Study Shows Resilience Despite Recession of 2009

WASHINGTON, May 11 — (PRNewswire) — Deloitte's study of the global aerospace & defense (A&D) industry financial performance for 2009, released today, evaluated the 2009 financial performance of the 91 global A&D companies with revenues exceeding $500 million and found that despite recession of 2009 the A&D companies in this study demonstrated resilience.

"Despite the economic recession of 2009, these 91 global A&D companies faced financial challenges head-on and experienced less decline than companies in many other sectors, demonstrating the resilience of the industry," said Tom Captain, vice chairman, and global and United States A&D sector leader for Deloitte LLP.  "In particular, the need for global defense, security and humanitarian aid as well as the long term growing demand for commercial airline travel remains strong, particularly in growing non-Western economies."

Overall, for these companies, global A&D revenue in 2009 remained essentially flat, with a slight 1.3 percent increase over 2008 to $635 billion.  However, their operating earnings decreased 15.3 percent to $47.9 billion while their operating margins fell by 16.4 percent to 7.5 percent.  The study found that if it were not for loss provisions or impairment charges at Boeing, EADS and BAE Systems collectively, profits for these companies would have been essentially flat, again demonstrating the underlying strength of the industry. A&D companies continue to face the challenges of moderating defense budgets, poor program performance, foreign exchange rate volatility and reduced credit availability.

"Flat A&D revenue and profits in 2009 for these companies are giving way to a global recovery," said Captain.  "But the timing and degree of the upswing will vary by global region, and the effects on individual A&D product sub-sectors will likely be uneven."

Other key findings from the 2009 A&D industry performance study are as follows:

• American A&D companies in this study grew faster in 2009, at 3.4 percent, than European companies in this study, whose revenue fell by 2.1 percent. American companies in this study were more profitable again in 2009, with operating margins of 9.3 percent, than European companies in this study, with operating margins of 4.6 percent, a reflection of the long term difficulty in rationalizing costs for the industry in countries with higher government intervention and stricter job protection scheme.
• Sales bookings fell short of replenishment levels. The industry Book-to-Bill ratio for the companies in this study fell significantly from 1.40x in 2008 to 0.89x in 2009, a substantial 36.9 percent decrease, due to fewer new bookings and existing order cancellations, portending slower times ahead.
• Boeing had higher sales revenue than EADS, and regained its position as the world's largest A&D company, reversing its 2nd place performance in 2008.

To access the Deloitte study in full, please visit: http://www.deloitte.com/us/aerospacedefense/2009globalwrapup.

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