Aerospace & Defence 2010 annual review and 2011 forecast: PwC

Our Aerospace & Defence 2010 year in review and 2011 forecast analyzes the path the aerospace and defence (A&D) industry took through the recent global recession and dares an outlook at this year's performance. While the recent global recession took a heavy toll on many industries, evident in waves of layoffs, lost revenue, bankruptcies, and a general sense of uncertainly about the future, the A&D industry as a whole continues to buck the trend, finishing 2010 with record results. Revenues increased by 2% compared with 2009, while operating profit was up 19% over 2009. Perhaps the most notable attribute affecting results was better programme performance. Also affecting 2010 performance was a strong rebound in commercial aviation, which drove better results in the aftermarket. While overall industry results were at record levels, not all news was cheery. Pressure has continued to mount on global defence budgets and on contractors to improve productivity. Many defence contractors have already taken actions to reduce payrolls and consolidate operations in preparation for leaner time ahead.

As we enter the second decade of the 21st century, commercial aerospace appears to be full of optimism and growth. Aviation should continue to grow faster than the overall economy, as it has done, because this critical part of the global economic infrastructure is bolstered by the growing middle class in Asia, the Middle East, Eastern Europe, and Latin America. However, the shift of economic power from West to East creates a changing competitive landscape. The outlook for defence, on the other hand, is filled with uncertainty and challenge. There are palpable tensions between the dynamic need for global security and a scarcity of economic resources. Security, however, is not a luxury but a necessity. So the defence industry, with a proud tradition of innovation, must become leaner and more productive. Policy makers can support the industry by preserving funding to maintain critical skills and competencies and by reducing regulation and promoting more free trade.