Aerospace, defense & aviation outlook: civil aviation profit soars, but aerospace and defense faces many challenges

Most macroeconomic factors are boosting the aerospace and defense industry to record-level profits. Industry margins are at near all-time highs, and cost controls in all segments are now paying dividends. But market conditions vary widely across sectors.

At a glance

• A&D profits soared to record levels thanks to the stronger US dollar, historically cheap oil, and growing global traffic.
• But price competition is raging among the airlines, and aerospace OEMS are struggling to meet demand.
• Meanwhile, global defense spending is at an inflection point, though emerging threats and increased spending from developing countries could expand budgets again.
• Space and satellite companies—feeling vulnerable to disruption from new startups—are responding with consolidations and cost-reduction programs.

A&D players will have to make more radical changes during the coming decade if they want to stay competitive.