Deloitte’s analysis of the quarterly financial statements of the top 25 global aerospace and defence (A and D) companies indicates that financial performance will remain flat throughout 2010.
For the companies that have issued quarterly financial statements in 2010, sales-revenue growth was -1.01 per cent, operating profit growth was -1.92 per cent and operating margin growth was -0.92 per cent.
Tom Captain, global leader of aerospace and defence at Deloitte, said: ‘Despite these growth challenges, the industry remains resilient and is performing better than many other sectors hit hard by the recession.
‘The imperative now will be to cut costs and grow top-line revenue in new areas to demonstrate to global markets the ability to grow profits again.’
The commercial aircraft industry is rebounding from its 15-year sales low of 2009. If the recovery continues into the second half of 2010, total orders for commercial aircraft are expected to be in the 800-unit range for the year.
These sentiments were echoed last week by Ian Godden, chairman of ADS, the UK’s aviation, defence and security trade organisation, when he said that Q2 2010 marks ‘the worst of the trough’ in overall orders for British companies.
He predicted a recovery for UK companies between 2011 and 2014, driven largely by commercial aircraft.
Looking further ahead, Boeing’s 2010 Current Market Outlook forecasts a $3.6tn market for new commercial airplanes over the next 20 years, as economies recover and demand for new and replacement aircraft drives growth. The report predicts a market for 30,900 new commercial passenger and freighter airplanes by 2029.
Pauline Biddle, UK head of aerospace and defence at Deloitte, said: ‘Long-term growth in aircraft production is expected to increase due to global trends, including the growing wealth from the Asia-Pacific region, replacement of older aircraft in favour of fuel-efficient and environmentally friendly aircraft, new point-to-point markets and the opening up of historically under-served regions.
‘The market demand for new large-scale commercial aircraft is forecast to be close to 30,000 new commercial aircraft through to 2029, worth an estimated $3.2tn.’
Deloitte believes that the global picture for defence budgets to be mixed. While budgets in the US and Europe are under pressure, spending in India and the Middle East is growing significantly. US and European aerospace companies now recognise India as a critical market, as well as a potential engineering and manufacturing partner.
For defence contractors, new areas will generate growth in 2010 and beyond. In particular, the number and variety of large hardware-based platforms is expected to decline and more innovation and capability will be found in software integration.
General Charles Wald, senior aerospace and defence advisor to Deloitte US, commented: ‘Decreasing defence spend by developed countries will require smarter use of the remaining funds in order to develop and deploy the technologies needed to counter our ever-more sophisticated adversaries.’