2015 Global Aerospace & Defense Outlook
Growth for commercial aerospace; defense decline continues
According to the 2015 Global aerospace and defense industry outlook, the industry is likely to grow around 3 percent. This increase is due to the continued strength of the commercial aerospace sector from rising passenger travel demand and production of next generation fuel-efficient aircrafts.
Revenue and earnings growth in the commercial aerospace sector is expected to be a bright spot and driving force behind the global aerospace and defense (A&D) industry performance in 2015. While the rate of growth for the overall industry has been slowing over the last two years as a result of declines in defense sector spending, the commercial aerospace sector is likely to enjoy close to an 8 percent growth rate according to the Deloitte Touche Tohmatsu Limited (Deloitte Global) Manufacturing Industry group 2015 Global aerospace and defense industry outlook.
The commercial aerospace sector is expected to set new records for aircraft production in 2015. The accelerated replacement cycle of obsolete aircraft with next generation fuel-efficient aircraft, and growing passenger travel demand, especially in the Middle East and the Asia-Pacific region are key drivers behind this trend.
Global revenues in the defense sector will likely continue to decrease in 2015 at an estimated 1.3 percent. Yet, defense spending is increasing in several areas of the globe, especially in the United Arab Emirates (UAE), Saudi Arabia, India, South Korea, Japan, China, and Russia, as these countries equip their militaries with modern defense platforms and technologies. The report noted that escalating tensions between nations and damaging cyber-attacks may have an impact on future spending in the sector.
Over the next few years, the defense sector will be challenged in two major ways: how to grow profitably in a declining market and what actions are necessary to cut costs to maintain acceptable financial performance. Successful defense companies are addressing these challenges by branching out into adjacent markets, focusing on foreign military sales, and investing in next generation product development in cyber security, defense electronics, precision strike, unmanned systems, and advanced analytics.
Deloitte Touche Tohmatsu Limited’s Global Manufacturing Industry group 2014 Global aerospace and defense sector financial performance study is an assessment of the 2013 financial performance of 100 major global aerospace and defense (A&D) companies using information from public company filings and press releases. The key financial indicators studied include sales revenue, operating earnings, and operating margin. The results presented in this study reveal important observations about the overall global A&D industry.
Key findings from the report
- Global aerospace and defense sector growth slowed down in 2013, with the U.S defense subsector slowdown a key contributor
- Top 10 global A&D companies rankings have changed from prior year, reflecting commercial aerospace growth
- While the A&D sector becomes more global, U.S. companies continue to dominate. Europe is gaining momentum in revenue growth, but losing some ground in profitability
- Profitability is improving across the global A&D industry
- A&D sector share prices outpaced global equity indices
The 2014 infographic gives a summary of key financial indicators. It talks about the average performance of A&D companies in 2013:
- Revenue: US$706 billion
- Operating earnings: US$63 billion
- Operating margin: 8.9%
- Return on invested capital: 17.0%
- Free cash flow: 5.1%
- Number of A&D employees: 2,042,252
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