U.S. Involvement at Major International Air Shows Principally Depends on Agencies' Missions and Aerospace Companies' Resources
Gao ID: GAO-07-1165R September 21, 2007For years, the U.S. government has participated at international air shows, such as those in Paris, France, and Farnborough, United Kingdom, with federal agencies renting exhibit space to present program information, displaying aircraft, or providing assistance to U.S. aerospace companies seeking to showcase their businesses. Hosted by aerospace industry associations and foreign governments, these shows present opportunities for business networking and often serve as forums for announcing billions of dollars in contract awards. While large U.S. aerospace companies are generally well represented at these shows, the ability of small and medium-sized companies to participate is unclear. On the basis of your interest in understanding U.S. government and company involvement at major international air shows, we (1) identified federal agencies' participation as well as their support to U.S. companies at these shows since 2000 and (2) determined what factors affect small and medium-sized U.S. companies' decisions to participate.
Agencies' participation in and support to companies at major international air shows largely depend on the agencies' missions, with such activities funded by operations accounts or fees charged to companies. While the Department of Defense (DOD) is the predominant U.S. agency participant at air shows, its presence is based on whether participation will contribute to its mission of advancing security cooperation, promoting interoperability of weapon systems, and demonstrating commitment to alliances or regions. Typically, DOD displays or demonstrates weapon systems, such as fighter aircraft, or meets with foreign military officials. DOD also provides support to U.S. companies by leasing military aircraft to them for use at these shows on a limited basis. The Department of Commerce (Commerce) is a key provider of support to U.S. companies participating at air shows because of its mission to open new markets and promote U.S. companies' products and services overseas. Commerce's support includes a range of fee-for-service programs, including product literature displays and business-to-business introductions, as well as business counseling services available at no charge. While the Federal Aviation Administration (FAA) and the National Aeronautics and Space Administration (NASA) do not provide support to companies, they occasionally participate at air shows when it may advance a specific agency mission. The State Department provides diplomatic support to federal agencies and facilitates meetings between U.S. companies and foreign officials--activities that the agency normally performs as part of its overseas mission. Because show participation and support are an integral part of agencies' missions, their costs are not budgeted separately from other mission activities. While only DOD and Commerce track direct participation costs, other agencies were able to estimate how much they spend for show participation. All five agencies pay for their costs from operations accounts or from fees charged for company support. For example, in 2005 and 2006, DOD spent approximately $2.4 million from its operations accounts to participate at air shows in Paris, France; Farnborough, United Kingdom; Singapore; Dubai, United Arab Emirates; and Santiago, Chile. Officials we interviewed from small and medium-sized companies identified a number of factors, including cost and sales opportunities, that influence their participation at air shows. One major factor is the high cost of sending employees and materials to international locations. Company officials indicated that their participation, which includes such activities as setting up information booths or establishing business contacts, generally does not result in a direct return on investment. While officials noted that their costs are typically greater than any sales that can be directly tracked to their show participation, they indicated that it is a business decision based on opportunities for promoting name recognition and fostering business relationships. Some companies paid fees to obtain Commerce's assistance at air shows, while others were unaware of Commerce's programs to assist small and medium-sized companies.
GAO-07-1165R, U.S. Involvement at Major International Air Shows Principally Depends on Agencies' Missions and Aerospace Companies' Resources
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September 21, 2007:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Michael Turner:
Ranking Member, Subcommittee on:
Information Policy, Census and National Archives:
Committee on Oversight and Government Reform:
House of Representatives:
Subject: U.S. Involvement at Major International Air Shows Principally
Depends on Agencies' Missions and Aerospace Companies' Resources:
For years, the U.S. government has participated at international air
shows, such as those in Paris, France, and Farnborough, United Kingdom,
with federal agencies renting exhibit space to present program
information, displaying aircraft, or providing assistance to U.S.
aerospace companies seeking to showcase their businesses. Hosted by
aerospace industry associations and foreign governments, these shows
present opportunities for business networking and often serve as forums
for announcing billions of dollars in contract awards. While large U.S.
aerospace companies are generally well represented at these shows, the
ability of small and medium-sized companies to participate is unclear.
