Deloitte report outlines declines in defense spending, recording setting commercial aerospace production
NEW YORK, USA: The continued decline of defense spending into 2014 will likely force new revenue streams for the aerospace and defense (A&D) industry that may include innovations in intelligence, precision strike technologies, and cyber security.
This is according to the Deloitte Touche Tohmatsu Limited (DTTL) 2014 Global Aerospace and Defense Outlook, which also projects the industry to repeat a modest growth of 5 percent, mirroring the growth rate of the past two years.
"It is anticipated that global revenues for the defense sector will track to similar levels as in the past two years, particularly in the US and Europe," said Tom Captain, DTTL Global.
Aerospace and defense sector leader
The commercial aerospace sector is expected to again set records for production of aircraft, due to 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 regions.
The decline in defense spending will challenge the industry to find new sources of revenue. These may include innovations in next generation intelligence surveillance, reconnaissance and precision strike technologies, cyber-security, opportunities in adjacent markets, potential new commercial ventures, and also acquisitions of synergistic businesses.
On the other hand, the significant demand for new commercial aircraft will pressure supplier networks to continuously improve its engineering design, manufacturing and supply chain management capabilities, all the while being able to cost effectively meet tougher price concession requirements from customers.
"As we celebrate the 110th anniversary of the Wright Brothers' first powered flight, we are reminded that the industry is still young, yet it has contributed much, with technology innovation at the heart of advancements in the industry," adds Captain.
"2014 and the rest of the decade promises to deliver even more exciting technology innovations that will focus on the way consumers travel by commercial aircraft, communicate via satellites, shop over the Internet, conduct armed conflict when necessary, and assist with humanitarian missions to far reaches of the globe."