The A&D Sector in the Wake of the COVID19 Pandemic

The A&D Sector in the Wake of the COVID19 Pandemic

After the “black swan” event of 2020, the global aerospace and defense (A&D) industry revenue is expected to begin a recovery in 2021. But this recovery is likely to be uneven across the two key sectors: commercial aerospace and defense. The commercial aerospace sector has been significantly affected by the COVID-19 pandemic, which has led to a massive reduction in passenger traffic, in turn affecting aircraft demand. As the travel demand is not likely to return to pre-pandemic levels soon, the sector is expected to recover slowly. On the contrary, the defense sector was comparatively stable throughout 2020, as most countries have not significantly reduced defense budgets and remain committed to sustaining their military capabilities. 

“Flight Hours vs Passenger Numbers” in Commercial Sector

Most are happy to see an end to 2020, and began their 2021 with an optimistic outlook. With the advent of COVID, there has been a certain behavioral change among passengers, due to which the commercial market took a massive downturn. Based on analyst reports, flight hours are recovering strongly in all regions over recent months, but passenger numbers have not yet increased at the same rate. Clearly, this is all dependent upon continued lockdowns, especially in Europe. The aerospace business is global, and virtual engagement works in the near term, but it is important to meet and engage face-to-face with employees and customers over the long term. 

Resiliency in Defence Sector

In 2021, defense budgets and revenues for defense contractors are expected to remain largely stable as military programs continue to be critical to national defense, especially considering geopolitical tensions. Most of the major defense spending nations have remained committed to strengthening their military presence, such as China, Russia, India, and many others. Also, some commercial aerospace companies are focusing more on their defense businesses to counter the broader pandemic-driven economic pressures. For instance, GKN Aerospace announced an active participation in the UK Tempest program and continued partnerships with many of our defense customers on future opportunities. 

Future Prospects of the A&D Market

In light of the continued increases in vaccinations, although at different rates depending upon the country, this should drive, over the near term, more certainty in getting back to some semblance of normality. Commercial aerospace manufacturers should focus on restructuring and cost reduction to position themselves for profitable growth in the long term. Further, the aerospace sector and technological developments, such as advanced air mobility, hypersonics, electric propulsion, and hydrogen-powered aircraft, are likely to drive future growth for the industry.

In addition to this, there needs to be continued support or stimulus provided to the supply base. Markets are still witnessing impacts from Tier2 and below, with businesses either going out of business, filing for bankruptcy, and/or having difficulty meeting the commitments to their contracts. This supply chain impact reverberates through the program, and in some cases, alternative suppliers are hard to find. This is a global problem in which government support will vary by country.

A Personal Piece of Advice 

As a Senior Level Executive who has been in the industry for more than 30 years, I would say 2020 was an unprecedented year of challenges and opportunities. I’m sure many have adjusted well to a more socially distanced business culture, but are ready to get back to more in-person interaction, as am I; however, we still need to keep doing our part to keep our workplace safe. 

I always look back on life and reflect on situations that have impacted me, my family, and friends, especially our employees and colleagues, and come to a realization that you learn from all those experiences. The hard times might hurt you, but they will challenge you and change you. That change is always for the better. You won't know how strong you are until you have to know!

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