Deloitte’s Research Center for Energy & Industrial recently released it’s 14-page report on the Aerospace and Defense industry in 2020. But if you’re more interested in hitting the highlights than sifting through the valuable but tedious report, then consider these important takeaways from Deloitte’s 2020 outlook for A&D.
Bird’s-Eye View of A&D in 2020
Deloitte indicates that the defense sector will continue to soar this year in the face of security threats and expanding defense budgets worldwide. In fact, you can expect to see a 3-4% increase in defense expenditures in 2020, reaching an estimated $1.9 trillion dollars.
Meanwhile the commercial aerospace sector is predicted to see continued growth through 2020 as demand for commercial aircraft remains high. Deloitte reports that as of August 2019, 14,000 units remain backlogged. Additionally, it’s projected that commercial aircraft production will reach about 1,900 aircraft in 2020, surpassing last year’s numbers.
Deloitte’s report offers another bold prediction, indicating that the commercial aerospace sector can expect to produce over 40,000 new units within the next 20 years.
As expected, the U.S. remains the “primary growth driver” for the A&D industry, but as more passengers take to the air worldwide, expect to see a surge in demand from other regions like Asia and the Middle East.
1. Need for Increased Production Technology in Defense Sector
Defense contractors and their supply chains will need to meet increasing demand due to rising global defense spending and the modernization of military. To improve production yields, defense contractors and their supply chains should implement “highly agile” production that allows them to quickly adapt to the changing demand, according to Deloitte’s 2020 outlook.
As governments seek to update their military and technological capabilities, their defense needs change abruptly. Successful contractors will be prepared to adopt new production technologies, like smart factory initiatives, to keep pace with the industry.
2. Expanding Opportunities for Aftermarket Revenue in Commercial Aerospace
Today’s commercial airlines are creating an aftermarket-friendly environment. Many employ a changing mixed fleet and are embracing new technologies while seeking to reduce maintenance costs. As backlogs and production rates increase, even OEM’s are cashing in on these aftermarket opportunities. OEM’s like Boeing are seeking partnerships and diversifying with new business lines to expand their aftermarket revenues.
3. More Mergers and Acquisitions on the Horizon for A&D
As the A&D supply chain focuses efforts on keeping pace with modernization and frequent changes in demand, many small companies will struggle with the burdens of increased investment requirements and other hefty demands. Deloitte’s 2020 outlook predicts this will lead to further consolidation by parts family. Expect to see large prime contractors acquire companies that provide them with access to advanced technologies while offering them an expanded global reach.
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