To Our Shareholders
2002 was another difficult year for the titanium industry and TIMET.With the commercial airline business still suffering greatly from the attacks of September 11,2001,as well as the general decline in business travel,two of the largest carriers are today in bankruptcy and the industry as a whole is reporting record financial losses.Overall revenue passenger miles are still below levels for the year 2000.As a result,parked aircraft have risen to an unprecedented 13%of the world passenger aircraft fleet, approximately double the rate that existed for several years prior to September 2001,and a higher level than that of the last downturn in the early 1990s.Production of new aircraft has been cut dramatically.In July of 2001,Boeing and Airbus had announced planned production of 915 aircraft for 2002,while actual deliveries totaled only 684 aircraft.Deliveries for 2003 are expected to decline again to 580 aircraft for the two companies combined.
Consequently,demand for titanium used in production of components for these aircraft has declined by an estimated 40%, greatly lowering the output of our factories.At the same time,demand from traditional industrial markets such as power generation and chemical process industry applications has also softened with the general sluggishness of the world economy. Overall,estimated world demand for titanium declined approximately 20%in 2002 from 2001 levels,and is anticipated to slightly decline again in 2003.
TIMET is committed to taking necessary steps to manage the business through these difficult market conditions.Employment levels have been reduced considerably across the company,spending at all levels has been decreased,and concessions from vendors have been negotiated.TIMET will continue to look for opportunities to further reduce costs over the coming year. In addition,we continue to evaluate projects that will meaningfully improve our profitability for the long term,including product line and facility rationalization,and new processes and sources that show promise for better margins and lower costs.
We continue to work to expand the market for titanium,developing new products and processes to service customers in industries such as oil and gas,armor,automotive,and architecture,to name some of the more prominent opportunities,and we believe that collectively demand from these new markets will continue to grow at healthy double digit rates.TIMET is well positioned to increase our current military aerospace business over the next several years as funding for new programs such as the F-22 and F-35 fighters creates promising opportunities.And we believe a recovery in commercial aerospace will happen once the airline industry rights itself and begins producing profits once again.
TIMET has a strong balance sheet,which we believe will sustain us through this downturn.Borrowing availability remains above $130 million,and we plan to manage working capital to maintain adequate borrowing availability over time.Additionally,in order to increase the attractiveness of our stock to investors,our stockholders and board of directors approved a 1 for 10 reverse stock split during the first quarter of 2003,which became effective February 14,2003. While our industry and TIMET face many challenges in the next few years,we are confident that TIMET will emerge from the current downturn as a strong company that is well positioned to benefit from improving conditions.
J. Landis Martin, Chairman, President & CEO