On the basis of your interest in understanding U.S. government and
company involvement at major international air shows, we (1) identified
federal agencies' participation as well as their support to U.S.
companies at these shows since 2000 and (2) determined what factors
affect small and medium-sized U.S. companies' decisions to participate.
Scope and Methodology:
To identify federal agency participation and support since 2000, we met
with officials at the Departments of Defense (DOD), Commerce, and
State; the Federal Aviation Administration (FAA); and the National
Aeronautics and Space Administration (NASA)--the five federal agencies
that are involved at major international air shows. We reviewed laws,
policies, guidance, and other documentation pertaining to these
agencies' participation and support at international air shows. We
defined federal agency participation as activities that include
transporting, displaying, staffing, or demonstrating exhibits and
equipment, as well as agency officials sitting on panels or conducting
meetings with company representatives and foreign officials. We defined
agency support as providing resources or other assistance to U.S.
aerospace companies to enable them to participate at air shows.
However, we did not review general attendance at air shows that was not
related to participation or support activities. To determine what
factors led aerospace companies to participate, we interviewed 20 small
and medium-sized companies--which we defined as those having fewer than
500 employees--based on their recent participation at major
international air shows and their use of federal agencies' assistance.
These companies represented a range of aerospace industry sectors,
including components manufacturing; simulation and training; and
maintenance, repair, and overhaul. The views of company representatives
included in this report do not represent those of the entirety of small
and medium-sized aerospace companies. We conducted our review from
February 2007 through September 2007 in accordance with generally
accepted government auditing standards.
Results in Brief:
Agencies' participation in and support to companies at major
international air shows largely depend on the agencies' missions, with
such activities funded by operations accounts or fees charged to
companies. While DOD is the predominant U.S. agency participant at air
shows, its presence is based on whether participation will contribute
to its mission of advancing security cooperation, promoting
interoperability of weapon systems, and demonstrating commitment to
alliances or regions. Typically, DOD displays or demonstrates weapon
systems, such as fighter aircraft, or meets with foreign military
officials. DOD also provides support to U.S. companies by leasing
military aircraft to them for use at these shows on a limited basis.
Commerce is a key provider of support to U.S. companies participating
at air shows because of its mission to open new markets and promote
U.S. companies' products and services overseas. Commerce's support
includes a range of fee-for-service programs, including product
literature displays and business-to-business introductions, as well as
business counseling services available at no charge. While FAA and NASA
do not provide support to companies, they occasionally participate at
air shows when it may advance a specific agency mission. The State
Department provides diplomatic support to federal agencies and
facilitates meetings between U.S. companies and foreign officials--
activities that the agency normally performs as part of its overseas
mission. Because show participation and support are an integral part of
agencies' missions, their costs are not budgeted separately from other
mission activities. While only DOD and Commerce track direct
participation costs, other agencies were able to estimate how much they
spend for show participation. All five agencies pay for their costs
from operations accounts or from fees charged for company support. For
example, in 2005 and 2006, DOD spent approximately $2.4 million from
its operations accounts to participate at air shows in Paris, France;
Farnborough, United Kingdom; Singapore; Dubai, United Arab Emirates;
and Santiago, Chile.
Officials we interviewed from small and medium-sized companies
identified a number of factors, including cost and sales opportunities,
that influence their participation at air shows. One major factor is
the high cost of sending employees and materials to international
locations. Company officials indicated that their participation, which
includes such activities as setting up information booths or
establishing business contacts, generally does not result in a direct
return on investment. While officials noted that their costs are
typically greater than any sales that can be directly tracked to their
show participation, they indicated that it is a business decision based
on opportunities for promoting name recognition and fostering business
relationships. Some companies paid fees to obtain Commerce's assistance
at air shows, while others were unaware of Commerce's programs to
assist small and medium-sized companies.
Background:
The air shows at Paris and Farnborough are preeminent and are held in
alternating years. Other major air shows include those at Singapore,
Dubai, and Santiago. Table 1 provides an overview of these five shows.
Table 1: Overview of Five Major International Air Shows:
First show: Show frequency;
Paris: 1909: 7-day show held every other year;
Farnborough: 1932: 7-day show held every other year;
Singapore[A]: 1981: 6-day show held every other year;
Dubai: 1989: 5- day show held every other year;
Santiago: 1980: 6-day show held every other year.
