The aerospace industry consists of companies which produce aircraft, missiles, satellites and propulsion systems, as well as the firms which maintain and develop these products. Aerospace and defense are closely allied, with the same companies frequently serving both civilian and military markets. The majority of civil aerospace ventures are related to the manufacture of planes for the transport of goods or passengers, while defense uses planes for combat, transport and reconnaissance. Satellite construction and maintenance also forms a growing part of this industry because of their applications in the areas of communications, entertainment, research and global positioning systems (GPS). According to the Bureau of Labor Statistics (BLS) there were some 2,800 companies doing business in aerospace and defense in 2004 (the latest year for which data was available).

We have liftoff

The aerospace industry took off (pun intended) following the Wright brothers' first successful flight in 1905. As with many new technologies, airplanes were first used extensively in a war -- namely, World War I, for reconnaissance, bombing and aerial combat. Following the war, when the U.S. found itself with a surplus of military aircraft and pilots with not much to do, the postal service opted in 1918 to use them to start a transcontinental air mail service, which ran from New York to San Francisco. To keep costs down, 12 spur routes were spun off to independent contractors -- thus were the familiar friendly sky-flying companies of American Airlines, United Airlines, TWA and Northwest born.

Passenger flights did not become a reality until Ford introduced a 12-seat plane, which made carrying people potentially profitable. Pan American Airways, the first airline with international destinations, was founded in 1927, with other airlines adding international routes in the 1940s. Remarkably, airlines remained generally profitable during the Great Depression. Following this period, World War II brought many advances to the civilian air transport sector. Innovations initially intended for bombers made passenger planes larger, faster, able to carry heavier payloads and to fly at higher altitudes. The 1970s saw the introduction of supersonic air travel with the advent of the Concorde -- which is now defunct.

Looking up

The civil aviation sector suffered a severe economic blow following the attacks of September 11, in the form of a forced grounding of planes immediately after the attacks, as well as the rapid institution of stringent airport security measures -- all of which led to a sharp decline in orders for new planes after 2001. The following year, the top 10 commercial airlines, the biggest customers for these aircraft when business is good, lost more than $12 billion, with key players like United Airlines' parent company UAL and US Airways filing for bankruptcy. Employment in the industry hit a 50-year low in 2004. But by the end of that year, aerospace sales, orders, exports and employment had all experienced a significant uptick. The number of U.S. commercial jetliners delivered increased for the first time in two years, while civil aircraft sector revenue increased to $35 billion. According to the Aerospace Industries Association (AIA), this favorable trend continued in 2005 with increases across all sectors of the industry -- sales, for one, were up 9.2 percent. The body's 2006 predictions are similarly rosy.

Plane dealing

The bulk of the aerospace industry is taken up by firms producing civil aircraft for commercial airlines and cargo transportation, as well as those for general aviation, like leisure planes, helicopters and corporate jets. But the lucrative nature of defense contracts shouldn't be underestimated: the U.S. government is planning to spend a whopping $439 billion on defense in 2007. Boeing, with its wealth of (sometimes controversial) defense contracts in addition to its commercial airplane business, dominates the aerospace and defense industry as a whole, closely followed, ranked according to sales, by EU firm EADS, which owns bitter Boeing rival Airbus; defense contract leader Lockheed Martin; and ship- and submarine-builder Northrop Grumman. Other major players are Raytheon, Textron, United Technologies and Embraer, while leading jet engine manufacturers include GE Aircraft Engines, Pratt & Whitney and Rolls-Royce.

De-FENSE!

In the area of companies that specialize in fulfilling defense contracts, Lockheed Martin and Northrop Grumman lead the pack, followed by Boeing, Raytheon, and BAE Systems. European companies are not far behind, though. With U.S. companies increasing spending and reeling in contracts, transatlantic rivals have no choice but to step up efforts to compete, and are slowly building up market share in America. EADS, for example, the EU's biggest defense and aerospace company, announced in 2006 that it will build UH-145 helicopters for use by the U.S. Army, Coast Guard and Department of Homeland Security. Back at home, Lockheed Martin maintains a healthy dominance in the sector thanks in part to its score of one of the richest defense deals in history, when in 2001 it beat out Boeing for a fighter jet contract worth $200 billion. Other major players on the international end include British Aerospace and Marconi Electric Systems (BAES), which picked up U.S.-based United Defense Industries for $4.1 billion in March 2005, and Italy's Finmeccanica. EADS has also established several partnerships recently with Northrop Grumman and Lockheed Martin.

The defense portion of the industry has been affected not only by the war on terror and mega mergers, but also by a shift in the way warfare is practiced. Since the Cold War, modi operandi among Pentagon types have shifted from "shock and awe" -- never mind the start of the most recent war in Iraq -- to a focus on equipment that's smarter, leaner and more mobile.

In order to keep on the bleeding edge of warfare technologies, the aerospace and defense industry spent about $38 billion on R&D in 2005. Developments in the industry include General Atomics' unmanned Predator drones, which saw success in Afghanistan. Unmanned jets and other computer-guided equipment are seen as preferable to traditional manned craft, as they are less costly to operate and pose less risk (obviously) to military personnel in combat. Other buzz on the industry's war front concerns "network-centric warfare," an area toward which the top defense contractors have shifted resources in recent years. In this approach, computers, satellites and sensors are all integrated so that soldiers and their planes, tanks and other equipment receive a constant stream of precise, real-time information about what's happening on the front lines.

