When the business climate turns cold, companies can contract or invest. With the Pentagon staring at a potential $1 trillion budget reduction during the coming decade, defense company officials are beginning to pursue both options, sometimes simultaneously. Sean O'Keefe, chairman and CEO of EADS North America, says that in this climate the prudent course is to avoid making investments that could amount to nothing as lawmakers wrestle with what level of funding to provide to the military.

In a generally difficult economic climate, France's aerospace and defense equipment industry is coming off an excellent year in 2011, with a healthy backlog and a particularly strong performance in global export markets. The growth more than compensates for declining French defense equipment budgets, having helped mitigate the negative impact of Europe's financial crisis on the country's economy, and augurs well for· both prime contractors and suppliers in 2012.·

Boeing and Embraer, already working together on biofuels research, are extending their cooperation with an umbrella agreement that is more broadly focused on commercial aircraft manufacturing and design.

ADP Paris airports authority and Air France are scheduled to jointly inaugurate Roissy-Charles de Gaulle's (CDG) additional passenger terminal, dubbed S4, in July. This initiative is expected to strengthen the country's quest for hub dominance in continental Europe. With a touch of arrogance but also armed with convincing arguments, ADP President Pierre Graff and Air France Chairman/CEO Alexandre de Juniac jointly assert that Paris in the longer term will become an indispensable asset for the global airline industry.

When pictures emerged last year showing Afriqiyah Airways aircraft destroyed in fighting in Libya, it was emblematic of the enormous toll that the war exacted on the region's air transport sector. A year later, industry officials at the Marrakech air show tell Aviation Week that they are starting to see signs of the market settling and the groundwork being laid for new orders. Deals themselves may still be months off, but the relatively quick turnaround is nonetheless striking even as carriers are also struggling with high fuel prices.

Canada's CAE and Israeli manufacturer Aeronautics have completed initial flights of a Dominator XP twin-engine unmanned aircraft from Alma Airport in Quebec under Project Miskam. The flights from the UAS Center of Excellence at Alma constitute the first phase of an R&D project aimed at demonstrating how unmanned aircraft can be used for civil applications such as inspecting pipelines and hydroelectric installations, monitoring forest fires and natural resources, and assessing disasters.

Embraer may wait until 2013 to select a new engine for its family of E-Jets as it talks with airlines about what upgrades are needed to keep the aircraft competitive.

Aerospace executives' skepticism about the prospects for implementing the NextGen air traffic control system is fading. With Congress finally having passed an FAA reauthorization bill that allows for new methods of financing the overhaul of air traffic management—the primary hurdle to persuading the airline industry to invest in NextGen equipment—execs are increasingly pointing to the potential payoff. In fact, the campaign now has so much momentum that it will be difficult to block implementation, says Fedex President and CEO David Bronzcek.