First show: Number of trade visitors;
Paris: 1909: 153,920 trade visitors;
Farnborough: 1932: 140,000 trade visitors;
Singapore[A]: 1981: 34,300 trade visitors;
Dubai: 1989: 35,000 trade visitors;
Santiago: 1980: 40,000 trade visitors.
First show: Foreign delegations[B];
Paris: 1909: 150 defense delegations from 60 countries and 40 civil
delegations from 20 countries;
Farnborough: 1932: 83 defense delegations from 43 countries and 40
civil delegations from15 countries;
Singapore[A]: 1981: 153 delegations from 44 countries;
Dubai: 1989: 60 military and 44 civil delegations;
Santiago: 1980: 143 delegations from 21 countries.
First show: Aircraft on display;
Paris: 1909: 140;
Farnborough: 1932: Over 100;
Singapore[A]: 1981: n/a[C];
Dubai: 1989: 101;
Santiago: 1980: 121.
First show: Dollar amount of orders announced at shows;
Paris: 1909: n/ a;
Farnborough: 1932: Over $40 billion;
Singapore[A]: 1981: $15 billion;
Dubai: 1989: Over $21 billion;
Santiago: 1980: n/a.
Source: Data obtained from air show organizers and U.S. federal
agencies.
[A] Following the 2006 Asian Aerospace show at Singapore, the organizer
relocated the show to Hong Kong. A new show is planned to be launched
in Singapore in 2008.
[B] Information on delegations varies for these shows and is included
as available.
[C] n/a indicates official information not available.
[End of table]
These shows serve as an opportunity for industry and government
participants to display products and services to potential buyers and
demonstrate aircraft to increase the public's awareness and
understanding of aerospace technologies.
Agencies' Participation and Support at International Air Shows Is
Mission Driven, with Costs Funded by Operations Accounts or User Fees:
U.S. agencies participate to varying degrees at international air shows
based on their missions, and the cost of their activities is funded by
operations accounts or user fees for certain support services. DOD and
Commerce are the two key agencies that usually participate and provide
support to companies at air shows, while FAA, NASA, and State
participate to a lesser extent. Table 2 highlights these agencies'
participation, support, and missions.
Table 2: Federal Agencies' Participation, Support, and Missions for the
Five Major International Air Shows:
Federal agency: DOD: Commerce;
Participation and/or support since 2000: Displays or demonstrates
weapon systems and sets up information booths at most of the shows;
leases weapon systems, such as fighter aircraft, on limited basis, to
U.S. companies: Offers several programs for U.S. aerospace companies,
for a fee, to assist companies in marketing goods and services at most
of the shows;
Agency mission for air shows: Advances security cooperation and
technological interoperability with friendly nations: Supports U.S.
companies' sales of goods and services abroad.
Federal agency: DOD: NASA;
Participation and/or support since 2000: Displays or demonstrates
weapon systems and sets up information booths at most of the shows;
leases weapon systems, such as fighter aircraft, on limited basis, to
U.S. companies: Sends official delegations to some shows and has set up
an exhibit on one occasion;
Agency mission for air shows: Advances security cooperation and
technological interoperability with friendly nations: Advances
international cooperation and disseminates results of U.S. space
exploration to the public.
Federal agency: DOD: State;
Participation and/or support since 2000: Displays or demonstrates
weapon systems and sets up information booths at most of the shows;
leases weapon systems, such as fighter aircraft, on limited basis, to
U.S. companies: Assists agencies with show activities by facilitating
entry into foreign countries and coordination with foreign officials;
cohosts receptions at some shows for companies to build business
relationships;
Agency mission for air shows: Advances security cooperation and
technological interoperability with friendly nations: Ensures U.S.
government activities are consistent with foreign policy goals.
Source: GAO analysis of agency statements and data.
[End of table]
DOD:
Since 2000, DOD has participated at most of the five major air shows
based on its mission of advancing security cooperation, promoting
interoperability of weapon systems, and demonstrating commitment to
alliances or regions. Officials stated that to foster coalition
building with international partners, DOD has displayed weapon systems,
disseminated information about systems' capabilities, and performed
live demonstrations. Air show participation also provides U.S. military
officials with opportunities to network with foreign counterparts. For
example, U.S. military officials may attend numerous bilateral
meetings, as many as 20, at a single air show.
