Asian defence market growth offset by slump in West: DeloitteMarch 7th, 2012 - 3:38 pm ICT by IANS
New Delhi, March 7 (IANS) The global defence market is expected to witness negative growth in 2012 with the rise in military spending in Asian nations, including India and China, offset by a slump in the US, Britain and the rest of Europe, a study by a British consultancy firm has said.
According to the ‘Global Aerospace and Defence Outlook: A Tale of Two Industries’ report brought out by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry Group, the commercial aircraft sector is likely to enter a prolonged upcycle in production in 2012. This is as a result of increasing demand for leisure and business travel, particularly in the Asia Pacific region.
“Global defence spending is expecting to be flat to declining in 2012, mostly made up of reduction in the US, United Kingdom, and the rest of Europe, offset with increases, principally in China, India, Kingdom of Saudi Arabia, the United Arab Emirates, Japan and Brazil,” the report said.
It said the growth in the commercial aircraft industry is expected to be driven by continued production and development of next-generation aircraft programs that aim to address increasing fuel costs.
“While a trend in US and Europe is seen for decrease in spending in defence, countries like India are on the ascent in terms of spending on space, commercial air transportation and defence sectors,” Deloitte India director Nidhi Goyal said.
“India is also amongst the fastest growing aviation markets in the global arena. The Indian government appears to be keen to provide the best possible support given the limitations of regulations, political situation and capacity of the industry in India,” Goyal said.
“The industry should take advantage of the opportunity by adopting global best practices. This should help the Indian industry to integrate with the global supply chain and in the process create an indigenous base in India.”
DTTL global aerospace and defence sector leader Tom Captain, in his remarks, added that “the commercial aircraft sector has taken an innovative approach to responding to increasing fuel costs”.
“The development of fuel-efficient aircraft that utilise next-generation engine technology has resulted in a significant rise in aircraft orders. However, certain suppliers will be challenged to keep pace with the expected increase in production rates and new program introductions this year,” Captain said.
Meanwhile, continued global economic challenges coupled with revenue gaps and cost pressures may result in margin contraction for global defence players.
As a result, the defence sector is likely to undergo more streamlining of its cost structure, divestiture of non-core assets, and additions of gap filling, as well as transformation acquisitions.
“Expect to see more aggressive competition for the fewer large defence programs of record, as well as growth in defence sales to India, Brazil, the United Arab Emirates, the Kingdom of Saudi Arabia, Brazil, Japan, and South Korea — countries with emerging wealth and a need to strengthen their defence capabilities,” Captain continued.
Overall, the financial performance of the top global aerospace and defence companies in 2012 is expected to be similar to 2011 performance, with the decline in defence revenues offset by cost-cutting and aggressive growth actions.
In 2012, the aerospace and defence industry is likely to continue to develop game-changing technology innovations in areas such as cyber-security, directed energy, high-powered microwave weapons, hypersonic missiles, long-range and high-altitude unmanned aerial systems, and extraordinary software that can trace financial transactions of known terrorists.
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