Juno is equipped with more than 18,000 solar cells. “In general, once we’re out at Jupiter, we need 405 watts, which is not really enough to even run your hair dryer,” says Russ Gehling, the solar array subsystem’s lead engineer with Lockheed Martin. “Of those 405 watts about half of them go toward keeping the spacecraft warm. So, the other half, somewhere in the 250 range, is to run all of the instruments and all of the avionics.” The massive wings were processed at Lockheed Martin’s main plant outside of Denver in 2006. Then, the solar cells and their miles of electrical wiring were installed to the panels in California at Spectrolab Inc., a

division of the Boeing Company.Frank Slazer, AIA’s Vice President for Space Systems, says

the innovative solar arrays represent yet another advance in a technology – photovoltaic power generation – whose first practical application was on the U.S. Vanguard satellite in 1958 and which now provides cheap electric power to tens of millions of people worldwide. “People often don’t appreciate how space innovations have become woven into the fabric of our daily lives. The efficiency improvements that enable Juno to be solar powered at Jupiter may make terrestrial applications even better with smaller arrays to meet consumer power needs.”

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One of the solar arrays for the Juno Jupiter probe being processed for launch.

Solar Power Used on Far Away Jupiter Probe

CLEEN II program participant Pratt & Whitney is working on mature advanced core-engine technologies, primarily for engine compressor and turbine modules.

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AEROSPACE INDUSTRIES ASSOCIAT ION1000 Wilson Blvd. #1700 Arlington, VA 22209-3928 Phone 703.358.1000 www.aia-aerospace.org

The AIA Executive Report is printed on FSC® certified paper, which contains recovered, post consumer waste fibers. Additionally, it was printed at a carbon neutral facility, utilizing 100% renewable electricity in the form of wind and solar REC’s with non-petroleum, vegetable based inks.

AIA staff and family members gather at Arlington National Cemetery where they participated in the annual Wreaths Across America event to honor our fallen heroes.

AIA’s Dave Melcher with Rep. Brian Babin (R-Texas), the new chairman of the House Science, Space and Technology Committee’s Subcommittee on Space.

Anne Norris, Dave Melcher and 2015 AIA Lyman Award Recipient for excellence in aerospace journalism Guy Norris

of Aviation Week and Space Technology.

At the Dubai Air Show Marcus Jadotte, Assistant Secretary of Commerce, Industry & Analysis for the International Trade Association, Air Force Deputy

Under Secretary for International Affairs Heidi Grant, AIA’s Bob Durbin and FAA Administrator Michael Huerta.

GE Aviation will host AIA’s 2016 Spring Supplier Management Council (SMC) conference in Cincinnati,

OH, March 15-17. Registration for the conference is now open. SMC will provide a wide range of Business to Business opportunities for potential suppliers to GE in the area of construction parts, composite structures, airfoils and structural castings, controls and accessories, raw materials, machined and fabricated parts, additive manufacturing, and indirect sourcing. GE Aviation’s President and CEO David Joyce will

give the keynote address. Facility tours of GE’s development lab and production lines will also be available.The SMC conference will also feature multiple breakout sessions on topics such as Cyber Security DFAR requirements, Intellectual Property protection, and counterfeit electronic parts. And the Teal Group’s Richard Aboulafia will provide a spirited analysis of current trends in the aerospace and defense industry. We look forward to a record turnout of SMC members at the conference.

SMC Spring Meeting Set for Cincinnati

AIA RECENT ACTIVITIES

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