In our original 2020 outlook, we forecasted that long-term demand for commercial aircraft and innovative technologies are likely to help the aerospace and defense industry rebound from the previous year. Since then, the COVID-19 pandemic has caused major disruptions throughout the industry. How can organizations address these new challenges to recover and thrive? Our midyear 2020 aerospace and defense industry outlook provides insights to help leaders navigate increased uncertainty to remain resilient in the wake of COVID-19.
Aerospace and defense (A&D) is one of the industries most affected by the COVID-19 pandemic, particularly the commercial aerospace sector. With significantly reduced domestic and international passenger traffic, the US commercial aerospace sector is preparing for a weak second half of the year. Will the US defense sector suffer alongside commercial aerospace? How can organizations recover and remain competitive amid COVID-19’s impact on the aerospace and defense industry?
Explore our midyear outlook—focused on four aerospace and defense industry trends—to address new challenges and facilitate recovery in the remaining months of 2020.
While defense continues to soar, commercial aerospace is experiencing a short descent
After a strong year in 2018, the global aerospace and defense (A&D) industry has experienced descent in 2019. While the defense sector has continued to soar, growth in the commercial aerospace sector has slowed. In 2020, the A&D industry is expected to get back to its growth trajectory with the commercial aerospace sector recovering from its decline in 2019.
The defense sector has sustained its growth in 2019 as security threats have intensified, requiring governments worldwide to continue increasing their defense budgets. Defense expenditure is expected to grow between 3 and 4 percent in 2020 to reach an estimated US$1.9 trillion,1 as governments worldwide continue to modernize and recapitalize their militaries. Most of the growth will likely be driven by increased defense spending in the United States, as well as in other regions, such as China and India.
The commercial aerospace sector has experienced a decline in deliveries in 2019 due to production-related issues in certain aircraft models. Order backlog of commercial aircraft has also decreased from the 2018 peak levels of about 14,700 aircraft to slightly more than 14,000 at the end of August 2019.2 This was a result of order cancellations and a drop in new orders. However, commercial aerospace sector growth is likely to recuperate from 2020 onward as the long-term demand for commercial aircraft continues to remain robust, with nearly 40,000 units expected to be produced over the next two decades.3
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