International aerospace and defence sector optimistic

17 June 2015

The international aerospace and defence sectors are optimistic and expect strong growth in the coming years, research by Roland Berger shows. Despite their optimism, the industry leaders foresee challenges ahead, with geopolitical unrest listed as the number one risk to growth. This at the same time boosts the assumption that public defence spending will increase again in the years to come. The Middle East is the most attractive defence export market, followed by the US.

In its recently released Aerospace & Defence Management Issues Radar 2015, titled ‘Tailwind for the aerospace industry - Aerospace & Defence’, Roland Berger Strategy Consultants researches the trends on market perspective and HR management in the international aerospace and defence sectors. For the research, the consulting firm surveyed 150 of the industry’s top international managers from companies representing a broad range of civil and military segments and positions in the value chain, from OEMs to pure service providers.

Expectations of Market Conditions in the Civil A&D Sector

The research highlights that the executives of the international aerospace and defence sector are feeling optimistic, with 73% of respondents expressing their optimism* as they expect the civil aerospace and defence market to grow for at least five more years.

Although the vast majority of respondents express their optimism, they do foresee challenges ahead, with ‘geopolitical crises’ named as the #1 risk factor to the cycles of growth. The economic downturn in China is seen as the second most likely risk factor, mentioned by 25%, followed by the economic crisis in Europe (20%) and rising fuel/energy costs (9%).

Possible risk factors

Defence spending
The research shows that the defence industry leaders are also optimistic when it comes to public spending, with 67% expecting the decline in European defence to come to an end, with 15% foreseeing growth in the next two years. According to Roland Berger, the deteriorating geopolitical situations in the Ukraine and the Middle East contribute to this judgment, as do on-going security concerns closer to home.

In addition, agreed upon targets will also have an effect on spending, Robert Thomson, Partner at Roland Berger, explains: “NATO member states are coming under increasing pressure to reach the agreed target of spending two percent of their gross domestic product on defence.”

Public spending on defence

The Middle East is seen as the most attractive export market for defence equipment and named by 25% as their top choice. The US ranks in second when it comes to its attractiveness, with 15% of the votes, followed by South-East Asia (14%). India has fallen to fourth place shares its ranking with Europe, both at 13%.

Most Attractive Export Markets for Defense Equipment

Commenting on the survey, Manfred Hader, Partner at Roland Berger, says: “The international aerospace and defence sectors have done well in managing the past few years’ challenges around the development of new programs and globalization all in all. But in the long run, the only companies that will be successful are those that now succeed in managing operational processes effectively, producing efficiently, and developing their human resources strategically.”

* Recent research by McKinsey & Company into the defence industry also highlights the optimism among defence industry leaders.


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