DOD determines which weapons to exhibit at upcoming shows, based on a
multitiered process, which begins with U.S. embassy and combatant
command officials providing DOD with a list of weapon systems, such as
military aircraft, to be displayed. The combatant command charged with
responsibility for the particular geographic region provides input on
whether the display of such systems advances the political-military
agenda for that region. These commands are responsible for providing
the required resources to support the event and paying the cost to
exhibit the system at the air show. As such, current military
operational needs may restrict certain equipment from being exhibited
at air shows. The Defense Security Cooperation Agency (DSCA) and the
military services also assess the political-military situation of the
country in which an embassy and a combatant command are seeking direct
show participation. Finally, DSCA obtains approval for participation
from DOD's Undersecretary of Defense for Policy. Since 2000, DOD has
exhibited a range of aircraft at these shows, including the C-130J
Hercules transport aircraft, UH-60A Blackhawk helicopter, and F-16
Falcon fighter aircraft. While DOD focuses on participating at major
shows, such as Paris and Farnborough, the agency also considers the
importance of smaller shows. For example, an Air Force official told us
that participation at an air show in South Africa is gaining in
importance for DOD's goal of providing regional support now that the
agency has established the U.S. Africa Command.
Also, DOD supports U.S. business by leasing equipment to defense
companies that seek to demonstrate particular weapon systems and
initiate sales to foreign nations. When a company requests an equipment
lease for an air show, DOD officials review the political-military
situation of the region, as well as equipment availability, to
determine whether to grant approval. All costs associated with leasing
the equipment are to be borne by the company, including transporting,
fueling, and potential damage during use.[Footnote 1] For the 2006 show
in Farnborough, the Air Force approved a lease to Lockheed Martin for
the F-16 Falcon fighter aircraft, and for the 2005 Paris show, the Navy
approved a lease of the F/A-18F Super Hornet strike fighter to Boeing.
Army officials say they have approved very few leases because equipment
is needed for ongoing military operations. On a limited basis, DOD
supports U.S. businesses at international air shows by sending high-
level officials to meet with potential buyers of U.S. equipment,
provided such contracts promote technological interoperability for U.S.
and foreign military equipment and strengthen the capabilities of
coalition partnerships.[Footnote 2]
Commerce:
According to Commerce officials, the agency's participation at air
shows is driven by its mission to promote the interests of U.S.
businesses abroad by providing support to U.S. aerospace companies
through a number of assistance programs. The agency's U.S. Commercial
Service, within the International Trade Administration, offers these
programs and activities to help U.S. companies, particularly small and
medium-sized companies, increase international exposure at air shows,
according to officials. Officials also noted that before approving the
use of company assistance programs for an air show, Commerce uses its
Trade Fair Certification Program to endorse an international air show
organizer that will recruit U.S. exhibitors and manage an official U.S.
pavilion. The certification program is a cooperative partnership among
Commerce, industry associations, international trade show organizers,
and foreign trade fair authorities. Commerce then initiates a range of
show-related services, such as oversight and coordination of events and
in-country site assistance to the show organizer. Show organizers are
required to recruit small and medium-sized businesses and provide
Commerce officials with a show floor booth to run operations, display
materials, and conduct business counseling. Since 2000, Commerce has
certified and supported eight trade show organizers.[Footnote 3] To
encourage companies to participate at shows and use available
assistance programs, Commerce utilizes International Trade
Administration staff that identify and contact companies, including
those that are new to the market, and distributes information through
domestic and international trade events, news releases, and Web sites.
In addition to the Trade Fair Certification Program, Commerce uses the
following company assistance programs:
Aerospace Product Literature Center aids small and medium-sized
companies by disseminating company literature at an information booth
staffed by Commerce personnel at air shows. This program typically
serves 50 to 65 small and medium-sized U.S. companies at a single air
show and is the most frequently provided program. The user fee charged
to companies generally ranges from $600 to $650 per show.
Aerospace Executive Service facilitates introductions and sets up
meetings between U.S. companies and potential foreign customers.
Commerce has provided this service to between 5 and 34 U.S. companies
per show, charging fees ranging from $2,500 to $4,700. Companies have
utilized this program at the Farnborough, Dubai, and Singapore air
shows in recent years.
