Thaindian News

New Delhi, May 2 (IANS) The future of global defence business looks bleak in 2011 and beyond, an industry study has forecast. This is despite major deals such as the $10.4 billion Indian tender for 126 combat planes that are likely to be signed this year.

The commercial aerospace sector, on the other hand, will seen fortunes soar, riding on the ever growing middle class in Asia, the Middle East, Eastern Europe and Latin America, the PricewaterhouseCoopers study concluded.

“As we enter the second decade of the 21st Century, commercial aerospace looks to be full of optimism and growth….The outlook for defence, on the other hand, is filled with uncertainty and challenge,” said the ‘PwC Aerospace and Defence 2010 in Review and 2011 Forecast’, a copy of which IANS has obtained.

“Aviation will continue to grow faster than the overall economy because this critical part of the global economic infrastructure is bolstered by the growing middle class in Asia, the Middle EAst, Eastern Europe, and Latin American,” the 21-page report, which tracks how aerospace and defence companies perform today and the challenges and opportunities they will face tomorrow, said.

“There are palpable tensions between the dynamic need for global security and a scarcity of economic resources. Security, however, is not a luxury, but a necessity. So the defence industry, with a proud tradition of innovation, must reinvent itself, becoming leaner and more productive,” it suggested.

The aerospace and defence sector as a whole achieved record financial results in 2010, with the top 100 companies reporting $646 billion in revenue and $58 billion in operating profit.

Revenues inched a modest two percent higher compared to 2009, while operating profit was up 19 per cent over 2009.

“Although overall industry results were at record levels, not all news was cheery. Pressure has continued to mount on global defence budgets and on contractors to improve productivity. As a result, many defence contractors trimmed payrolls, consolidated operations and deferred some non-product investments,” the report said.

Most of the top six global firms — Boeing, EADS, Lockheed Martin, Northrop Grumman, BAE Systems and General Dynamics — reported increased revenues and profits.

While US majors Boeing and Lockheed Martin are out of the race now for India’s medium multi-role combat aircraft tender, European consortium EADS is in the reckoning for what is being described as India’s “mother of all defence deals”.

The report also highlighted the existing and projected difficulties the defence sector was facing, with strategic business advice on how to deal with them.

One key area that the report highlighted was the preservation of the defence industry’s precious skill sets which could be in danger of being lost.

“Policy makers need to recognise the value of innovation, research, and development and invest in retention of specialised expertise so that critical knowledge and skills are not lost as one generation of workers retires and the next takes its place,” it said.