2017 Global aerospace and defense sector outlook
Growth prospects remain upbeat
The global aerospace and defense (A&D) industry is likely to experience stronger growth in 2017, following multiple years of positive, but a subdued rate of growth.
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- Download the 2014 Outlook
The 2017 Global aerospace and defense outlook reviews the industry’s performance in 2016 and expectations for 2017. It outlines a long term projection for aircraft production, as well as an analysis of global defense spending. It also provides perspectives on defense contractor expectations, growth in travel demand driven by wealth creation in Asia and the Middle East, and observations on what travel demand means for the commercial aerospace sub-sector.
This year’s outlook finds global aerospace and defense (A&D) industry revenues expected to resume growth, driven by higher defense spending.
Trends forecast a return to growth
The global aerospace and defense industry is likely to experience stronger growth in 2017. Following multiple years of positive but a subdued rate of growth, the report forecasts the sector revenues will likely grow by about 2.0 percent in 2017.
The global A&D sector revenue rebound is attributed to a number of factors in both the commercial aerospace sub-sector and the defense sub-sector. Key findings are as follows:
Commercial aerospace sub-sector analysis
- Stable global gross domestic product (GDP) growth, relatively lower commodity prices including crude oil, and strong passenger travel demand, especially in the Middle East and Asia Pacific regions, will likely drive the commercial aerospace sub-sector growth.
- Despite an expected increase of 96 additional large commercial aircraft being produced in 2017, continued pricing pressure and product mix changes by airline operators will likely result in only a marginal increase of 0.3 percent in commercial aerospace sub-sector revenues.
Defense sub-sector analysis
- Defense sub-sector revenues are likely to grow at a much faster 3.2 percent in 2017 as defense spending in the US has returned to growth after multi-year declines in defense budgets, and future growth many be driven by the new US administration’s increased focus on strengthening the US military.
- Rising global tensions have led to increasing demand for defense and military products in the Middle East, Eastern Europe, North Korea, and the East and South China Seas. This is in turn resulting in increased defense spending globally, especially in the United Arab Emirates (UAE), Saudi Arabia, South Korea, Japan, India, China, Russia.
Executive summary - 2016
The global aerospace and defense (A&D) industry is expected to return to growth in 2016 with total sector revenues estimated to grow at 3.0 percent, according to the Deloitte Touche Tohmatsu Limited (Deloitte Global) Consumer & Industrial Products Industry group’s 2016 Global aerospace and defense sector outlook. This positive signal follows years of declining revenue growth of 3.2 percent in 2013, 1.9 percent growth in 2014, and an expected decline of minus 0.5 percent in 2015 as found by Deloitte Global in its 2015 Global aerospace and defense sector financial performance study.
Key findings from the 2016 report:
- Defense budgets in the US, United Kingdom, France, Japan, several Middle Eastern countries, and other nations are increasing at a time when national security threats are being heightened with governments equipping their armed forces with modern defense weapons platforms and next-generation technologies, including cyber, intelligence gathering, defense electronics, and precision strike capabilities.
- The commercial aerospace subsector is expected to continue its decade-long trend of above-average growth rates, driven by growth in passenger travel demand and an accelerated equipment replacement cycle.
- The 2016 Global aerospace and defense sector outlook outlines a projection for aircraft production for 2016 and beyond, as well as defense spending by major countries. It also provides perspectives on defense contractor expectations, the anticipated impact of the lower oil prices on aircraft sales and the economic slowdown in China.
Executive Summary - 2015
The 2015 Global Aerospace & Defense Industry Outlook, from Deloitte Touche Tohmatsu Limited (Deloitte Global) Consumer & Industrial Products Industry group, is an assessment of the 2014 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 2015 report:
- 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.
- The commercial aerospace sector is expected to set new records for aircraft production in 2015.
- 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.
- 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.
Executive Summary - 2014
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