A cautionary tale: Deloitte's 2012 global aerospace and defense industry outlook

A new report by the Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry group entitled 2012 Global aerospace and defense industry outlook: A tale of two industries indicates optimism for commercial aircraft sector and caution for defense. The financial performance of the top global aerospace and defense companies is expected to stay flat in 2012. Despite the challenging environment, the aerospace and defense industry is likely to continue to develop game changing technology innovations, according to the report.

The commercial aircraft sector is likely to enter a prolonged upcycle in production in 2012 as a result of increasing demand for leisure and business travel, particularly in the Asia Pacific region, while the global defense market is expected to experience flat or declining growth due to anticipated decreases in military spending, principally in the United States and Europe. According to the report, the growth in the commercial aircraft industry is expected to be driven by continued production and development of next-generation aircraft programs that aim to address increasing fuel costs.

Meanwhile, continued global economic challenges coupled with revenue gaps and cost pressures may result in margin contraction for global defense players. As a result, the defense sector is likely to undergo more streamlining of its cost structure, divestiture of non-core assets, and additions of gap filling, as well as transformation acquisitions.

Overall, the financial performance of the top global aerospace and defense companies in 2012 is expected to be similar to 2011 performance, with the decline in defense revenues offset by cost-cutting and aggressive growth actions. In 2012, the aerospace and defense industry is likely to continue to develop game-changing technology innovations in areas such as cyber-security, directed energy, high-powered microwave weapons, hypersonic missiles, long-range and high-altitude unmanned aerial systems, and extraordinary software that can trace financial transactions of known terrorists.

To access "2012 Global aerospace and defense industry outlook: A tale of two industries", please visit the Deloitte website at http://goo.gl/plEQQ.