The COVID-19 pandemic has created unprecedented disruption across global aerospace and defense supply chains. The commercial aviation segment has been most significantly affected, with aircraft OEMs, aftermarket providers and airlines experiencing dramatic reductions in demand through early 2021. In recent months, signs are pointing to accelerating improvement, with OEMs raising production forecasts and domestic air travel in the U.S. and China recovering to near pre-pandemic levels — though vaccinations and virus variants will dictate the pace of recovery.
In the defense sector, the Biden Administration's FY2022 defense budget signaled relative top-line stability, but with important changes in force structure and investment priorities. Renewed emphasis on China as a near-peer threat, accelerated retirements of legacy military aircraft fleets, and increased investments in autonomous systems, hypersonics, precision fires, resilient battle management networks and other force multipliers, will all influence defense supplier investment and M&A strategies in 2022 and beyond.
Aerospace and defense M&A is likely to accelerate in response to these challenges — particularly in the commercial aviation supply chain where, despite signs of recovery, industry capacity remains well ahead of demand. Well-capitalized suppliers and financial sponsors will see opportunities for consolidation, while a gradual and uncertain recovery will pressure weaker players to sell, seek new capital or restructure.
Aviation Week’s A&D Mergers and Acquisitions Conference will provide a unique opportunity for leading dealmakers, CEOs, business development specialists and analysts to gain valuable insights into the outlook, opportunities and challenges facing the industry.