Securing the homeland

Another major shift in the defense industry since 2001 is the growth of companies focusing on domestic (aka "homeland") security. This sector includes everything from audio and video surveillance equipment to disease and bioterrorism identification and secure communications equipment. In May 2006, the Bush administration announced an open-ended $2 billion contract for the design and implementation of devices for the Secure Border initiative, the latest version of a plan to patrol U.S. borders. Similar, previous attempts at high-tech surveillance have not been unqualified successes. Video cameras, ordered in the 1990s, were never installed or didn't work; ground sensor systems alerted agents to unauthorized intruders such as passing trains and desert animals; and a $6.8 million unmanned aircraft crashed in 2006.

Armies for hire

The Pentagon is increasingly -- and controversially -- relying on manpower from private military contractors (PMCs) to bolster its missions in Iraq, Afghanistan and elsewhere. These projects can include rebuilding power and sanitation systems and other logistical support, or (more notoriously) conducting interrogations and security operations. While the military outsourced just one percent of its work, mainly for airfield maintenance, during the first Gulf War in the 1990s, contractors are, according to Brookings Institute fellow P.W. Singer, handling as much as 30 percent of the military's services today, including reconstruction, during the ongoing activities in Iraq. These contractors include well-known giants like Halliburton subsidiary KBR (formerly Kellogg, Brown & Root), which has a nearly $4 billion contract for oil field reconstruction and maintenance in Iraq, as well as many smaller firms.

The latter are catching the eye of aerospace and defense giants like Northrop Grumman, which recently acquired the PMC Vinnell. But they are also drawing attention from Congress, the media and the public, who question oversight of these organizations and wonder if the military should be outsourcing so much of its operations to people who, in some cases, are seen as mercenaries.

Spatial relations

The first object launched into space was a German rocket in 1942 -- though exploration did not begin in earnest until 1957, when Russia's Sputnik become the first man-made object ever to orbit the planet. Yuri Gagarin became the first person in space in 1961, and Neil Armstrong and Buzz Aldrin walked on the moon in 1969. But since then, there has been less interest in the awesome fiscal outlays necessary for manned space missions. NASA's budget was reduced by over half between 1994 and 2006, and the Columbia and Challenger shuttle disasters did little to recommend the program to public or political favor. Most manned space flights today are for the purposes of launching and repairing satellites and performing experiments. Unmanned exploratory missions, however, have continued, with a robotic probe sent to Mars in 2004.

In the space sector, which is made up of satellite and rocket manufacturing and launch services, familiar names lead the pack, including Boeing, Northrop Grumman and Lockheed Martin, which picked up a hefty NASA contract in June 2005 (capped at $700 million) to develop a satellite designed to collect scientific data on Jupiter and from the solar system as a whole. Major aerospace and defense companies continue to build space activities into their long-term investment plans, even though shooting for the stars won't turn cash flow positive in any time frame outside of a science fiction novel.

Closer to Earth, space pursuits have resulted in the launch of satellites for such useful purposes as GPS devices, communications, weather prediction and research, television and radio. Specialized leaders in this field include Alcatel Space, Astrium, Orbital Sciences and Arianespace, a division of EADS. Government and military demand for satellite bandwidth is expected to quadruple in the next decade -- and, as such, the two groups (which can't seem to launch satellites fast enough) have been attaching their tech to civilian birds.

Space cowboys

The star players are keeping an eye on a pack of upstarts in the space race, private companies that rely on individual investors rather than federal dollars. If successful, these private liftoff firms promise to radically alter the space exploration game by stripping it of the costs, bureaucracy and $400 hammers that often accrue around federally funded projects. One major impetus for commercial space ventures was the Ansari X Prize, a $10 million bounty for the first privately-funded, -manned and largely reusable spaceship to reach space twice in two weeks. The prize, modeled after the Orteig Prize, which Lindberg claimed in his transatlantic flight, was won by Scaled Composites' SpaceShipOne in June 2004. To capitalize on the success of these prizes, NASA announced several Centennial Challenges, cash prizes awarded for innovations necessary to make space flight less costly and more feasible.

Later in 2004, an unmanned rocket built by a small California company was set to carry an experimental satellite into orbit for the Defense Department in a project involving no federal dollars. The Bush Administration has come out in favor of increased involvement by such private companies in missions to send people to the moon and, one day, to Mars. In addition to these types of missions, many space visionaries -- some of whom formerly headed the dot-com pack back in the Internet boom days -- see all sorts of opportunities up beyond the clouds, ranging from tourism to mining for oxygen and precious metals. A few brave entrepreneurs, including Virgin chief Sir Richard Branson, who in 2004 announced a space tourism company called Virgin Galactic, have made inroads into space. Branson's aim is for people to experience short, suborbital trips for around $200,000 per ticket starting in 2008. Currently, space tourism is limited to individuals with exceedingly high net worth, who can afford the tens of millions of dollars necessary to send them beyond the mesosphere.

Fly right

Professionals who work in the aerospace product and parts manufacturing sector, the BLS reports, enjoy earnings that are substantially higher, on average, than those of their counterparts in other manufacturing sectors. Most jobs in the sector are in the areas of skilled production and management. The BLS reports that, in 2004, 62 percent of jobs in aerospace manufacturing were in large establishments employing 1,000 or more workers. In addition, aerospace employment stopped a five-year skid in 2004, as the industry added 18,900 new jobs. Employment numbers, according to the AIA, have been gently increasing since 2004. Women are still scarce in the industry, making up only 11.3 percent of U.S. aerospace engineers in 2004, despite the fact that women earning doctoral degrees in aerospace increased by 150 percent between 1994 and 2001.