Aerospace & defence - Business issues
Today, the international aerospace and defence industry faces uneven terrain.
In the United States – the world’s largest defence market – A&D enterprises can expect overall spending to remain high as the country continues with commitments in Iraq, Afghanistan and the global war on terror. Of course, this does not mean that individual programmes will not be trimmed or cut. Many have been. Some quite deeply as the Obama administration navigates health and welfare reforms and an historic budget deficit. But the fact remains that defence expenditure in the US is still projected to account for 16% of the federal budget in 2012 – approximately $1 trillion1.
In Europe, the vista is less nuanced. Recession and cuts have hit hard.
In the UK the Spending Review 2010 mandated an 8% reduction in the defence budget by 2014-152. France has reportedly cut €3.5 billion from defence spending. Germany is retiring large numbers of aged planes, helicopters and ships whilst simultaneously cutting back on new buys. Italy cut €255 million in 2011 with a further €304.8 million projected for 2012. And Spain has slashed spending by 9%3.
By way of contrast, look to the Asia-Pacific region and there is more than the hint of an arms race. China is equipping itself with the capability to project military power through an incipient carrier fleet. Perhaps following suit, countries including India, Pakistan, Japan, South Korea, Thailand and Indonesia are all seeing increases in defence spending too.
It is a complex and unsettled scene – and it isn’t purely driven by budgets or the lack of them.
Government and military authorities alike must also work out how to keep pace with technological opportunities and threats – including cyber warfare – and explore the potential for deploying their forces using renewable energy sources given that much of the world’s energy is currently buried within politically unstable regions.
Now more than ever, A&D enterprises need efficiency and flexibility as part of their armoury. To secure commercial objectives. And to defend themselves against economic assault.