Pathfinder Program is modeled after the Aerospace Executive Service and
assists U.S. companies by providing customized program catalogues and a
list of suggested foreign companies to meet with. This program has been
used in lieu of the Aerospace Executive Service but does not set up
meetings for participants. Since 2000, Commerce has offered the
Pathfinder Program only once at the 2005 Paris air show for a charge of
$2,950 per company plus $700 for each additional company participant.
Showtime Program provides market analysis and counseling services to
U.S. companies at major shows through a team of in-country market and
industry specialists. There is no user fee for this service.
Table 3 indicates Commerce assistance programs provided at the major
shows since 2000.
Table 3: Commerce Assistance Programs Provided Since 2000:
Year: 2000;
Air show: Farnborough;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2000;
Air show: Singapore;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2000;
Air show: Santiago;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2001;
Air show: Paris;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2001;
Air show: Dubai;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2002;
Air show: Farnborough;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2002;
Air show: Singapore;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2002;
Air show: Santiago;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2003;
Air show: Paris;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Year: 2003;
Air show: Dubai;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2004;
Air show: Farnborough;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Year: 2004;
Air show: Singapore;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Year: 2004;
Air show: Santiago;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2005;
Air show: Paris;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Check];
Showtime Program: [Check];
Year: 2005;
Air show: Dubai;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2006;
Air show: Farnborough;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Year: 2006;
Air show: Singapore;
Trade Fair Certification: [Check];
Aerospace Product Literature Center: [Check];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Year: 2006;
Air show: Santiago;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Check];
Pathfinder Program: [Empty];
Showtime Program: [Empty].
Year: 2007;
Air show: Paris;
Trade Fair Certification: [Empty];
Aerospace Product Literature Center: [Empty];
Aerospace Executive Service: [Empty];
Pathfinder Program: [Empty];
Showtime Program: [Check];
Source: GAO analysis of Commerce data.
[End of table]
On a limited basis, Commerce also arranges for officials to advocate on
behalf of U.S. businesses competing for foreign contracts, including
those participating at international air shows. Although not specific
to air shows, this advocacy can include U.S. embassy and consulate
assistance, as well as communications from senior-level U.S. government
officials to foreign government officials.
FAA:
FAA participates at many air shows as part of its mission to promote
aviation safety and the harmonization of international aviation
standards by conducting bilateral and multilateral meetings with
foreign aviation counterparts. Sometimes, FAA will send an employee to
distribute agency information at its own exhibition space or at
Commerce's booth. In other cases, FAA pays Commerce a fee to display
and distribute materials at a show. Since 2000, the agency has
regularly participated at the Paris show because it is the largest and
at the Singapore show because it is in the fast-growing Asia-Pacific
region. The agency has also participated at Santiago and Dubai.
According to agency officials, FAA does not provide support to
companies seeking to participate at international air shows.
NASA:
NASA officials stated that the agency participates at air shows to
support the agency's mission of advancing international cooperation and
disseminating the results of U.S. space exploration to the public.
Since 2000, NASA has taken part in two international shows--Farnborough
and Paris--to disseminate information on the completion of the
International Space Station and future exploration efforts as directed
by a 2004 presidential policy statement that introduced a new vision
and priorities for the agency. At the 2004 Farnborough show, NASA had
an exhibit to describe this new vision, and at the subsequent Paris Air
Show in 2005, NASA officials said they met with foreign international
space program officials but did not set up an exhibit. In addition,
these officials told us that NASA does not provide support to companies
seeking to participate at international air shows.
State:
According to State officials, as part of the agency's mission to ensure
that international air show participation is consistent with overall
foreign policy objectives, agency and embassy staff facilitate
coordination of Commerce and DOD participation and provide support to
U.S. government officials to these shows. These activities are
coordinated through State's International Cooperative Administrative
Support Services. For example, State provided country clearances and
logistical support for a NASA official participating at the 2006
Farnborough air show. At some air shows, State cohosts an ambassador's
reception with U.S. industry associations, such as the Aerospace
Industry Association, to build business relationships. In addition,
officials noted that when approved through a Commerce, DOD, and State
interagency process, State officials attend the shows to advocate on
behalf of U.S. companies competing for foreign contracts.
