Commercial aircraft market sector entering prolonged up cycle, says Deloitte report

NEW YORK, 5 March 2012. The commercial aircraft sector is likely to enter a prolonged up cycle in production in 2012, as a result of increasing demand for leisure and business travel, particularly in the Asia Pacific region, according to “2012 Global aerospace and defense outlook: A tale of two industries” by Deloitte Touche Tohmatsu Limited's (DTTL’s) Global Manufacturing Industry group. The global defense market is expected to experience flat or declining growth due to anticipated decreases in military spending, principally in the U.S. and Europe.

According to the report, growth in the commercial aircraft industry will be driven by continued production and development of next-generation aircraft programs that aim to address increasing fuel costs.

"The commercial aircraft sector has taken an innovative approach to responding to increasing fuel costs," says Tom Captain, Global Aerospace and Defense sector leader, DTTL. "The development of fuel-efficient aircrafts that utilize next-generation engine technology has resulted in a significant rise in aircraft orders. Certain suppliers will be challenged to keep pace with the expected increase in production rates and new program introductions this year."

Continued global economic challenges coupled with revenue gaps and cost pressures may result in margin contraction for global defense players. As a result, the defense sector is likely to undergo more streamlining of its cost structure, divestiture of non-core assets, and additions of gap filling, as well as transformation acquisitions.

"Expect to see more aggressive competition for the fewer large defense programs of record, as well as growth in defense sales to India, Brazil, the United Arab Emirates, the Kingdom of Saudi Arabia, Brazil,Japan, and South Korea–countries with emerging wealth and a need to strengthen their defense capabilities," continues Captain.

Overall, the financial performance of the top global aerospace and defense companies in 2012 is expected to be similar to 2011 performance, with the decline in defense revenues offset by cost-cutting and aggressive growth actions.  

In 2012, the aerospace and defense industry is likely to continue to develop game-changing technology innovations in areas such as cyber-security, directed energy, high-powered microwave weapons, hypersonic missiles, long-range and high-altitude unmanned aerial systems, and software that can trace financial transactions of known terrorists.

 

 

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