Aerospace and Defense: Growth Prospects Remain Upbeat

The global aerospace and defense (A&D) sector is likely to experience stronger growth in 2017, following multiple years of positive, but a subdued rate of growth. Deloitte forecasts the sector revenues will likely grow by about 2.0 percent in 2017.

Stable global gross domestic product (GDP) growth, relatively lower commodity prices including crude oil, strong passenger travel demand, especially in the Middle East and Asia Pacific region, will likely drive the commercial aerospace sub-sector growth. Commercial aircraft backlog is at an all-time high of ~13,500 aircraft units, representing more than nine and a half years of current annual production rate.

Specifically, strong global airline passenger traffic and improved global airline profits, primarily on account of lower fuel costs will likely drive increased large commercial aircraft production and in turn commercial aerospace revenues in 2017 and 2018. We expect about 96 more aircraft to be produced in 2017 as compared to 2016.

On the defense side, resurgence of global security threats, expected increases in US defense budgets, as well as higher defense spending from other major regional powers such as Japan and India will likely promote global defense sub-sector revenue growth in the near future.

In particular, we see an upside for US defense expenditure, given the outcome of the recently concluded US elections. In addition to boosting the number of troops, the US military will likely add more aircraft and ships, which will drive revenue growth at large defense primes over the next few years.

Click here for the full report (32 PDF pages), on the Deloitte website.


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