Cost of Agency Participation and Support:
We found that the five agencies in our review do not receive separate
budget line item appropriations for international air show
participation, as participation and support are integral parts of
agencies' missions. While DOD and Commerce track costs associated with
their direct participation, other agencies were able to estimate some
of their air show costs, even though they do not track these separately
from other mission activities.
DOD collects data on expenditures from combatant commands based on
estimates of air show participation and support. These costs include
travel for agency personnel, exhibition expenses, and transportation
costs for military aircraft exhibited at the show and are paid out of
existing operations and maintenance or other budget accounts. Table 4
shows that combatant commands reported a total of $7.1 million between
2000 and 2007 for air show participation and support.[Footnote 4]
Table 4: DOD Combatant Command Reported Costs for Major Air Shows:
Year 2001:
Air show: Farnborough, Singapore, Santiago;
Cost (U.S. dollars)[A]: $336,873, $501,000, $531,182.
Year: 2001;
Air show: Paris, Dubai;
Cost (U.S. dollars)[A]: $443,911, $21,500.
Year: 2002;
Air show: Farnborough, Singapore, Santiago;
Cost (U.S. dollars)[A]: $394,237, Data not available, $193,709.
Year: 2003;
Air show: Paris, Dubai;
Cost (U.S. dollars)[A]: $356,069, $403,631.
Year: 2004;
Air show: Farnborough, Singapore, Santiago;
Cost (U.S. dollars)[A]: $663,747, $415,930, $194,910.
Year: 2005;
Air show: Paris, Dubai;
Cost (U.S. dollars)[A]: $395,484, $1.1 million.
Year: 2006;
Air show: Farnborough Singapore Santiago;
Cost (U.S. dollars)[A]: $372,184, $327,147, $253,120.
Year: 2007;
Air show: Paris;
Cost (U.S. dollars)[A]: $239,925.
Total of available data: $7.1 million.
Source: GAO analysis of DSCA and DOD combatant command data.
[A] Not adjusted for inflation.
[End of table]
Commerce tracks the cost of its direct air show participation and
support and tracks the fees charged to each company for programs
offered at certified shows. According to Commerce officials, these fees
generally offset the agency's direct cost. Officials stated that they
require a minimum level of company participation to ensure that fees
charged cover their expenses. However, officials noted that such fees
would not include the cost of many show activities related to
participation, such as agency and personnel resources expended in
preparation for the show. For the three fee-based company assistance
programs Commerce provided at the five major air shows from 2001
through 2006, agency officials identified total costs of $399,598 for
which the agency collected $583,043 in fees from companies.[Footnote 5]
Although FAA and NASA officials said their agencies do not routinely
track air show participation separately from other mission activities,
they provided estimates on their total cost, where available. FAA
officials estimated that the agency has spent approximately $107,000 at
over half of the major air shows it has participated at since 2001 for
travel and registration fees for FAA delegations to the show, but were
unable to estimate costs for the remaining shows. NASA officials
estimated $729,350 for participation costs at the 2004 Farnborough air
show. This estimate included costs for booth space, exhibit design and
construction, and literature distribution. The State Department did not
provide any cost figures because its participation is integrated into
its overall mission activities and is not separately tracked.
Small and Medium-Sized Companies Consider Cost and Sales Opportunities
When Participating at Major International Air Shows:
According to officials at the small and medium-sized companies we
interviewed, their decision to participate at air shows is based on a
number of factors, including cost and potential sales. However, these
officials generally could not identify a direct return on investment
resulting from their participation. For these companies, participation
included such activities as renting space and setting up information
booths, displaying sample products, and prearranging meetings with
potential customers at shows. Company officials told us that they may
have a booth at some shows and at others they may opt just to meet with
potential customers. One company leased a large booth space and sent a
significant number of its employees to share information about their
company's products.
More than half of the company officials we spoke with noted that the
high cost of sending employees and materials to international air shows
is a major factor for determining whether and to what extent they
participate. Several companies indicated that their average cost of
participating ranged from $5,000 to $15,000 per employee. Generally,
this cost included travel, hotel, meals, and entertainment but did not
include booth rental and assembly and shipping of materials to
international locations. Some companies said additional expenses that
are not captured include the time employees are away from other work
activities that is spent preparing for, traveling to, and participating
at shows.
