Com­mer­cial air­craft or­ders in the pipe­line

Keen com­pe­ti­tion in aero­space and de­fence sec­tors

The National - News - Business - - Inside Track - Sananda Sa­hoo ssa­hoo@then­

Or­ders for com­mer­cial air­craft are ex­pected to con­tinue this year as global aero­space and de­fence com­pa­nies look to in­vest in in­no­va­tion to counter com­pe­ti­tion, ac­cord­ing to a Deloitte re­port.

Over­all, the global aero­space and de­fence (A&D) sec­tor rev­enues grew by 2.4 per cent over 2015 to reach US$674.4 bil­lion last year, ac­cord­ing to Deloitte’s Global Aero­space and De­fence Fi­nan­cial Per­for­mance Study re­leased yes­ter­day.

Of that amount, the com­pa­nies an­a­lysed added $15.7bn in rev­enues, with growth pri­mar­ily driven by the Euro­pean com­mer­cial and US de­fence sub­sec­tors. The re­port an­a­lysed top 100 global A&D com­pa­nies, such as Air­bus, Boe­ing, BAE Sys­tems and Lock­heed Martin.

While the global de­fence sub­sec­tor was still larger than the com­mer­cial aero­space sub­sec­tor in terms of rev­enues, the lat­ter out­stripped the de­fence sub­sec­tor in terms of growth rate even as de­fence spend­ing in­creased glob­ally.

Rev­enue from the de­fence sub­sec­tor grew by 2.1 per cent last year over 2015 to $351.3bn, led by the US. Global growth in the de­fence and com­mer­cial aero­space sub­sec­tors could au­gur well for the UAE.

“In the UAE, the air traf­fic growth is ex­pected to con­tinue [fu­elled by eco­nomic growth in China and In­dia] and ex­pan­sion of Emi­rates and Eti­had, driv­ing the growth of the UAE avi­a­tion sec­tor,” said Rashid Bashir, the part­ner and public sec­tor leader at Deloitte, Mid­dle East. “In the de­fence space, given the se­cu­rity sit­u­a­tion and the chal­lenges, the gov­ern­ment is ex­pected to keep on spend­ing.”

That could trans­late into more com­mer­cial air­craft or­ders from the UAE airlines and de­fence spend­ing from the UAE, Mr Bashir said.

Mubadala’s Strata, which man­u­fac­tures parts for Euro­pean and US aero­space com­pa­nies such as Boe­ing, Air­bus, Leonardo, Facc Aus­tria, Sabca Bel­gium and Swe­den’s Saab, ex­pects to ex­pand its Al Ain plant this year and cre­ate about 500 jobs.

“The con­tin­ued growth in air travel de­mand and the huge air­plane back­logs al­ready means that [the global aero­space com­pa­nies would] con­tinue to ex­pand their port­fo­lio and work ca­pa­bil­ity,” said Saj Ah­mad, chief an­a­lyst at the Lon­don-based Strate­gicAero Re­search. “And that in turn means more UAE aero­space jobs.”

The global com­mer­cial sub­sec­tor grew at 2.7 per cent last year to touch $8.4bn.

The growth rate was, how­ever, down from 6.3 per cent in 2015 over 2014. The com­mer­cial air­craft back­log was at a record high last year at 13,687 air­craft.

Com­mer­cial air­craft de­liv­er­ies grew in Europe at 8.3 per cent in 2016 over 2015. In the US it re­ported a decline of 1.8 per cent over 2015. The US com­mer­cial air­craft sub­sec­tor de­liv­ered 1,436 air­craft glob­ally.

In the past decade, the UAE airlines bought more air­craft in dol­lar value than any other re­gion.

The five-day Dubai Air Show from Novem­ber 12 could in­volve more or­ders from UAE airlines, said Mr Ah­mad. “The Dubai Air Show could cer­tainly see Emi­rates buy the likes of the 787 fam­ily to help grow its fleet where [Boe­ing] 777s and [Air­bus] A380s are too big,” he said. “We’ll see Air Ara­bia look to­wards a ma­jor order to re­place its age­ing A320 fleet, hav­ing lost its per­for­mance edge to fly­dubai, who will in­duct their first fuel-ef­fi­cient 737 MAX 8 later this year.”

Glob­ally, about 35,000 air­craft will be de­liv­ered be­tween 2016 and 2035, ac­cord­ing to the Deloitte re­port.

Pas­cal Rossignol / Reuters

The global com­mer­cial sub­sec­tor grew at 2.7 per cent last year to touch $8.4bn.

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