Cushioning the Crunch in the Aerospace Industry : Manufacturing: A backlog in commercial airline orders may help offset declines in defense work. But payrolls and profits are expected to shrink.

The aerospace industry will lose an estimated 27,000 jobs nationally and suffer a 13% decline in profits in 1990 but will post record sales on the strength of commercial aircraft production, according to a report by the Aerospace Industries Assn.

The report indicates for the first time the magnitude by which commercial work will help cushion anticipated declines in defense work at least in the near term. The trade association projected that sales of commercial transport aircraft will jump 68% to $23.5 billion in 1990.

Prospects for major reductions in defense orders, stemming from easing tensions in Europe, have rocked the industry in recent weeks. Officials are still attempting to understand which companies will be affected and how steeply the defense budget will drop.

So far, analysts agree that no catastrophic blow to the industry is in sight for two or three years, but a painful consolidation will take place during the 1990s to eliminate excess capacity. The extent of the downsizing will depend on decisions over the next several years.

In the meantime, the industry is enjoying a historic boom in commercial work. The backlog of firm orders for airliners, not including options and other conditional agreements, reached $82 billion in 1989--an amount equal to an entire year of Pentagon procurement. Boeing and McDonnell Douglas, the two U.S. producers, have committed all of their production capacity through the early 1990s to fill existing orders and have some orders booked past the turn of the century.

Don Fuqua, president of the Washington-based trade group, said in an interview that the strong commercial outlook should help the industry absorb declining military orders at least for the next several years. But he was cautious about the longer-term outlook, predicting that defense spending would decline throughout the 1990s, not just in the first half as many industry optimists are saying.

“I do not minimize the impact on our industry of the defense spending cuts we know are coming,” he said in a speech Wednesday. “We are braced for heavy weather, particularly among those . . . companies most deeply committed to defense work.”

He added that the group expects “a moderate decline in real, inflation-adjusted sales volume.”

Total aerospace industry sales are expect to increase 5.6% during the year to a record $120.6 billion, and an even larger 14% gain is projected for 1990, the report said. Gains in commercial aircraft and a smaller increase in spacecraft production are expected to fully offset declines in missiles and military aircraft.

Aerospace industry employment is now 1.32 million Americans, virtually unchanged from last year. The civilian aircraft industry, which includes subcontractors, has added 35,000 jobs during the year and the military aircraft industry lost 14,000 jobs. Similarly, missile contractors were down 12,000 jobs and a category of leftover products was down 11,000 jobs.

By occupation, the ranks of production workers grew by 8,000 jobs while scientists and engineers were net losers of 6,000 jobs in 1989. Next year, both groups will shrink.

It may seem contradictory that sales will continue to increase and employment decrease. The reason is that the work force at commercial companies have already been built up, but increases in deliveries of aircraft have not yet occurred. For example, McDonnell Douglas plans to boost deliveries and sales of its MD-80 series of aircraft by one-third over the next several years with its existing work forces.

Boeing has plans to increase the production rates of every one of its commercial aircraft lines. Its sales also were depressed this year by a lengthy strike at its Seattle plants that curtailed deliveries.

Fuqua cited recent surveys that show a potential need for 8,500 new airliners over the next 15 years, an astronomical number that would boost production far higher than levels in the 1980s. The projection is based on a doubling of world aircraft traffic.

The association, which has long complained that the Pentagon has provided for inadequate profits in weapons contracts, noted that the aerospace industry posted profit margins on sales of just 3.7% in 1989, “lower than similar ratios for all U.S. manufacturing industries.”