Global aerospace and defense (A&D) industry revenue is expected to begin to recover in 2021 after a difficult year in 2020. This recovery will likely be uneven across the two key sectors—commercial aerospace and defense. The Report explores six aerospace and defense industry trends that companies can expect in the year ahead.

(1) A slow recovery in passenger travel may affect aircraft deliveries and industry revenues

An effective vaccine against COVID-19 could result in short-term growth in passenger traffic, driven by pent-up demand. However, this is unlikely to offset the ongoing damage to lucrative business travel, which may take two to three years to recover, as virtual meetings are expected to continue to substitute in-person meetings for a prolonged period.

(2) The Defense Sector to remain stable as countries plan to sustain their military capabilities

In 2021, defense budgets and revenues for defense contractors are expected to remain largely stable, as military programs continue to be critical to national defense, especially when geopolitical tensions are considered. Global defense spending is expected to grow about 2.8% in 2021, crossing the $2 trillion mark. Countries across the globe continue to spend on strengthening their militaries as geopolitical tensions intensify amid the global pandemic.

(3) Satellite broadband, space exploration, and militarization continue to drive growth

As funding continues to increase and costs decline, the space industry is likely to experience increased opportunities, primarily in satellite broadband internet access. In the first half of 2020, space investments remained strong at $12.1 billion; this momentum is likely to remain solid in 2021 as well. Space launch services are also expected to record strong growth in 2021, with the market forecasted to grow more than 15% year over year. Space exploration is expected to continue to evolve and grow in 2021 as well, due to declining launch costs and advances in technology.

(4) The aerospace and defense industry should focus on transforming supply chains into more resilient and dynamic networks

Lower aircraft demand and restrictions on the movement of people and goods due to the pandemic led to a breakdown of many essential A&D supply chains in 2020. This has resulted in an impact on smaller suppliers, especially those with heavy exposure to the commercial aerospace industry and the aftermarket business. As most A&D suppliers are highly specialized, with unique expertise and complex equipment, they could continue to struggle to make quick changes to production in response to varying demand.

(5) M&A Deal activity likely to recover in 2021 as A&D companies seek long-term growth

Well-capitalized suppliers are likely to pursue opportunities for consolidation, as lower production rates in commercial aerospace could force weaker players to sell and restructure assets. Companies in specific A&D segments are likely to pursue M&A to build scale, whereas others could initiate vertical and horizontal integration strategies to capture more value, drive cost-competitiveness, or acquire targeted niche capabilities and emerging technologies.

(6) Emerging technologies will transform the aerospace and defense industry and drive long-term growth

While the industry has been affected by the pandemic, continued technological developments in 2021 are likely to drive growth and shape aerospace and defense industry trends over the long term. Some technologies that could transform the A&D industry include advanced air mobility, hypersonics, electric propulsion, and hydrogen-powered aircraft.

The full report is here for download – https://www2.deloitte.com/us/en/pages/manufacturing/articles/global-aerospace-and-defense-industry-outlook.html