2013 Global A&D Industry Outlook

Continued global economic challenges coupled with revenue gaps and cost pressures in 2013 may result in additional decreases in defense industry revenue, lower returns on invested capital, as well as margin contraction for many companies, creating pressure to consolidate in order to squeeze out excess defense segment capacity. Defense revenues were flat through the first nine months of 2012 at the global level.

On the other hand, growth in commercial aircraft manufacturer’s revenues is expected to reach record levels in 2013, based on increased production rates to fulfill increased global travel demand, and the introduction of the next generation aircraft. It is likely that 2013 may continue the new trend of global production levels above 1,000 aircraft per year for the third year in a row. Backlogs are expected to continue growing, with airlines continuing to update their fleets with new fuel-efficient aircraft in order to stay competitive. Suppliers to aircraft original equipment manufacturers (OEMs) are likely to be challenged to keep pace with production requirements and are expected to invest in skills development, tooling, and manufacturing capacity. Finally, for the first time in several years, the industry may experience an uptick in demand, albeit modest, in the business aircraft segment as well.