20170321-德勤-2017_Global_aerospace_and_defense_sector_outlook_28页_813kb

2017 Global Aerospace and Defense Sector Outlook Summary

Core Content

The global aerospace and defense (A&D) sector is projected to experience stronger growth in 2017, following several years of modest but positive growth. Deloitte forecasts a 2.0% revenue growth for the sector in 2017, with the commercial aerospace sub-sector expected to grow by 0.3% and the defense sub-sector by 3.2%. The US A&D sector is anticipated to grow by 1.7% in revenue and 12.7% in operating profits, while the European A&D sector is projected to see a 2.5% revenue increase and a 9.3% rise in operating earnings.

Main Points

• Commercial Aerospace Growth:

  • The sub-sector is expected to grow slightly in 2017, driven by a recovery in aircraft production following a slowdown in 2016.
  • Production is expected to increase from 1,360 units in 2016 to 1,456 units in 2017, a 7.1% increase.
  • Demand for next-generation aircraft and rising passenger traffic, especially in the Asia-Pacific and Middle East, are key drivers.
  • However, pricing pressure and product mix changes by airlines may limit revenue growth.
  • There is a significant backlog of 13,500 aircraft, which will continue to influence production levels.
  • New entrants like China and Russia are emerging in the market, potentially challenging the existing duopoly.
  • The supply chain faces challenges in meeting increased demand for capacity, quality, and timely delivery, with a focus on cost reduction and innovation.

• Defense Sector Growth:

  • The defense sub-sector is expected to grow at 3.2% in 2017 due to increased US defense spending and rising global security threats.
  • The US administration under President Trump has signaled increased defense budgets, leading to more military equipment procurement.
  • Countries such as the UAE, Saudi Arabia, India, South Korea, Japan, and China are increasing their defense spending.
  • Defense contractors can expect opportunities in military equipment such as armored vehicles, missiles, and surveillance systems.

• Growth Regions:

  • The Asia-Pacific and Middle East regions are key growth areas for commercial aerospace due to rising wealth and demand for air travel.
  • The defense sector is seeing increased spending in the Middle East, Asia, and Oceania, with the US and Europe experiencing declines.
  • Global defense companies are shifting focus to regions like India, China, and the Middle East to capitalize on rising military expenditures.

• Macro and Geopolitical Trends:

  • Global security threats are increasing, leading to a shift in defense priorities from traditional land-based conflicts to maritime disputes, cyber-attacks, and hybrid warfare.
  • The US is expected to increase its military presence and capabilities, which will have a positive impact on the defense sector.
  • The new US administration is likely to prioritize military modernization and increase defense budgets.

• Technological Advancements:

  • The A&D sector is adopting digital innovations such as additive manufacturing, machine learning, and smart automation.
  • Additive manufacturing is being used to produce complex and customized parts, leading to improvements in efficiency and performance.
  • These technologies are expected to shape the future of the sector, improving fuel efficiency and reducing costs.

• Challenges and Opportunities:

  • One-time charges and write-downs have increased in the A&D sector, primarily due to program delays, cost overruns, and currency fluctuations.
  • While the magnitude of these charges is expected to slow, they will likely continue to impact the sector.
  • Acquisitions and joint ventures are becoming more common as defense companies seek to expand into new markets and share risks.
  • The US A&D sector is still more efficient than the rest of the world, with higher operating earnings per employee and better operating margins.

Key Information

• Revenues:

  • Global A&D sector revenue growth: 2.0% in 2017
  • Commercial aerospace revenue growth: 0.3% in 2017
  • Defense sector revenue growth: 3.2% in 2017

• Operating Earnings:

  • Commercial aerospace: 20.6% growth in 2017
  • Defense sector: 7.0% growth in 2017
  • US A&D sector: 12.7% growth in operating profits

• Production Trends:

  • 96 more large commercial aircraft are expected to be produced in 2017 compared to 2016
  • Commercial aircraft production is expected to increase by 29.3% over the next decade
  • Airbus and Boeing are increasing production rates for their respective aircraft models

• Regional Trends:

  • Asia-Pacific and Middle East: High growth in passenger traffic and demand for new aircraft
  • Middle East, Asia, and Oceania: Rising defense spending
  • US and Europe: Declining defense spending but still key players in the A&D sector

• Market Dynamics:

  • Increased competition from new global entrants like China and Russia
  • Supply chain challenges include cost reduction, innovation, and meeting demand for higher quality and faster delivery
  • Foreign military sales (FMS) are expected to remain strong due to increased defense budgets in key markets

• Efficiency and Productivity:

  • The US A&D sector is more efficient than the rest of the world, with higher operating earnings per employee and better margins
  • Efficiency initiatives such as automation, economies of scale, and supplier integration are helping to improve productivity

• One-Time Charges:

  • The global A&D sector saw a significant increase in one-time charges in 2015, reaching US$10.3 billion
  • These charges are expected to continue in 2017 due to factors such as Brexit, currency fluctuations, and program delays

Conclusion

The global aerospace and defense sector is poised for growth in 2017, with commercial aerospace experiencing marginal growth and defense seeing a stronger uptick. Key drivers include rising passenger and freight traffic, increased defense spending, and technological advancements. However, the sector faces challenges such as pricing pressure, supply chain complexity, and the emergence of new competitors. The US remains a leader in efficiency and productivity, but global defense companies are increasingly looking to regions like India, China, and the Middle East for growth opportunities.