United States involvement in Afghanistan has kept demand for parachutes high
Los Angeles, CA (PRWEB) April 26, 2012
Performance in the Parachute Manufacturing industry is highly volatile due to its dependence on government expenditure and the fluctuating cost of nylon. In 2012, the US government represents the largest market for the industry. "Department of Defense spending on parachutes is dependent on numerous factors, including US involvement in wars, budget availability and parachute technology developments," explains IBISWorld industry analyst Sophia Snyder. The United States has been involved in wars in Iraq and Afghanistan, which has helped drive revenue up at an annualized rate of 4.2% to $164 million during the five years to 2012. Revenue grew substantially in 2009 following President Obama's announcement of a troop surge in Afghanistan; however, the budget for defense spending in the region is expected to fall over 2012 and hurt revenue growth over the year.
Over the next five years, further troop withdrawals from Afghanistan and a lower defense budget will continue to drag down revenue. Also contributing to falling Parachute Manufacturing industry revenue is suppressed demand from the commercial market. As the unemployment rate falls, fewer individuals will find time to use parachutes for recreational purposes, such as skydiving. “Technological development will continue to be the bright spot for the industry, though, and is anticipated to stimulate some demand,” Snyder says. Projects are currently under development and will likely be completed during the next five years. Despite technological developments, the cost of nylon (a parachute’s main input) is forecast to increase in the coming years, which will pressure profit margins. The cost of nylon is dependent on oil prices, which have been rising and highly volatile during the past five years. Prices are forecast to persistently rise through the foreseeable future as emerging markets, such as China and India, generate more demand and as oil becomes increasingly more costly to produce.
The Parachute Manufacturing industry has a low level of concentration, with top industry companies including Airborne Systems Inc., Pioneer Aerospace and Raven Industries. Since a significant portion of industry revenue is derived from defense contracts, market share tends to vary from year to year, depending on which companies are awarded the contracts. In addition, market share can shift based on companies' new technology and innovative products. For instance, when the military increased its demand for low-velocity cargo parachutes over the past two years, firms carrying such products first were able to gain market share. In the five years to 2012, market share concentration has been relatively stable. It has remained low as firms win and lose bids from the military. Also, as the government reduced the number of troops in Afghanistan and Iraq, all companies have been affected. Although IBISWorld expects market share concentration to remain the same in the next five years, companies that cater to the recreational market might be able to gain more market share and revenue as skydiving increases in popularity. For more information, visit IBISWorld’s Parachute Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
Companies in this industry manufacture parachutes, which are devices used to slow the motion of an object through an atmosphere by creating drag. This industry does not include powered parachutes or manufacturers that primarily produce parachute harnesses or components.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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