MRO Magazine

Fitch: Global Aerospace & Defense Stable for 2016; Defense Upturn May Join Commercial Strength


December 10, 2015
By Business Wire News

NEW YORK

The aerospace and defense (A&D) sector outlook remains stable, but could move to positive during 2016 in view of the healthy market for large commercial aircraft (LCA) coupled with a likely rebound in defense spending in both the U.S. and Europe, according to Fitch Ratings’ new outlook report.

The ratings outlook remains stable, with the strong sector dynamics mitigated by moderate risks relating to cash deployment, aircraft program ramp-ups, merger and acquisition integration, as well as emerging markets weakness in some regions.

Fitch expects LCA deliveries from Airbus Group NV and The Boeing Company to rise to approximately 1,440 (up 3%) and 1,550 (up 7.5%) aircraft in 2016 and 2017, respectively. Fitch does not believe these deliveries are excessive, as they fall within a reasonable range given replacement and growth needs.

The order books at Airbus and Boeing reached 12,485 aircraft at the end of November, equivalent to more than 8.5 years of deliveries at projected 2016 rates. Fitch estimates the value of the backlog at $875 billion-$900 billion. The record backlog serves not only as a key driver of the A&D outlook but also as a significant cushion to downside scenarios. Key indicators of aircraft demand, such as global airline traffic, remain positive.

There have been positive defense spending developments in the U.S. and U.K., where spending should rise in 2016. International demand continues to be healthy, and the global threat environment is a tailwind. The U.S. fiscal 2016 defense budget is still being finalized, but there is a chance of a substantial increase in modernization spending. Program details remain key to the analysis of specific credits.

The full ‘2016 Outlook: Global Aerospace and Defense’ is available on Fitch’s website at ‘www.fitchratings.com.’ Outlook reports for other sectors and regions are also available on Fitch’s website.

Fitch will hold a teleconference discussion on December 16 to discuss the Global Aerospace and Defense outlook. Details will be announced in the coming days.

Additional information is available at ‘www.fitchratings.com‘.

2016 Outlook: Global Aerospace and Defense (Defense Upturn Could Join Commercial Strength)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875065

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Fitch Ratings
Craig D. Fraser
Managing Director
+1-212-908-0310
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Tom Chruszcz
Director
+48 22 338-6294
or
Media Relations
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com