Financial News

Aerospace industry flies in to financial trouble

The global aerospace and defence industry is flying in to trouble after growth stalled to just over 2%, according to the latest research.

The sector grew to US$681 billion in 2011, but with revenue up 2.3%, which was down on 2010’s poor performance of 2.5%, while global earnings and margins were down 3.1% and 5.3%, a report from Deloitte Touche Tohmatsu revealed.

However, future revenue is predicted to soar by 17.4% based on orders of new more fuel efficient aircraft.

Defence manufacturers are finding business much harder than their commercial aircraft counterparts – with the gap between revenues growing to 13.4%.

The report also reckons the growth of commercial revenues were based on record production of large commercial aircraft and increased demand for aircraft services.

Additionally, the report indicates that defence revenues were likely impacted by decreased defense budgets, weaker than expected economic performance in the western world, and the withdrawal of armed forces from Iraq and Afghanistan.

“With the defence segment comprising about two thirds of the sector, a continued uncertain defense outlook is likely to impact overall financial performance in 2012,” said Tom Captain

“However, the report findings indicate that defense spending is increasing in geographies such as India, China, Japan, the United Arab Emirates, Saudi Arabia, and Brazil as a result of increases in wealth and in light of growing national security concerns.”

The report also found that the difference in financial performance between companies based in Europe and the United States is growing wider.

The European market grew less than 1%, while the US industry returned 3.3% revenue growth in 2011.

Most significantly, the report found that reported operating earnings in Europe fell by 21.6%, while companies in the United States were able to grow operating earnings by 2.9%.

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