Aerospace & Defense

The Aerospace & Defense (A&D) industry encompasses the design, development, production, and maintenance of aircraft, spacecraft, missiles, military systems, and related components and services. It is segmented into commercial aviation, defense and military aviation, and space exploration.

The Aerospace & Defense industry's performance is influenced by economic indicators like global air travel demand, defense spending driven by geopolitical tensions, and technological developments such as AI, additive manufacturing, and cybersecurity. Regulatory changes, including export controls and cybersecurity standards, significantly impact operations. Geopolitical factors and sustainability efforts, including the development of Sustainable Aviation Fuel, are also key trends.

The A&D industry includes commercial aviation, ground defense, military aircraft, shipbuilding, and space systems. Business models range from Engineer-to-Order to Maintenance, Repair, and Overhaul services, subscription-based offerings, and digital services. The industry is concentrated, with Airbus and Boeing dominating commercial aerospace, and large prime contractors like Lockheed Martin and Raytheon leading the defense sector. Competition revolves around innovation, scale, and regulatory compliance.

The Aerospace & Defense industry experienced record revenue in 2024, reaching $922 billion for the top 100 companies. Demand soared in both civil and defense aviation, but production lagged due to labor gaps and supply chain issues. Global air passenger traffic surpassed 2019 levels, and defense budgets grew by 9%. 2025 is expected to be another year of recovery, with revenues projected to grow 12% year-over-year. The industry is focused on integrating digital technologies and AI to address talent and supply chain challenges, and the global A&D market is projected to grow at a CAGR of approximately 8.2% between 2023 and 2030, reaching around $1388 billion by 2030.

Investors in the A&D industry face economic sensitivity to inflation, high regulatory exposure leading to compliance costs, commodity price volatility for materials like titanium, and geopolitical factors disrupting supply chains. Workforce disruptions, including talent retention and labor disputes, pose hurdles. Complex supply chains are prone to disruptions from factory fires, extreme weather, and reliance on single suppliers.