Deloitte report: Projects 5 percent growth in aerospace and defense industry, technology innovations to dominate in 2014
Report outlines declines in defense spending, recording setting commercial aerospace production
SINGAPORE, 8 January 2014 — The continued decline of defense spending into 2014 will likely force new revenue streams for the aerospace and defense (A&D) industry that may include innovations in intelligence, precision strike technologies, and cyber security. This is according to the Deloitte Touche Tohmatsu Limited (DTTL) 2014 Global Aerospace and Defense Outlook, which also projects the industry to repeat a modest growth of 5 percent, mirroring the growth rate of the past two years.
“It is anticipated that global revenues for the defense sector will track to similar levels as in the past two years, around minus 2 percent, as a result of continued efforts by governments to cut defense budgets, particularly in the U.S. and Europe,” said Tom Captain, DTTL Global Aerospace and Defense Sector Leader.
The commercial aerospace sector is expected to again set records for production of aircraft, due to the accelerated replacement cycle of obsolete aircraft with next generation fuel-efficient aircraft, and growing passenger travel demand, especially in the Middle East and the Asia Pacific regions.
“The Asia Pacific countries recorded one of the strongest increases in the commercial aerospace sector during the last year contributing over a third to the total growth in international premium travel, according to the International Air Transport Association (IATA), and this trend is set to continue in the future given the positive economic growth expected across the region,” said Hugo Walkinshaw, Deloitte Southeast Asia Manufacturing Leader.
“In the defense sector, four countries from Southeast Asia – Indonesia, Malaysia, Singapore and Thailand are listed among the Global top 50 defense spenders (Singapore with 8%, while Indonesia, Malaysia and Thailand with 5%). Nevertheless, the global defense spending in the region is expected to follow the global downward trend in the following years due to a declining government spending environment” added Walkinshaw.
The decline in defense spending will challenge the industry to find new sources of revenue. These may include innovations in next generation intelligence surveillance, reconnaissance and precision strike technologies, cyber-security, opportunities in adjacent markets, potential new commercial ventures, and also acquisitions of synergistic businesses. On the other hand, the significant demand for new commercial aircraft will pressure supplier networks to continuously improve its engineering design, manufacturing and supply chain management capabilities, all the while being able to cost effectively meet tougher price concession requirements from customers.
“As we celebrate the 110th anniversary of the Wright Brothers’ first powered flight, we are reminded that the industry is still young, yet it has contributed much, with technology innovation at the heart of advancements in the industry,” adds Captain. “2014 and the rest of the decade promises to deliver even more exciting technology innovations that will focus on the way consumers travel by commercial aircraft, communicate via satellites, shop over the internet, conduct armed conflict when necessary, and assist with humanitarian missions to far reaches of the globe.”
View the report at: www.deloitte.com/us/2014ADoutlook
DTTL Global Manufacturing Industry group
The DTTL Global Manufacturing Industry group is comprised of around 2,000 member firm partners and over 13,000 industry professionals in over 45 countries. The group’s deep industry knowledge, service line experience, and thought leadership allows them to solve complex business issues with member firm clients in every corner of the globe. Deloitte member firms attract, develop, and retain the very best professionals and instill a set of shared values centered on integrity, value to clients, and commitment to each other and strength from diversity. Deloitte member firms provide professional services to 80 percent of the manufacturing industry companies on the Fortune Global 500®. For more information about the Global Manufacturing Industry group, please visit www.deloitte.com/manufacturing.