Aerospace Buyers Expect Increased Levels of Consolidation Over the Next 12 Months

Respondents from aerospace industry supplier companies expect increased levels of consolidation in their industry over the next 12 months, with 55% of respondents predicting either a ‘significant increase’ or an ‘increase’ in M&A activities.

According to a research, across the aerospace industry, respondents have become more optimistic about revenue growth in the next 12 months than they were in the previous 12 months. This is attributed to a number of trends within the industry, such as strong growth in air travel around the world for both civilian and military purposes, decreased global economic uncertainty and demand from emerging markets such as India, China, Mexico and Brazil. Demand for new, fuel-efficient aircraft also follows rising jet fuel prices. Between 2011 and 2012, demand for aircraft is expected to increase considerably, with stronger rates of global economic recovery encouraging overall business growth.

Executives from aerospace buyer companies expect increased levels of consolidation over the next 12 months, with 55% of respondents predicting at least some increase. High fuel prices resulting from a consistent rise in international oil prices and increasing raw material costs, including aluminum, is exerting pressure on profitability and acting as a stimulus to switch to inorganic growth, through measures such as industry consolidations.

The top growth regions in the aerospace industry are China; India; Singapore, Taiwan and Hong Kong; the US and the Middle East. China has emerged as one of the giants in the Asian aerospace sector with its burgeoning civil and defense aerospace segments. The country is building on its technological capability to develop dual-use aerospace products for defense and military use. Similarly, India is considered to be another high-growth emerging market for the aerospace industry and the country has become one of the leading military spenders in the world. Other attractions offered by India are a large number of high-tech industries operating in the country, low-cost manufacture and favorable offset policies. Singapore is a key engineering hub for the aviation industry. Indeed, the country’s aerospace industry is growing at an annual rate of 10%

Buyers consider ‘improved customer service’, ‘price reductions’ and ‘engaging in partnerships’ to be the leading actions of suppliers to secure business from the buyers, as expressed by 43%, 40% and 40% of respondents respectively. Many companies in the aerospace industry deal with a variety of clients and to stay competitive and achieve repeat business, suppliers need to focus on service issues such as successful, on-time fulfillment of orders.

Responding to ‘pricing pressures’, ‘market uncertainty’ and ‘cost containment’ are the most pressing business concerns for the global aerospace industry. Companies in the most energy-intensive sectors, such as airlines, are facing pricing pressures as a result of rising operating costs and attempts to keep ticket prices competitive, due to high levels of competition in the market. Companies are therefore seeking innovative solutions, including enhancing business process optimization, supply chain streamlining, switching to cost-effective raw materials and advanced technology solutions, to reduce operating costs.

Read more on ASDReports

Source: ASDReports - Market Research
Date: Feb 2, 2012