The global aerospace and defense industry is expected to remain flat in 2012, yet the commercial aircraft industry is likely to enter a prolonged upcycle in production, according to an annual report by the Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry.
The commercial aircraft industry is expected to enter a prolonged period of increased production in 2012, after 2011 was the best year ever for production in the commercial aircraft industry and the second best year for orders.
The demand for commercial aircraft in 2012 is being driven primarily by leisure and business travel, particularly in the Asia Pacific region. The top large commercial aircraft manufacturers expect between 26,900 and 33,500 commercial aircraft to be produced over the next 20 years. Plus, there is a demand for next-generation aircraft programs that are more fuel efficient.
Yet the global defense industry is expected to either be flat or decline due to decreased military spending primarily in the U.S. and Europe. “The sector is likely to undergo more streamlining of its cost structure, divestiture of noncore assets, and additions of gap filling, as well as game-changing acquisitions,” the report states.
Military spending reductions in the U.S., United Kingdom, and the rest of Europe, are expected to be offset with military spending increases in China, India, Kingdom of Saudi Arabia, the United Arab Emirates, Japan, and Brazil, prompting many in the defense industry to push for loosened export controls.
If an additional $500 billion is cut over 10 years due to sequestration, up to 25 percent of defense and government contractor budgets are likely to be impacted. These cuts could mean the U.S. defense industry may not be able to afford to keep certain technology capabilities alive.
