Nothing in 2012 consumed defense planners in the United States and abroad like America’s looming budget crisis. Programmed cuts to the world’s largest defense budget and the prospect of further cuts from Congress’ self-imposed sequestration touched every aspect of defense aerospace acquisition.

The halted growth of U.S. defense spending was evident in the administration’s 2013 budget, which received congressional approval to cut $487 billion over the next decade. Without resolution of the broader budget impasse, another $500 billion in cuts would automatically take effect, a prospect Secretary of Defense Leon Panetta referred to as “unworkable” and a “disaster.” Despite the elections having been decided, the “fiscal cliff” negotiations left sequestration delayed until March but unresolved.

The uncertainty had been driving decisions all year, however. In January 2012, Boeing began dispersing defense work from its mammoth Wichita, Kan., plant to other company facilities. The plant is set to close in 2013, signaling a likely round of industry plant closures, according to consultant Deloitte LLP, which forecast that overcapacity would affect one in four defense workers. The budget uncertainty drove more decision-making midyear as aerospace firms reduced or deleted buys of long-lead items for programs considered at risk.

At-risk programs weren’t necessarily those with poor performance. They were more likely weapon systems that did not fit with the Obama administration’s strategic “pivot” to the Pacific. The platforms, weapons, and sensors so in demand in Afghanistan and previously Iraq will find little to no funding as the acquisition of new, longer-range manned/unmanned ISR (intelligence, surveillance, and reconnaissance) aircraft/sensors, ballistic and cruise missile defenses, and a Long Range Strike bomber take precedence.

With 80 percent of U.S. intelligence, communications, and targeting capacity dependent upon space-based assets and clear Chinese investment in various space-attack strategies, fortifying America’s overhead constellations will be a priority. So too will be fielding less centralized platforms, and systems less vulnerable to cyberattack.

While 13 years of defense spending increases come to a close in the West, expenditures in Africa, the Middle East, Asia, and, notably, Russia (up 9.3 percent) continue to rise. In China, the results were manifest in the launch of its first aircraft carrier, the Liaoning (formerly reported to be named Shi Lang), and the debut of new unmanned systems and new fighter aircraft at the Zhuhai Air Show. The JF-17 Thunder has been the subject of speculation since 2011, but a second little-known stealth fighter, the J-31, was revealed. Fitted with a pair of Russian-supplied Klimov RD-93 turbofans, it bears an unsurprising resemblance to the F-35 and has already flown.

Outgoing Chinese President Hu Jintao called for stepping up defense technology, declaring the military’s most important task is to be able to “win a local war in an information age.” Combined with China’s yearlong brushes with Japan, the Philippines, and Vietnam over disputed island territories, such posturing signaled to the United States and its Pacific allies the need for aerospace systems capable of overcoming the “anti-access/area denial” capabilities China intends to field.

The most high profile of these is the Joint Strike Fighter (JSF). Five years after its first flight, an F-35A made its first night flight in January, a telling milestone for a program that has completed just 20 percent of its planned flight testing. With JSF procurement costs estimated at a minimum $380 billion, the services are mulling how many of the desired 2,443 aircraft they can buy and what the type mix will be. International participants are as well. Japan’s favorable late 2011 decision to buy 42 F-35s was somewhat offset by persistent rumors that Italy will reduce its buy, possibly eliminating the F-35B purchases.

The lifting of “probation” on the short takeoff/vertical landing (STOVL) F-35B by Panetta in January was predicated on testing successes in 2011. The decision was cited by the U.K. Ministry of Defense (MoD) as a factor in its decision to reverse course in May, abandoning its switch to the F-35C carrier variant. More vital to the decision, however, were the greater-than-projected costs of redesigning Britain’s new Queen Elizabeth-class aircraft carriers and training U.K. pilots in conventional carrier flight operations. During handover ceremonies for the U.K.’s first F-35B in July, U.K. Defense Secretary Philip Hammond indicated the country would reduce its buy to 48 F-35Bs initially, with additional unit buys to be decided later.

As in the rest of Europe, Britain’s fiscal situation is uncertain, but the cost of the F-35 would be an issue regardless. Early year revelations of Chinese cybertheft of F-35 data play a role as well. Before detection in 2009, Chinese hackers actually sat in on secure online program progress conferences. The resulting loss of information forced redesign of critical equipment, contributing to program delays and further driving up cost. Broader data losses from a variety of U.S. military programs not only demonstrated the efficacy of foreign cyber intrusions but the resulting rise in cost of those programs and potential operational vulnerabilities.

U.S. Marine Corps F-35 initial operating capability (IOC) is slated for 2015 (IOC for the U.S. Air Force [USAF] and U.S. Navy [USN] is planned for 2018), making test program progress scoreboard-worthy. As of July, the fighter had conducted 595 test flights, ahead of its 445-flight schedule. By late fall, F-35s had executed the first aerial releases of the AIM-120 AMRAAM air-to-air missile and the GBU-31/BLU-109 JDAM bomb at the Navy’s China Lake test range. November saw the 500th combined F-35 sortie at Eglin Air Force Base (AFB), Fla., whose ramp was stocked with 22 F-35s. Later in the month the Marine Corps formally stood up its first (largely ornamental) F-35B squadron (VMFA-121) at Marine Corps Air Station Yuma, Ariz.