- 2018 Global aerospace and defense industry outlook by Deloitte
New Delhi. 07 May 2018. Global aerospace and defense (A&D) industry revenues are expected to experience significant growth in 2018. Revenues are expected to accelerate at 4.1 percent almost doubling last year’s 2.1 percent growth. This is according to Deloitte Global’s 2018 Global aerospace and defense industry outlook report, which analyzes the commercial aircraft and defense sectors and identifies key trends ahead.
With the global economic recovery underway and heightened passenger travel demand, the commercial aircraft subsector is expected to grow at 4.8 percent, primarily driven by elevated production levels to meet growing demand. South Asia is said to witness 8.0 percent passenger traffic growth over the next 20 years, which will be dominated by India.
Alaric Diniz, Director, Deloitte India said, “The country is forecasted to have a demand for a record 2,100 new aircrafts, worth US$290 billion, with the majority of these being single aisle planes. The demand will primarily support the growth of low-cost carriers, which account for more than 60.0 percent of the total flights in the country.”
Over the last two years, the Indian government has undertaken multiple policy initiatives to attract foreign investment in the A&D industry including 100% FDI with government approval, increased international engagement, updated defense procurement procedures with amendments to the offset regulations and the strategic partnership model focused on key subsectors such as fighter aircraft, submarines, helicopters, and armored fighting vehicles.
Additional key trends in the industry include:
- In 2018, global M&A activity is expected to remain strong in the aerospace sector, driven by OEM’s continued pressure on suppliers to reduce costs and boost production rates.
- Acquisitions related to space, data analytics, cyber security and advanced technologies are expected to be the focal point. Large prime contractors are expected to buy small- to mid-sized companies to gain access to new technologies or certain markets.
- In Europe, the defense sector is likely to see large deals; however, companies may choose Joint Ventures to bolster their market positions. Valuations of A&D companies have been on the rise with price earnings (P/E) ratio of the A&D industry at 30 percent higher than it was five years ago.
- India and the Middle East are likely to be ‘hotspots’ for cross-border JVs in the near term for both commercial aircraft and defense sector on account of change in regulations, access to new technologies and the need for local partners.