Another major factor companies consider is the potential that
participation will generate sales. Although most companies were unable
to identify specific sales of goods or services resulting from show
participation, they made a business decision to participate in an
effort to generate sales by promoting name recognition and goodwill of
the company. Even companies that subsequently sell to contacts made at
shows are uncertain about attributing those sales to show
participation. Nevertheless, some companies view participation at major
international air shows as necessary for being recognized as an active
player in the aerospace industry. Some stated that nonparticipation
puts them at a disadvantage with competitors that do participate. While
at shows, some companies split their time between maintaining
relationships with current clients and building relationships with
potential customers. For example, officials at one small company we met
with said that they recently participated at an air show to maintain
the company's relationship as a supplier to a larger exhibiting
company, even though the company did not expect to generate any direct
sales from participating.
Companies also considered other factors when participating at air
shows. Some companies were more likely to participate at air shows if
others from the same aerospace industry sector were also present. For
example, companies that provide interiors for private and corporate
jets may not be interested in shows that are dominated by military and
large commercial manufacturing companies.
Most of the companies we interviewed attend the Paris and Farnborough
shows. Fewer companies attend the Singapore, Dubai, and Santiago shows
and either already have a company presence in the region or have a
desire to move into the region. Figure 1 shows the frequency and type
of participation by these companies at the major air shows.
Figure 1: Overview of 20 Small and Medium-Sized Companies'
Participation at Major International Air Shows, 2000-July 2007:
This is a bar chart and text describing the number of companies
participating in air shows. There were 4 in Santiago, 11 in Dubai, 12
in Singapore, 17 in Farnborough, and 16 in Paris.
[See PDF for image]
Source: GAO analysis of company data.
[End of figure]
The majority of the companies we interviewed were aware of Commerce's
air show support programs and activities and often paid the applicable
fees to use these programs. For these companies, the programs
frequently supplemented other forms of participation. For example,
instead of sending employees to both conduct meetings and distribute
literature, one company's employees were free to conduct meetings and
make new contacts while also having the company's literature
distributed through Commerce's Aerospace Products Literature Center.
Some companies utilized Commerce's Aerospace Executive Service to
facilitate foreign business contacts and arrange meetings at the shows.
Company officials that use these services told us that they were
generally satisfied. None of the company officials we spoke with leased
DOD equipment, which has generally been leased to larger companies,
according to DOD data.
Agency Comments:
We provided a draft of this letter to DOD, Commerce, State, the
Department of Transportation, and NASA for comment. Commerce and State
provided technical comments, which we have incorporated as appropriate.
* * * * * *:
As requested by your office, unless you publicly disclose the contents
of this report, we plan no further distribution of it until 30 days
from the date of this letter. At that time, we will send copies to the
Secretaries of Defense, Commerce, State, and Transportation; the
Administrator of NASA; and interested congressional committees. We will
also make copies available to others upon request. In addition, this
report will be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
Should you or your staff have any questions concerning this report,
please contact me at (202) 512-4841 or at CalvaresiBarrA@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Key contributors
to this report were John Neumann, Assistant Director; Angela D. Thomas;
Najeema Davis Washington; Brent Helt; Lily J. Chin; and Alyssa Weir.
Signed by:
Ann Calvaresi Barr:
Director, Acquisition and Sourcing Management:
[End of section]
Footnotes:
[1] We did not assess whether DOD incurred any leasing costs that were
not paid for by companies.
[2] DOD guidance specifies when agency officials may support U.S.
companies competing for foreign contracts.
[3] While the official U.S. pavilion at the Paris Air Show is not part
of the Trade Fair Certification Program, it is operated under the
authority of the Department of Commerce and organized and managed by a
contractor. Nevertheless, Commerce offers its complete range of
business services at the Paris show.
[4] These costs include participation as identified by the combatant
commands and military services, but do not include other defense
agencies' participation, such as the Missile Defense Agency or the
National Geospatial-Intelligence Agency. These agencies separately
reported that they spent $168,639 and $22,564.17, respectively, for
their participation at major international air shows since 2000.
[5] Fees collected in excess of costs are retained in a Commerce trust
fund to be used for International Trade Administration activities.
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