Welcome to PwC’s ninth edition of our annual aerospace manufacturing attractiveness ratings report, a rating of – and guide to – promising geographic locations for aerospace development. The “attractiveness index” explores relative strengths across numerous key variables of locales both within the United States and around the globe. We hope that this edition will provide data and analysis that can inform investors and manufacturers in both the civil/commercial and defense spheres as they seek locations that support their strategic vision.
This year’s ratings suggest a rapidly evolving investment landscape across the global civil and military aviation manufacturing industries as they strive to respond to an economy drastically altered by war in Europe and ongoing pandemic-related challenges. This picture contrasts with our data on the US domestic aerospace and defense (A&D) industry that shows impressive resilience in the face of both expected and unexpected market changes.
Travel demand recovery in 2021 and 2022 was bifurcated, with pax demand surging in large domestic markets such as the US, Brazil and China, while long-haul international travel – both business and leisure – remained slack. Just as in 2021, 2022 was a year of recovery for civil aviation manufacturers after the 2020 plunge that interrupted a decade of inexorable growth. Still, a complete return to pre-pandemic output levels appears to be some way off. Stubborn supply chain problems continue to hinder leading OEMs as they strive to fulfill a slew of new orders from carriers seeking to expand, rejuvenate and/or green their fleets.
The central narrative of the world’s defense industry over the last decade – and its trajectory for the decade to come – is likely to be unrelenting growth. Total global military spending in 2021 surpassed the $2-trillion mark for the first time, increasing by 0.7% in real terms and rising to USD$2.113 trillion. An era of sustained, elevated demand in military aerospace is almost certainly upon us. While the precise contours of the surge cannot yet be mapped, the industry may well look back on Russia’s invasion of Ukraine as a moment in military aviation history as decisive as either of the twentieth century’s world wars.
Our country ratings this year suggest a global aerospace industry in a state of flux. This comes as no surprise, given the complexity of doing business in the current phase of late-pandemic recovery. Across civil aviation, in both pax and cargo, patterns of traffic and leasing remain shifting and unsettled. The sudden increase in military procurement triggered by the war in Ukraine – especially in the NATO countries – is also changing the global A&D picture. However, despite current economic uncertainties, opportunities for successful investment abound in many markets.
The improved ratings for the UK, Israel, Ireland and Spain provide particularly strong evidence of this changing landscape, as do other noteworthy shifts in our ratings: last year’s top ten, for example, included countries that have fallen this year, with Japan sinking from 6th to 19th place and Switzerland from 7th to 13th. This year’s survey also shows that, while every sector of the global A&D industry is ever more globalized, securing the reliability, resiliency and transparency of manufacturers’ supply networks has never been more critical. Strong collaborative relationships remain a key to success on a regional and global scale, as does support by investors of local training and education pipelines.
This year’s state ratings emphasize the impressive resilience of US civil aviation manufacturing, despite the demand and supply-chain shocks of the COVID-19 era and the uncertainties of the current inflationary period. The need for workforce development – growth, diversification, education and (re-)training – and the efforts underway to address that need also emerge strongly as themes in many states.
States with well-developed supply networks to the US military, especially those that have invested in R&D capability enhancement in recent years, could expect strong growth in and beyond 2023. Competition among top states to attract space-sector investment and green aviation startups reveals a growing emphasis on public-private collaborations and the development of new technologies that cross boundaries among the civil, defense and space areas. Whereas innovation in past decades was often likely to cascade into civil aviation from NASA and military R&D, today the reverse is just as plausible. Above all, the urgent priority to decarbonize all aspects of flight ensures that, while it is hard to predict which technologies will take the lead, the pace of change is likely to accelerate.
We hope you find this year’s aerospace attractiveness ratings informative and useful. Our Aerospace and Defense Practice provides insights, perspectives and solutions addressing the full-spectrum of scenarios that are changing the possibilities for A&D companies.
We welcome the opportunity to discuss the findings from our report. Clients can contact us through the form below to discuss your companies specific objectives and how we can work to customize our model for your individual needs.