Deloitte Report Forecasts Flat Aerospace & Defence Industry for 2011
28 January 2011
Financial performance outlook for the United States aerospace and defence (A&D) sector will likely be flat for 2011, according to a new report from Deloitte. The Deloitte report, “Aerospace & Defense 2011 Outlook,” attributes the forecast to the continued impact from anticipated defense spending cuts, offset by an uptick in commercial aerospace, and the slow recovering economic cycle.
According to the analysis in the report, for many defense firms, the new market realities will require innovation, risk taking and bold moves to continue growth in revenues and profitability. Several areas for growth are expected to be in critical emerging and growing product segments. These include: cybersecurity, intelligence, surveillance and reconnaissance (ISR), defence electronics, precision targeting and response, remotely controlled platforms, directed energy, data fusion and energy security.
Furthermore, given the slowdown in U.S. defense spending, the report suggests that contractors need to consider how to replace revenues in areas such as foreign military sales, growth in adjacent markets and through gap filling and scale building acquisitions, for example.
“Continued threats in the Middle East, North Korea, Iran and other places, plus the significant military procurement decisions being made in Saudi Arabia, India, Brazil and the UAE, will likely provide defense contractors with opportunities to win new business,” said General (USAF Ret) Chuck Wald, who serves as a senior advisor to the aerospace and defense industry for Deloitte.
For commercial aerospace, the 2011 Outlook examines the beginnings of what appears to be an up-cycle in sales and production, first in the large commercial aircraft segment, to be followed in 2012 by the business and general aviation segment. With production rate increases being announced by the large aircraft manufacturers, and the introduction of next generation fuel efficient aircraft, the supply base may expect to experience a prolonged growth pattern, if past is prologue.
“With the seven year global moving average for production of commercial aircraft approaching 1,000 aircraft per year, we expect that the game changing next generation aircraft will create new purchase demand by passenger and freight airline operators,” said Tom Captain, vice chairman and aerospace and defense sector leader, Deloitte LLP.
Acopy of the 2011 Outlook, can be obtained from : www.deloitte.com/us/aerospacedefense/2011outlook .