INDUSTRY FOCUS
AEROSPACE & DEFENSE
OVERVIEW
The US aerospace and defense (A&D) industry provides employment to over 2.2 million Americans and generates a combined annual revenue of $909 billion. The industry is generally distributed across two sectors: commercial aerospace and defense.
The US companies holding the largest market share in the industry include American Airlines, United Airlines, Delta Air Lines, Lockheed Martin, General Dynamics, Northrop Grumman, Boeing, GE Aviation, Raytheon, and United Technologies.
2020 was a difficult year for the A&D industry. The Pandemic dramatically decreased the passenger traffic (-70%), strongly impacting the commercial aerospace sector and forcing the federal government to inject $25 billion into the crippled airline industry. The defense sector however remained relatively stable as most countries maintained their defense budgets.
TRENDS & CHALLENGES
The pandemic has resulted in certain behavioral changes among passengers, with an increased focus on short-haul and domestic travel resulting in higher demand for narrow-body aircraft. Due to expected lower aircraft utilization rates, the sale of aftermarket parts and services could remain weak, especially as airlines delay discretionary maintenance or upgrades to conserve cash.
Most major defense spending nations have remained committed to strengthening their military presence, despite the pandemic’s economic impact on fiscal deficits. Space exploration, satellite broadband, and militarization are expected to drive growth in the A&D sector. The industry is turning its focus on transforming supply chains into more resilient and dynamic networks. While the drone sector has slowed down significantly from the past 3 years, emerging technologies are driving the continuous transformation of the industry: advanced aerial mobility (AAM). hypersonic, electric propulsion, and hydrogen-powered aircraft.
FUTURE FORECAST
The A&D industry is expected to begin to recover in 2021 after a difficult 2020. As vaccination increases worldwide, passenger traffic is expected to slowly return to the commercial aerospace sector. However, travel demand is not expected to return to pre–COVID-19 levels before 2024. The defense sector is expected to remain stable in 2021, as most countries have not significantly reduced defense budgets and remain committed to sustaining their military capabilities. However, given the disruption in the complex global supply chain, some defense programs could face minor cost increases and schedule delays in 2021.
INDUSTRY PERFORMANCE
8X
EBITDA MULTIPLE
1X
SALES MULTIPLE
Disclosure: These key performance indicators are based on industry averages for a company with $10 million in revenue. The KPIs are not specific to the operational performance of your company or your sub-sector.
The information contained has been obtained from different sources deemed reliable, including DealStats, Deloitte, Dun & Bradstreet, and Business Reference Guide. Pacifica Advisors does not make any representation or warranty as to the accuracy of the data. PA is a mergers and acquisitions (M&A) advisor and business broker.