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2023 AlixPartners Aerospace, Defense and Aviation Outlook

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A TIME FOR PROACTIVITY

The Aerospace, Defense, & Aviation industry faces a very steep ramp-up. Conflict in Ukraine, post-COVID demand for aircraft and equipment, and disruption in space drive a strong revenue outlook. But the race to seize opportunity has its share of hurdles: the war for talent, supply chain kinks, production ramp-up, high borrowing costs, and finally ESG concerns threaten to knock business plans off course. Only the most proactive players will thrive.

The AlixPartners Global Aerospace, Defense, & Aviation Outlook provides summaries, insights, and challenges for specific sectors of the overall industry. Even though the pandemic has passed, now is not the time to take a breather. Overcoming the challenges ahead requires mastery of multiple operational and financial improvements.

AMONG THE GLOBAL AEROSPACE, DEFENSE & AVIATION OUTLOOK'S KEY INSIGHTS

1. Disruption is the new economic driver

“Normal” is over, and today’s environment is defined by a strong interlink between several monumental challenges. Finding talent, solving supply-chain riddles, managing inflation, raising money, and creating a more sustainable business all represent a multi-front strategic puzzle that requires several new capabilities to solve.

2. COVID is over, but headaches persist

Many of the challenges that emerged during and directly after the pandemic still threaten to destabilize during the ramp-up. High energy and raw material prices (and availability) continue to threat commercial airlines, for instance. Demand uncertainty and poor supply chain performance introduce an unwanted level of instability for defense. Carefully managing quality, planning, and production is essential.

3. Ukraine is reshaping defense and space

As the West stands united behind Ukraine, military expenditures and commitments are on the rise at a time when stocks are being depleted. In space, Russia is permanently removed from the launch market and Ukraine’s space industry is decimated. Look for LEO constellations as combat tools, an increased demand for responsive space access, and escalating demand for testing and weapons tracking.

4. Financing costs are likely only going up

Aerostructure suppliers are highly leveraged, potentially in need of restructuring and liquidity to handle ramp-up requirements, including working capital for inventory. Handling this new environment will require the tuning of muscles that haven’t been in a situation like this since the 2014-2018 ramp-up.

5. Sustainability cannot be ignored

Aviation faces a tough challenge if it hopes to fulfill net zero. All available levers must be activated, including fuel efficiency, utilization of sustainable aviation fuels, and improved operations in flight and on ground. This requires new aircraft technologies, propulsion solutions, and careful coordination of company efforts.

"It’s time to stop just ‘fighting fires’ and instead to put in place systems—including production systems, workforce systems and cost-control systems—that are both robust and flexible."

“The defense industry needs to become a whole lot more agile in order to meet today’s rapid, and unpredictable increases in production volume. Today’s uncertain geopolitics demand nothing less than that.”