Over the past several years, the aerospace and defense industry has seen a steadily increasing flow of divestiture activity. Since 2010, each year has seen at least as many divestitures as the year before, reaching a high of 57 transactions in 2015.
Cyclical. That word speaks both of opportunity and risk. It also is one descriptor for the aerospace / defense industry. Private equity funds have been investing in the sector for decades (Forstmann Little, the investment firm, bought Gulfstream in 1990 before selling it to General Dynamics nine years later) and continue to be active acquirers in the industry.
President Obama announced this week that the U.S. plans for approximately 9,800 American troops to remain in Afghanistan in 2015, following the scheduled completion of combat operations in the country this year.
Airbus confirmed this week it plans to increase seating on its A320 aircraft from 180 to 186 seats, while maximum capacity on A321 aircraft will increase from 220 to 240 seats. Although full details will not be revealed until next month, the European Aviation Safety Agency also confirmed Airbus’ “process for significant modification” has already started.
International competition between the aerospace giants, Airbus and Boeing, continues to heat up as both companies secured multi-billion dollar orders in China this week. China Southern Airlines Company announced an order of 50 Airbus A320neo aircraft, as well as 30 A320 jets, with a combined order value of approximately $7.3 billion.
The House Armed Services Committee (“HASC”) unanimously approved a measure that would authorize just over $600 billion in defense spending for the 2015 fiscal year. The HASC’s version of the 2015 National Defense Authorization Act includes the Pentagon’s previously requested $495.8 billion base budget, as well as $79.4 billion for Overseas Contingency Operations (“OCO”).
According to a new Deloitte report analyzing the financial performance of the top 20 major U.S. aerospace and defense sector companies, U.S. defense contractors posted a 2.6% revenue decrease in 2013.
Boeing’s first quarter earnings release this week offered generally clear skies, with a strong tailwind from its commercial operations. The world’s largest aerospace / defense company delivered 161 aircraft in the first three months of 2014, decidedly trumping Airbus’ 141 deliveries in the same period.