Overall profitability
Profitability is higher and overall operating costs are lower for aerospace products manufacturers in West Virginia compared both to the national averages and the averages in West Virginia’s top ten regional competitor states. A typical West Virginia manufacturer would enjoy an average total operating cost savings of $3.5 million versus manufacturers in comparison states. Specific savings of $3.5 million would accrue in labor expenses and $43,962 in non-labor operating expenses. Profitability for West Virginia manufacturers averages 5.2 percentage points higher than in the comparison states.
| Profitability |
U.S.
|
Region
|
W.Va.
|
W.Va. advantage
vs. region
|
| Aerospace Industry |
| NAICS 336411 - Aircraft manufacturing |
4.10%
|
9.60%
|
10.60%
|
1.00%
|
| NAICS 336412 - Aircraft engine and engine parts manufacturing |
4.40%
|
6.80%
|
9.90%
|
3.00%
|
| NAICS 336413 - Other aircraft parts and auxiliary equipment manufacturing |
4.10%
|
4.50%
|
8.70%
|
4.10%
|
| NAICS 488190 - Other support activities for air transportation |
6.30%
|
8.20%
|
18.00%
|
9.80%
|
| Average |
4.60%
|
8.60%
|
12.10%
|
3.50%
|
Source: West Virginia Development Office Cost Model
Lower labor costs, higher profit margins.
Labor-related costs in West Virginia are low. A typical aeronautics manufacturer in West Virginia could expect to save an average of $3.5 million in total labor (payroll and non-payroll) expenses in comparison to regional competitor states. This is directly attributable to West Virginia’s low average annual wage for the aeronautics industry cluster, which was just $52,275, according to the most recent available data. This is only 72 percent of the industry-wide national average of $59,709 and 82 percent of the competing state average of $52,606.
centers.
| Labor Costs |
U.S.
|
Region
|
W.Va. |
W.Va. advantage vs. region
|
| Aerospace Industry |
| NAICS 336411 - Aircraft manufacturing |
$55,481,250 |
$43,417,660 |
$41,751,470 |
($1,666,190) |
| NAICS 336412 - Aircraft engine and engine parts manufacturing |
$23,493,380 |
$20,771,670 |
$17,739,720 |
($3,031,950) |
| NAICS 336413 - Other aircraft parts and auxiliary equipment manufacturing |
$19,077,320 |
$18,717,370 |
$15,857,830 |
($2,859,540) |
| NAICS 488190 - Other support activities for air transportation |
$14,536,780 |
$13,835,320 |
$10,236,760 |
($3,598,560) |
| Average |
$28,147,180 |
$24,185,510 |
$21,396,450 |
($2,789,060) |
Note: Labor costs are defined as the combined annual costs of wages, workers' compensation, unemployment insurance and other fringe benefits for a national average operating establishment in the indicated NAICS
group. Wages are based on the most current available BLS data for the U.S. and the respective states.
Source: West Virginia Development Office Cost Model
Utility costs
Utility costs represent a significant portion of operating costs. A West Virginia facility would attain utility cost savings averaging $63,040 annually compared to all states. West Virginia offers major savings in energy, with electric rates among the lowest in the nation. The typical facility would realize electricity costs lower than the regional competing states with an average annual savings of $55,614.
| Utility Costs |
U.S.
|
Region
|
W.Va. |
W.Va. advantage
vs. region
|
| Aerospace Industry |
| NAICS 336411 - Aircraft manufacturing |
$1,761,810 |
$1,712,780 |
$1,297,610 |
($415,170) |
| NAICS 336412 - Aircraft engine and engine parts manufacturing |
$887,520
|
$862,820
|
$653,820
|
($209,150) |
| NAICS 336413 - Other aircraft parts and auxiliary equipment manufacturing |
$601,460 |
$584,720 |
$442,990 |
($141,730) |
| NAICS 488190 - Other support activities for air transportation |
$1,462,230
|
$1,411,190
|
$1,160,070
|
($251,120) |
| Average |
$1,178,260 |
$1,142,880 |
$888,590 |
($254,290) |
Source: West Virginia Development Office Cost Model
Approach
To confirm the viability of the aerospace products industry as a target industry cluster for West Virginia, a comparative analysis of operating costs and profitability was prepared for a national average operating establishment in West Virginia versus the 10 surrounding and regional states considered to be our principal competitors: Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Virginia.
The national average operating establishment was based on industry average operating and financial characteristics derived from the most current Annual Survey of Manufactures published by the Census Bureau, Annual Statement Studies published by Robert Morris Associates and national input/output coefficients for various factor costs. This information was used to develop a detailed annual operating expense statement, which served as a baseline for estimating costs for West Virginia and the comparison states. These national baseline costs were adjusted by state-specific cost differentials for various factors (wage rates, utility rates, etc.) to derive operating costs for West Virginia and the comparison states.
|