Despite work stoppages and the global credit crisis, 2008 was a record-setting year for the companies included in a new global aerospace and defense (A&D) industry study released today by Deloitte. The 67 companies or divisions in the Deloitte study increased their sales revenue to $595 billion, and their operating earnings jumped to more than $54 billion.
"Our analysis shows that despite the industry's challenges with aircraft order financing difficulties, the global credit crisis, weapons affordability challenges and problems in large scale programs, the companies in our study surpassed their combined revenue performance of 2007. This is an excellent indication that the global A&D industry, as a whole, is still well-positioned for the current economic downturn, with these companies having paid down debt, achieved economies of scale, improved productivity and generated significant free cash flows," said Tom Captain, vice chairman, Deloitte LLP, and the global and U.S. Aerospace & Defense leader.
The Deloitte study also showed a change in rank of the top A&D industry revenue producer. EADS, the multi-country European aerospace company, edged out Boeing as the largest A&D industry company in terms of revenue due, in large part, to the strike at Boeing Commercial Airplanes. Overall the European companies in the Deloitte study grew significantly faster at 9.56 percent in revenue, than the U.S. firms, which grew at 6.3 percent. The study illustrated that operating margins of 10.17 percent for the U.S. companies were higher than the operating margins of 7.55 percent for the European companies, a reflection of the long term difficulty in cutting labor costs and rationalizing facilities for the industry in countries where there are higher government intervention and job protection schemes.
Deloitte's report identifies six components necessary for these companies to be successful in 2009 and beyond:
1. Successful continuance of current large-scale programs under contract
2. Civil aircraft backlog protection mitigation actions
3. Successful business development efforts globally, particularly in the Middle East and India
4. Effective management of cost and schedule targets while achieving mission assurance for the customer
5. Executing strategic leverage in the acquisition space
6. Identifying and capturing technology directions and funding for emerging defense and security priorities
"The next two years will be a true test of resilience for global A&D manufacturers, as the credit crisis is expected to bottom out," said Captain. "The industry is in the midst of game-changing challenges and those who adapt and innovate will prevail."
To access the Deloitte study in full, please visit: www.deloitte.com/us/a&D/global2008wrapup. For more information about Deloitte's Aerospace & Defense practice, please visit www.deloitte.com/us/a&d.
As used in this document, "Deloitte" means Deloitte LLP and Deloitte Services LP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.