The commercial aerospace sub sector in 2014 set new records for sales totaling 2,888 orders. Photo: AP
Dubai: A record aircraft production is expected to boost commercial aerospace sector growth nearly eight per cent in 2015, according to a latest study by Deloitte.
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 region are key drivers behind this trend.
According to the 2015 Global aerospace and defence industry outlook, the industry is likely to grow around three per cent. This increase is due to the continued strength of the commercial aerospace sector from rising passenger travel demand and production of next generation fuel-efficient aircraft.
Revenue and earnings growth in the commercial aerospace sector is expected to be a bright spot and driving force behind the global aerospace and defence (A&D) industry performance in 2015.
Global aerospace and defence companies added $12.7 billion in revenues in 2014, according to a Deloitte study of the top 100 global aerospace and defence companies.
Although revenues in the commercial aerospace sub sector increased by $23.7 billion in 2014, the strong growth was partly offset by revenue declines in the defense sub sector, which experienced a $8.2 billion decrease in revenue from 2013 to 2014.
The analysis found that the commercial aerospace sub sector in 2014 set new records for sales totaling 2,888 orders; a 6.1 per cent increase in deliveries to 1,352 planes; a 14.4 per cent growth increase in backlogs reaching a record high of 12,175 aircraft; and revenues reaching $314.9 billion.
The primary drivers of new commercial aircraft sales include increased travel demand, especially in the Middle East, India, and China, as well as replacement of obsolete aircraft with new fuel-efficient models.
Global revenues in the defence sector will likely continue to decrease in 2015 at an estimated 1.3 per cent. Yet, defence spending is increasing in several areas of the globe, especially in the UAE, Saudi Arabia, India, South Korea, Japan, China, and Russia, as these countries equip their militaries with modern defense platforms and technologies, according to the report.
Over the next few years, the defence sector will be challenged in two major ways: how to grow profitably in a declining market and what actions are necessary to cut costs to maintain acceptable financial performance.
Successful defense companies are addressing these challenges by branching out into adjacent markets, focusing on foreign military sales, and investing in next generation product development in cyber security, defense electronics, precision strike, unmanned systems, and advanced analytics.
“Led by the largest country defence industry, the US has lost close to 168,000 defence jobs since 2010 and revenues of approximately $11.5 billion in the same period”, said Tom Captain, Deloitte Global Aerospace and Defense Sector Leader.
The study found that aerospace and defense companies headquartered in the United States accounted for $408.5 billion of the global aerospace and defence sector revenue, while European companies accounted for $222.8 billion in 2014.
“Europe is also a critical geographic region representing nearly 33 per cent of total global aerospace and defence revenues,” said Captain.
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