Soaring commercial aviation market drives best year yet for aerospace & defence industry

• 2012 is likely to be another strong year for A&D sector.

• Record number of large commercial aircraft orders driving sustained backlog.

• Lower defence sector revenues in 2011.

Moscow – May 23, 2012 –The aerospace & defence (A&D) industry experienced a record year in 2011 on the strength of a surging commercial aviation market, according to the Aerospace & Defence 2011 year in review and 2012 forecast report from PwC. In 2011, the top 100 A&D companies reported $677 billion in revenue, a 5% increase compared to the previous year, and $60 billion in operating profit, an increase of 2% from 2010.

Neil Hampson, global aerospace and defence leader, PwC, said:

“This year, we expect continued growth in commercial aerospace resulting from strong and steady demand for global aviation and increased commercial aircraft production. Conversely, defence revenues should continue to remain low, but recent cost-cutting actions should mitigate the impact on company bottom lines.

“While revenue is expected to rise for the sector overall, there is a significant risk that return on sales could drop due to supply chain inefficiencies.”

Commercial aerospace companies predominantly reported strong revenue growth and delivered a record number of large aircraft in 2011, exceeding 1,000, driven by a record backlog and increasing production rates. The strong order activity was largely led by the launch of two new single-aisle aircrafts, the A320NEO and 737MAX. These re-engined versions of existing models, which promise at least 15% efficiency improvement, have unleashed a flurry of orders, both in the expanding Asian market and among U.S. carriers.

Neil Hampson said:

“2012 is already off to a great start, but the industry will continue to face challenges such as rising production rates, raw materials shortages and late deliveries. Despite these issues, times are good for the A&D sector. Сurrent backlog levels provide ample cushion between demand and production rates, likely absorbing any reasonable softening in demand near-term.”

As the report highlights, the industry must overcome three challenges to thrive in the future: preserving innovation, improving productivity and abiding by the regulatory environment.

According to the report, 2011 was a record year for A&D transactions, with 341 deals and a total value of $43.7 billion. European acquirers played a much more significant role in the 2011 A&D deal market compared to 2010. In 2011, all European outbound deals that exceeded $50 million were for North American targets, boosting the number of cross-border deals for US targets.

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1. For a copy of Aerospace & Defence 2011 year in review and 2012 forecast, visit: www.pwc.com/aerospaceanddefence.

2. PwC Russia (www.pwc.ru) provides industry-focused assurance, tax, legal and advisory services to various industries. Over 2,000 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Krasnodar, Yuzhno-Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients.

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"PwC Russia" refers to PwCIL member-firms operating in Russia

Based on PwC Russia information