The trend of robust U.S. military aircraft sales offsetting a lagging civil aircraft market is changing. Delivering its year-end review and forecast December 14 in Washington, D.C., the Aerospace Industries Association (AIA) said civil aircraft sales grew 3.2 percent to $49.7 billion in 2011. This follows a “disappointing” 2010, when sales declined 6 percent.
U.S. military aircraft sales also grew in 2011, by 6.7 percent to $66.5 billion. This will be the tenth consecutive year of growth. But the defense industry faces stiff headwinds from federal deficit-reduction measures.
“A mounting sense of urgency to address high levels of deficit spending by the U.S. is expected to induce cuts to the U.S. defense budget,” AIA said. “However, rising commercial aircraft sales could offset these drags on the market and may spur the commercial aviation sector to increase capital spending on new equipment.”
The civil market growth is expected to continue, with close to $52 billion in sales projected in 2012. Compound annual growth is estimated at 3.4 percent from 2011 to 2013, spurred by increased production of the Boeing 787 and 747-8. AIA notes, however, that “sagging” airline demand in the U.S. and Europe will make manufacturers more dependent on exports to Asia, the Middle East and other fast-growth markets.
The AIA’s perspective on the U.S. industry is echoed by Deutsche Bank’s just-released Global Aerospace & Defense 2012 Outlook. It anticipates a third successive year in which the commercial aerospace sector will outperform a defense industry confronting the prospect of further deep cuts in spending by debt-strapped governments. The bank takes the view that commercial OEMs will continue to prosper in the New Year from large order backlogs and the introduction of new aircraft.
“The U.S. commercial aerospace sector has proved resilient to broader macroeconomic fears,” concluded Deutsche Bank, while warning that aftermarket suppliers could struggle from “macro-shocks.”
As of mid-December, the equity values of the U.S. firms analyzed for the report were outperforming the overall S&P 500 group of public companies by 9 percent. Deutsche Bank’s five top aerospace stock picks for 2012 are Boeing, Triumph Group, United Technologies, Hexcel and General Dynamics.