Stable 2012 for Global A&D Sector


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Stable 2012 for Global A&D Sector

20 February 2012

Fitch Ratings released its outlook for the global Aerospace and Defense sector in 2012, predicting stability – with commercial growth offsetting defense pressure.

“Fitch expects the commercial aerospace sector to grow in 2012, but this outlook is tempered with caution based on several economic indicators,” it said. “In contrast, global defense budgets are falling, cash deployment is a key risk, and thus pure-play defense names could see ratings come under pressure.”

In the commercial segments, Fitch expects that deliveries from Airbus and Boeing will rise approximately 15% in 2012 and 9% in 2013, with 20% revenue growth in 2012. Aftermarket revenues should grow in the mid single digits in 2012. It expects business jet deliveries in 2012 will increase approximately 5%, with revenues up 5%-10%, while regional jet aircraft deliveries are expected to rise 10%. It does not expect aircraft financing to be a limiting factor on commercial aerospace, though it sees a likely 20% higher financing requirement in 2012.

“The key risk to Fitch’s outlook is a global economic downturn,” it said. “The downside risks for the aerospace industry were recently illustrated by the International Air Transport Association’s (IATA) estimate that a downturn driven by a banking crisis could lead to global airline losses greater than $8 billion in 2012�Most commercial aerospace indicators are positive, yet jet fuel prices and cargo traffic are currently concerns. Several other indicators are at risk of turning negative later in the year. Considering euro zone uncertainty and some signs of slowing growth in key emerging markets, Fitch sees reason to be cautious.”

Joe Pinto, Vice President and Chief Operating Officer of Performance Review Institute commented: “A recent poll we conducted showed that over 70% of our customers feel confident about the long-term future of the industry, but 79% do not feel that the worst of the economic crisis is over. This is up from nearly two-thirds (64%) in 2010, showing that there is less confidence in the situation than there was a year ago. This is the time for companies to focus on their core competencies and work out how to add value to their products or services to keep their customers happy, even in these difficult times.”

2012 Outlook: Global Aerospace and Defense is available at