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The global aerospace and defence industry will ride high in 2012 as it did last year, according to a report by industry consultancy PricewaterhouseCoopers.
Mergers and acquisitions in the sector are likely to continue this year too.
The national scene will be lifted mainly by government support and higher defence outlay.
The report, ‘Aerospace & Defence: 2011 year in review and 2012 forecast', says a rosy-looking 2012 seems albeit tinged with rising costs and delayed deliveries.
“..Times are good for the A&D space. Many are [also] debating whether there's a bubble. However, current backlog levels provide ample cushion between demand and production rates.”
It, however, cautions that, “although 2012 is off to a great start, the industry will continue to face rising production rates, raw materials shortages and late deliveries.”
On the domestic scene, Mr Dhiraj Mathur, Leader — Aerospace and Defence, PwC India, said, “The creation of the Indian aerospace supply chain and industrial base is gathering momentum. The drivers are India's inherent competitiveness in manufacturing, IT and engineering services along with the (Government's) proactive support and increased defence spending.”
SUPPLY RECORD
Last year, commercial aerospace companies delivered a record 1,000-plus large aircraft. The top 100 A&D companies posted total revenue of $677 billion — a five per cent rise over 2010. Operating profits rose 2 per cent, at $60 billion.
Last year saw record A&D transactions, with 341 deals worth $43.7 billion conducted .
In Asia and the US, two re-engined single aisle aircraft models led the booking activity: the A320NEO and the 737MAX.
Mr Neil Hampson, Global Aerospace and Defence Leader, PwC, was quoted as saying that 2012 revenues could rise; but a poor supply chain may spoil the game.
“This year, we expect continued growth in commercial aerospace from strong and steady demand for global aviation and increased commercial aircraft production. Defence revenues should continue to trend modestly lower.”
DEFENCE ORDERS
For defence contractors, export growth led to a record backlog of $327 billion in 2011.
These companies will face pressure to improve productivity, increase transparency and meet complex government regulations.
According to Mr Hampson, growth was to be read with backlogs at original equipment manufacturers; “Aerospace M&A is likely to continue to lead the A&D deal market in 2012. Defence M&A will likely remain oriented toward large spin-offs of lower-growth units and smaller acquisitions in areas such as cyber security.”
Falling defence budgets could warrant larger-scale consolidations. . “Strategic investors have significant cash positions and appear well-positioned to drive a high volume of deals in 2012.”
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