Airbus Plant Shows Fierce Competition Among States

With the announcement of aircraft-giant Airbus SAS’s decision to build a new $600 million facility in Alabama earlier this month, some in Georgia are likely wondering what’s next for the aerospace industry in the Peach State.

In recent years, Georgia has placed a large focus on recruiting major and minor aerospace companies to invest in the state, which already hosts more than 500 industry-related companies employing more than 85,000 workers,  according to the Georgia Department of Economic Development.

And at the 2012 Farnborough International Air Show, one of the largest aerospace events in the world held July 19-25, the department exhibited with seven leading aerospace companies with major operations in Georgia to tout the state’s economic advantages to potential investors.

As a largely non-unionized state with a moderate tax credit system, a top-ranked engineering university in its capital and a state-funded technical education for potential workers, Georgia is a very strong place to invest in as an aerospace company.

Further, its well-connected highway system, bustling ports and strong international connections via the Hartsfield-Jackson Atlanta International Airport, means Georgia gets a lot of attention for aerospace suppliers looking to expand in the United States, particularly from companies based in Montreal, said Louise Fortin, economic affairs director for the Quebec Trade Office in Atlanta.

For example, two years ago when Montreal-based Bombardier Inc. was looking to build a new $2 million consumer airlines service center, the aircraft manufacturer settled on Macon, Ms. Fortin said.

Other manufacturing facilities in the state also play a part in determining when an aerospace company decides to invest in new facilities in an area, she continued.

“Because Georgia has a number of important industry players, such as Gulfstream Aerospace Co. and Lockheed Martin Corp, as well as both civilian and military [maintenance, repair and overhaul] facilities, the state is a magnet for tier one and tier two suppliers,” Ms. Fortin said.

However, the delegation in Farnborough demonstrates a trend among states to market complex, lucrative incentive packages in an effort to compel companies to invest in their states.

That’s likely because other states in the Southeast, in particular, see the potential benefits of investment by the aerospace industry, which often offers both economically wide-ranging jobs and brand new multi-million dollar facilities.

“Competition is fierce among the states for major economic development projects,” said Jeremy King, deputy communications director for Alabama Gov. Robert Bentley, whose state recently announced the planned construction of a $600 million aircraft manufacturing and service facility by Airbus in MobileAla.

Although Georgia currently leads the pack of Southeastern states in terms of total aerospace exports, beating even Florida with its John F. Kennedy Space Center and Alabama with its Marshall Space Flight Center and related infrastructure with $5.9 billion in exports in 2011, according to the US International Trade Administration, other states are growing at a remarkable rate.

For example, even though Alabama’s aerospace exports were more than 11 times smaller than the Peach State in 2011, it’s seen an increased rate of exports of 24 percent in the last year, only six percent off from Georgia’s own rate of 30 percent growth.

Further, Alabama has recieved a billion dollars more in defense contracts compared to Georgia, although commercial products appear to be making a greater percentage of its focus.

“That’s why incentives are needed – to make sure we have economic development in our state, which provides new jobs and new opportunities for the people of Alabama,” Mr. Bentley said. “Without incentives, projects go elsewhere.”

The Airbus facility at the Brookley Aeroplex in Mobile will be the company’s first U.S.-based production facility and is expected to create up to 1,000 jobs when it reaches full capacity, according to the Alabama Department of Commerce.

The deal is largely seen as a major success for the state, in particular its Accelerate Alabama program, a long-term strategic plan meant to attract new industries and jobs through economic development packages.

To secure the Airbus deal, for example, the state said the company will receive more than $158 million in incentive packages dispersed over the next five years from local and state development agencies as well as the Mobile Airport Authority.

Further, Airbus will be receiving services valued at more than $51 million over a several-year period through the Alabama Industrial Development Training (AIDT) program, a program mostly analogous to Georgia’s Quick Start program, which provides company-specific workforce training and job sourcing.

However, just because the plant is in Alabama, don’t expect Georgia to get completely left behind or excluded from the manufacturing process of Airbus’s new factory.

Officials at the Georgia Department of Economic Development say Georgian supply companies will likely have a role in providing parts and components for the new facility that can’t or won’t be produced in-house, which is important because the new plant announcement comes at a time when Airbus and Boeing Co. have stepped up competition over sales in the U.S. market and abroad, demonstrated by their sales annoucenments at  Farnborough.

At the international airshow, Boeing easily trounced its rival European aircraft maker, announcing total orders and commitments for 396 airplanes valued at around $37 billion. By comparison, Airbus said that it secured only about $16.9 billion of expected new business.

Most telling was Boeing’s announcement that it secured 285 purchase commitments for its 737 Max, the company’s latest update to the 737 line of aircraft, which it hopes will duplicate the success of Airbus’s top-selling narrow-body A320neo.

However, Airbus’s chief executive officer, Fabrice Brégier, praised the quality of orders at the trade show and said the new plant in Mobile, which will manufacture planes in the A320 line, will play an important role in the company’s international competition.

“With the recent announcement last week to build an A320 production line in America, coupled with the start of production for the A320neo in Toulouse, [France], Airbus is cementing its leading global position,” Mr. Brégier said in a news release.

Toulouse is a sister city of Atlanta.

For more information on Airbus, go to http://www.airbus.com/.

 

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Photo caption: One of Delta’s Airbus A319 jets lands at the Hartsfield–Jackson Atlanta International Airport. Used with permission by Stefan Seville

This story first appeared on GlobalAtlanta July 17.

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