Military

Commercial Aircraft Production, Defense Spending to Increase in 2017 

By Woodrow Bellamy III  | January 9, 2017
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[Avionics Magazine 01-09-2017] Global commercial aircraft production is expected to increase by 96 additional units, and defense sector spending is projected to increase by 3.2 percent in 2017, according to a new report. Expectations for gains in the commercial and military segments of the global aerospace and defense industry are driven by airline profitability and passenger traffic, and continued regional tension and projections for overall military spending to increase in the U.S. and other areas of the world. 
 
According to Deloitte’s 2017 global aerospace and defense sector outlook, while commercial aircraft production is expected to increase, commercial aerospace revenues globally are expected to remain flat with a modest 0.3 percent increase. Here are some of the highlights for the commercial and defense subsectors mentioned in the new report. 
 
 
Boeing's parts processing center in Portland, Ore. Photo: Boeing.

Commercial 

Production rate increases are projected from both Airbus and Boeing in 2017 with their best-selling aircraft types: the 737 and A320, respectively. Boeing has already indicated it will increase the production rate of the 737 from the current 42 per month to 47 per month in 2017. That rate will further increase to 52 per month next year. Tom Captain, global aerospace and defense leader for Deloitte, author of the latest outlook, also expects Airbus to announce a production rate increase during the annual January press briefing this week. 
 
Boeing delivered a total of 748 aircraft in 2016, received 668 total orders and its current backlog on orders for commercial airplanes stands at 5,715. Nearly 80 percent of the commercial order backlog for Boeing is for 737s, including 3,300 orders for the 737 Max. 
 
In contrast, the latest reported numbers for Airbus include an order backlog standing at 6,664 total aircraft, including 5,460 A320s. The French original equipment manufacturer has yet to report delivery totals for 2016. 
 
Deloitte’s latest aerospace and defense sector outlook projects total demand for new aircraft production over the next two decades, excluding regional jets, to be 35,155 aircraft.
 
Additionally, the report notes the challenges new entrants into the global airliner market will face in attempting to disrupt the dominant Airbus and Boeing. 
 
“New entrants will face multiple challenges, including procurement of
orders from established carriers, risk of budget and schedule overruns in
product development, as well as delays in establishing a track record of reliable, safe, and trouble-free operation, which could be a lengthy process,” the report says. 
 
On the supply chain side, the report anticipates continued consolidation among manufacturers of airframe electronics, interiors, aerostructures and other airframe components to continue to meet increased financial, program management, skills, risk-taking and investment requirements from the primes. 
 
Competitive pricing in the commercial aerospace supply chain is also anticipated to be an ongoing challenge in 2017, driven by demands among the flying public for lower airfares. 
 
 

Defense

Rising global tensions and increased demand for new military aircraft and other equipment from countries in the Middle East and Asia are expected to increase global defense spending, leading to an increase in defense subsector revenues by 3.2 percent this year. The expected growth is also driven by increases in foreign military expenditures in recent years to address security threats. According to the outlook, in 2015, China, Russia, Saudi Arabia and South Korea’s 2015 military expenditures rose by 7.4, 7.5, 5.7 and 3.6 percent year-on-year, respectively.
 
Some of the biggest in-demand defense products and services globally include light air support aircraft, intelligence, surveillance and reconnaissance (ISR) electronic sensors, cyber protections, maritime patrol ships and aircraft, as well as provision for equipment maintenance and sustainment.
 
The report also expects U.S. military spending to increase with the start of a new administration under President-elect Donald Trump. The 2017 National Defense Authorization Act (NDAA), recently signed into law by President Barack Obama, includes a $3.2 billion overall increase in U.S. defense spending. 
 
2017 is also expected to be another record year for U.S. Foreign Military Sales (FMS), which grew by 118.2 percent between 2010 and 2015 from $21.36 billion to $46.6 billion. 
 

“FY2017 is expected to be another record year for US FMS. This will be largely driven by the helicopter, missile, and other military sales to the Middle East, which have already been cleared by the State department,” the report says.  

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