Aerospace & Defense

The Aerospace & Defense (A&D) industry is a critical sector encompassing the design, manufacturing, and sale of products, services, and components for air travel and defense. It includes commercial aircraft, military jets, spacecraft, weaponry, and related control systems. The industry is highly concentrated, with a few large enterprises significantly influencing market trends and pricing, and is divided into aerospace and defense segments. Many companies are government-owned or partially controlled, with public orders often driving product development.

The A&D industry's performance is influenced by economic, geopolitical, and technological factors. Geopolitical tensions and global conflicts increase defense spending. The demand for air travel impacts the commercial aerospace segment. Technological advancements in AI, autonomous systems, hypersonic technology, additive manufacturing, and advanced air mobility are revolutionizing capabilities. There is a growing focus on sustainability initiatives, driving the development of eco-friendly aircraft and sustainable aviation fuels. Regulatory changes, with increased scrutiny on foreign investments and cybersecurity compliance, are a constant influence.

The A&D industry is highly concentrated, with a small number of large firms dominating production. These large defense prime contractors provide products such as electronic systems, military aircraft, vehicles, weaponry, and ships, alongside services like engineering, technical support, logistics, and training. Key players include Boeing, Airbus, and Lockheed Martin. Competition revolves around innovation, scale, and meeting regulatory requirements. Companies invest in R&D and streamline manufacturing through digital transformation. The industry's value chain involves program management, design, building, and services, with an emphasis on technical expertise and accurate pricing of long-term contracts.

The A&D industry is experiencing transformation and growth, with operational challenges. Global revenue for the top 100 A&D companies reached $922 billion in 2024, with demand across both civil and defense aviation soaring. The commercial aerospace sector has seen a strong recovery, but production lags behind demand due to labor gaps and supply chains, leading to order backlogs. The defense sector continues to benefit from increased global military spending. The global A&D market is projected to experience steady growth, with the worldwide aerospace market expected to reach approximately USD 791.78 billion by 2034, growing at a CAGR of 7.8% from 2024 to 2034. The US A&D market is estimated at USD 525.16 billion in 2025 and is expected to reach USD 694.86 billion by 2030, at a CAGR of 5.76%. The outlook for 2025 emphasizes operationalization, with companies focusing on integrating digital technologies and AI. Strong fundamentals suggest promising dealmaking activity in 2025.

Investors in the A&D industry face several risks and challenges. Government dependence makes companies susceptible to shifts in political priorities and budget fluctuations. Geopolitical risks and global conflicts introduce volatility and disrupt supply chains. Supply chain fragility is a concern due to labor strikes, material shortages, and geopolitical instability. High R&D costs can limit investment and impact competitiveness. Regulatory exposure is extensive and complex, requiring resources for compliance. Workforce challenges, including talent shortages and the need for skill modernization, pose a hurdle. Inflation and economic uncertainty can raise raw material costs and decrease government buying power.