Travel Demand, New Technologies, And Security Threats Are Fueling Increases In Aircraft Production, Defense Budgets, And The Global Supply Chain

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.

Over the last three years, global A&D industry revenue was largely impacted by decreased revenues in the United States (US) defense subsector. The return to growth in 2016 is expected to be fueled by increases in the US defense budget, a resurgence of global security threats, and growth in defense budgets of key nations around the world. In addition, relatively stable growth in global gross domestic product (GDP), lower crude oil and other commodity prices, and continued increases in passenger travel demand are contributing to expected growth in production rates for next-generation commercial aircraft.

"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," says Tom Captain, Deloitte Global Leader, Aerospace and Defense Segment. "Global revenues in the defense subsector are expected to return to growth in 2016, as governments equip 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. "Strong increases year over year of global revenue passenger kilometers are leading to an unprecedented level of aircraft production rates, which in 2015 were about twice the levels experienced 10 years ago," said Captain.

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, the economic slowdown in China and its potential impact on the commercial aerospace subsector, and the near-term effects a strong US dollar may have on the industry.

(Source: Deloitte news release)

FMI: www.deloitte.com/manufacturing