Deloitte study: Global aerospace and defense sector returns to growth after two-year slowdown

NEW YORK, NY, 14 July, 2016 –The global aerospace and defense (A&D) sector grew 3.8 percent in 2015, outperforming global domestic product growth of 2.4 percent, according to Deloitte’s “2016 Global Aerospace and Defense Sector Financial Performance Study”. Companies analyzed added US$24.8 billion in revenues to reach US$674.4 billion. However, when adjusted for the strong US dollar exchange rate, global revenues declined 1.9 percent.

Further, due to increased military spending, the defense subsector showed a 1.7 percent growth in revenues, equating to US$5.8 billion of revenue. “The defense subsector appears to have bottomed out with a slowdown in the pace of decline in revenue,” said Tom Captain, principal, Deloitte Consulting LLP; vice chairman, US A&D leader at Deloitte LLP; and global A&D leader. “We anticipate this sector will rebound in 2016 and 2017 as an increase in funding is expected by the sovereign governments, especially in the US, Middle East, Japan and India.”

In the global commercial aerospace sector, original equipment manufacturers (OEMs) analyzed achieved record high aircraft deliveries and backlogs in 2015. Deliveries rose 3.3 percent to 1,397, while aircraft backlog units reached an all-time high of 13,467 at the end of 2015, up 3.4 percent year on year. The backlog is valued at a record high of US$1.9 billion. Overall, the commercial aerospace subsector grew 6.3 percent to US$325.5 billion in 2015.

“The current backlog suggests future years of sector industrial stability despite a drop in new commercial aircraft sales orders in 2015 after a three-year surge,” said Captain. “Growth in travel demand, primarily in China, India and the Middle East, as well as the need for next generation fuel-efficient aircraft continued to drive demand.” Deloitte estimates that approximately 34,000 jets will be delivered from 2015 through 2034, with a value of over US$5.47 trillion at list prices.

At a regional level, the European A&D sector is eclipsing the US sector in revenue growth rates, according to Deloitte’s analysis of top global A&D company revenues. Greater market competitiveness, increased defense spending, and continued growth in commercial aircraft production helped fuel an 8.2 percent revenue increase in Europe, compared with the US’s 1.4 percent growth. European growth consisted of 9.6 percent growth in commercial aerospace and 6.9 percent growth in defense.

About the Study

Deloitte analyzed the 2015 financial performance of 100 major global and US aerospace and defense companies. Key financial indicators analyzed include sales revenue, operating earnings and operating margins, obtained through public company filings and press releases.

About Deloitte’s Aerospace and Defense Group

Deloitte's aerospace and defense sector focuses on the top issues facing the industry. Deloitte A&D practitioners have deep industry experience and are actively involved in various segments of the industry, including: M&A, advanced technology programs, airplane program launches, and acquisition reform and economic assistance packages. For more information about Deloitte’s aerospace and defense group, please visit: www.deloitte.com/a&d.

About Deloitte

Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including 80 percent of the Fortune 500. Our people work across more than 20 industry sectors to deliver measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to make their most challenging business decisions with confidence, and help lead the way toward a stronger economy and a healthy society.

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