Strong GDP growth in newly industrialized nations will buoy demand for military equipment
Los Angeles, CA (PRWEB) May 28, 2013
The Global Military Aircraft and Aerospace Manufacturing industry has been growing over the past five years due to increased demand for military aircraft and missile systems, especially from the North America and Europe regions. “Growth in military aerospace equipment was backed by the Iraq War, the war on terrorism and homeland security,” says IBISWorld industry analyst Antonio Danova. Because of heavy military activity and increased defense funding across various regions, IBISWorld anticipates the industry to grow at an annualized rate of 1.6% to roughly $166.4 billion over the five years to 2013, with an expected increase of 0.7% during 2013.
IBISWorld estimates that there are 1,745 establishments and 1,385 enterprises in the industry in 2013. “The number of establishments is expected to increase at an annualized rate of 0.2% per year over the five years to 2013 due to the emergence of new players in the Asia-Pacific region,” says Danova. The increase in establishment numbers in this region has outpaced the consolidation of players in Europe and North America. The industry has also experienced an increase in collaborations between enterprises to reduce risks and costs. Over the past five years, profitability within the industry has been hampered by rising prices in key inputs. For example, IBISWorld estimates that steel, the main input in the manufacture of industry products, has been growing at an annualized rate of 2.8% over the past five years. As a result, the average industry profit margin, as defined by earnings before interest and taxes (EBIT), has fallen to 11.5% of revenue in 2013 from about 13.1% in 2008. Nonetheless, some profitability has been salvaged thanks to technological advancements that have increased efficiency in the manufacturing process, as well as training grants and tax breaks from government clients.
This Global Military Aircraft and Aerospace Manufacturing industry also has a medium level of concentration because the market is dominated by a small pool of consumers. For example, the US Department of Defense accounts for 40.0% of worldwide aerospace product purchases. Other large markets are in Europe, the Middle East and Asia. In addition, the costs associated with manufacturing aircraft, missiles and components are very high. Governments award contracts to existing players in similar fields with prior contracts or proven experience in the specified area of development. Concentration is expected to remain at this level as significant research and development is required to develop new products and innovation in the defense area.
The industry will continue to grow over the next five years, but at a moderate pace as modest spending in defense budgets occurs across the globe, but particularly in Western and developed nations. However, strong GDP growth in newly industrialized nations such as China and India will buoy demand for military equipment and air superiority. Additionally, new technology in aerospace equipment and military parts will boost demand as clients look to update their existing products. As a result, IBISWorld estimates that industry revenue will grow an average 1.8% per year over the five years to 2018 to roughly $182.0 billion.
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IBISWorld industry Report Key Topics
Firms in this industry engage in the manufacture of complete military aircraft, missiles or space vehicles, along with associated parts. Industry firms also develop prototypes of aerospace products; convert aircraft (i.e., major modifications to systems); and complete aircraft or propulsion systems overhaul and rebuilding (i.e. periodic restoration of aircraft to original design specifications).
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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