Deloitte: Global Aerospace and Defense Sluggish

Rob Starr, Big4.com Staff Reporter

Despite the uncertainty in the defense sector, a new Deloitte report has found that the global A&D industry as a whole grew in 2011 to US$681 billion, posting a sluggish revenue gain of 2.3 percent, compared to 2.5 percent in 2010.

According to the report, financial performance differences widened between the commercial and defense segments in 2011: commercial revenues grew 10.1 percent while defense revenues declined by 3.3 percent. The report also suggests that factors contributing to the growth of commercial revenues were record production levels of large commercial aircraft and increases in demand for aircraft services. Additionally, the report indicates that defense revenues were likely impacted by decreased defense budgets, competing domestic priorities, weaker than expected economic performance in the western world, and the drawdown of forces in Iraq and Afghanistan.

The report found that regionally, the financial performance differences between A&D companies based in Europe and the United States continue to diverge. According to the report, the European A&D industry grew less than one percent (only 0.8 percent) while the U.S. industry achieved 3.3 percent revenue growth in 2011. Most significantly, the report found that reported operating earnings in Europe fell by 21.6 percent, while companies in the United States were able to grow operating earnings by 2.9 percent.

On the supplier side, companies experienced revenue growth in 2011, the report found. Other report findings: Tier one, two, and three A&D suppliers, many of which have significant participation in the commercial aerospace segment, reported revenue increases of 5.1 percent, 11.1 percent, and 29.1 percent respectively. And according to the report, these increases compare with revenue growth of just 0.1 percent for original equipment manufacturers, many of which are defense segment companies.