Steady growth predicted for global aerospace and defence industry

The report, Compass 2010 – Global Aerospace & Defence Sector Outlook, from business consultants Deloitte expects steady growth in 2010 for the global aerospace and defence (A&D) industry as order numbers rebound and significant growth opportunities emerge in the east and mergers and acquisition (M&A) activity – particularly in the US by UK firms – accelerates. According to Deloitte, orders for new commercial aircraft are projected to grow to over 800 units this year, reversing the steep decline experienced in 2009 when orders totalled 413 units. Similarly, demand for business jets (pictured) is showing signs of improvement. Defence companies should also see demand rise driven by new requirements for innovative technologies in cyber-security, intelligence, surveillance, reconnaissance, remotely piloted vehicles and data fusion. Pauline Biddle, UK head of aerospace and defence at Deloitte, commented: "We are confident that 2010 will see an improvement in M&A activity in the A&D sector. While we do not envisage a return to the high volumes of deal activity witnessed in the peak year of 2007, we are confident that both strategic and private equity buyers can gain access to capital to pursue acquisition opportunities in this resilient sector. "We anticipate that large original equipment manufacturers will continue to acquire smaller companies to fill capability gaps. European sector firms, led as in prior years by UK headquartered businesses, are likely to acquire U.S. companies. This will occur as companies look to 'dollarise' their cost structure and to establish or strengthen their position with the largest A&D market in the world, the U.S. Department of Defence. "Further, we predict a very definite move to the east as China, India and the Middle East increase their demand for industry products, as well as growing their manufacturing capability. China is expected to become a major provider of commercial aircraft over the next 20 years and India is boosting its defence offering, with their procurement budget expected to rise to US$45bn by 2012. U.S. and European aerospace companies now recognise India as a critical market as well as a potential manufacturing partner."