Defense spending is growing systematically with the escalation of global security threats. According to the report of the consulting company Deloitte: 2020 Global Aerospace and Defense industry outlook, in 2020 individual governments will spend 3-4 percent on defense goals. more than a year earlier, i.e. around $ 2 trillion. While the defense market is gradually improving its health, the commercial aviation and space sector experienced a slight decline in 2019. However, Deloitte experts predict that in 2020 it will return to the development path.
The rise in defense budgets is primarily driven by increased military spending in the United States and countries such as China, Russia and India. The governments of these countries are focusing more and more on the modernization and financing of the armed forces. It is associated with increasing international tensions and the current security threat around the world.
Breakdown of supplies
2019 saw a decline in deliveries from the commercial and space aviation sector. The reason for this was a problem with the production of some aircraft models. The order backlog for commercial aircraft also fell to over 14,000 at the end of August 2019. pieces. This is 700 less compared to the previous year. This decrease is due to the cancellation of already placed orders and a smaller number of new ones. However, Deloitte experts predict that at the end of next year everything will return to the right track.
– The drop in deliveries is related not only to the economic pressure on the airlines, but also to ever higher production requirements. Along with the technological development, the customers of the A&D market have increasing expectations when it comes to timely deliveries and adapting producers to their needs. Therefore, in order to maintain the current market position, companies will be forced to apply new technological solutions. In practice, this will translate into greater productivity and efficiency – says Piotr Świętochowski, Partner in the Audit & Assurance Department, defense industry expert, Deloitte.
Aviation industry prospects
It is estimated that in 2020, 450 commercial aircraft will be produced more than in the previous year, reaching the level of 1,900 units. This includes not only the return to service of the Boeing 737 MAX, but also the planned commencement of supplies of narrow-body aircraft to China in 2021. Additionally, Deloitte experts forecast further development of regional connections. Over the next 20 years, over 5,000 jobs will be needed regionally. jets.
This segment is driven primarily by an aging fleet and demand from Asia-Pacific, the Middle East and Latin America. The countries of these regions will continue to develop regional connections. The changes will affect the secondary market, where the desire to reduce maintenance costs and the emergence of new technological solutions will prevail. Thus, not only aftermarket manufacturers, but also original aircraft manufacturing companies will have greater opportunities.
– The aviation industry largely depends on the condition of the global economy and the global aviation industry. The technological development of countries also plays an important role. During such high market competition, the use of modern solutions has become a decisive factor. By investing in digital technologies, the A&D industry will be able to meet market challenges. Intelligent solutions can contribute up to 12 percent. increase of companies’ results without major investments – says Piotr Świętochowski.
The global space sector will grow rapidly over the next few years. Currently, the profits of the space market come mainly from the production of satellites or rockets, which in turn are used to bring the former into orbit.
According to specialists from Deloitte, investments in technologies and services related to space will also increase in the near future. Funding will come mainly from national governments and venture capital funds, where the initial potential of the invested company matters. Deloitte experts predict that 2020 will create the foundations for significant changes in this segment
– The purpose of investments in research, technological solutions or space-related services is mainly to improve the military capabilities of individual countries. Significant changes in the context of the military use of space, ie the deployment of non-satellite weapons there, are unlikely. The implementation of new military space concepts will therefore take place in the second half of the next decade – forecasts the Deloitte expert.
The leader of the future
The United States is currently the main driver of growth in the aerospace and defense industries. The growing number of passengers around the world and political instability will become the main drivers of the global increase in defense spending by about 3%. in the next five years. Expert