The global defense industry’s revenue will likely continue to slide as a result of cuts in military spending, while the commercial aircraft industry will likely have record revenues in the coming year, a report said.

The commercial aircraft segment is experiencing a virtually unprecedented and prolonged up-cycle, as demonstrated by recent increases in production by both Boeing and Airbus, added the 2013 Global aerospace and defense outlook launched by Deloitte, a leading professional services firm.

This trend is being driven by growth in passenger travel demand particularly in Asia and the Middle East, as well as the need for more fuel-efficient aircraft.

Market forecasts of top large commercial aircraft manufacturers describe an expectation of between 27,350 and 34,000 commercial aircraft to be produced over the next 20 years.

The report also indicates that the difficulty in keeping commercial airlines profitable, based on the volatility and mostly long-term increase in fuel costs, is generating requirements for more fuel-efficient aircraft. This is driving demand for derivative aircraft that are equipped with next generation engine technology.

Moreover, the Deloitte report forecasts that global spending with defense contractors is expected to decline in 2013 due to the onset of US defense budget cuts, continuing the pace set in 2011 with a 3.3 per cent decline, followed by a nominal decline so far in 2012.

The declines are mostly made up of defense budget reductions in the US, UK and the rest of Europe, offset with smaller aggregate increases, principally in Saudi Arabia, the UAE, China, Russia, India, and Brazil.

“The global defense industry should expect to see more aggressive competition for fewer large defense programs. Renewed foreign military sales efforts into new geographic markets that face increasing national security threats should offset part of the decline,” said Tom Captain, vice chairman and US and Global Aerospace and Defense (A&D) leader, Deloitte.

However, in contrast to cuts in defense spending, the commercial aerospace sector is expected to reach record levels of revenue in 2013 as a result of increased production rates and the introduction of next generation aircraft, he added.

The report forecasts, that in 2013, the commercial aircraft sector will continue with the trend of global production levels above 1,000 aircraft per year for the third year in a row.

The report highlights that the overall combined revenues for the A&D industry are expected to increase modestly in 2013 given large increases in global revenues for commercial aerospace, coupled with declines in defense spending.

The balance of defense and commercial production activity should provide the diversification the A&D industry may need to continue to thrive and grow next year. – TradeArabia News Service