Global aerospace and defense

Annual industry performance and outlook

How are aerospace and defense companies performing today?

What challenges and opportunities do they face?
PwC takes a look.

www.pwc.com/us/aerospaceanddefense
 Contents

Executive summary

Aerospace and defense

Aerospace and defense performance: 2020
Aerospace and defense deals

Commercial aerospace
Commercial aerospace performance: 2020
Notable developments
Space developments
Commercial aerospace outlook

Defense
Defense performance: 2020
Notable developments
Defense outlook

In summary

Appendix
Methodology
A&D top 100 companies
Additional resources
Contact

PwC Aerospace and defense 2

 Executive summary
The 2021 edition of PwC’s Global Aerospace and Defense: Annual Industry
Performance and Outlook shares key performance metrics of the global
commercial aerospace and defense (A&D) industry. Our data are drawn from
financial reports on fiscal year (FY) 2020 and include financial results for the
largest 100 A&D companies by revenue (see complete list in the Appendix).
We also highlight notable industry developments and express PwC’s point of
view on topics affecting the industry, developed through interactions with our
clients and other industry leaders and analysts.
This edition naturally comes in the wake of the worst year ever for the
commercial aerospace industry due to pandemic-related pressures; indeed,
developing an industry outlook has been unusually challenging given the
uncertain future course of the COVID-19 crisis. This is less the case with
prognosticating the future of the defense industry, which was relatively
unscathed, given that defense spending remained steady and strong.

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Aerospace and defense

2020 was an incredibly difficult year for the A&D industry, as more than a decade of
stratospheric growth came to a landing amid the COVID-19 pandemic. The sudden
and dramatic downturn in end markets caused heavy losses in the commercial
aviation sector. The defense sector was only mildly affected by the pandemic and
reported modest growth.

A&D performance: 2020

The aerospace and defense industry reported $697 billion of revenue, down 8% from
2019, and $25 billion of operating profit, a decrease of 61%, primarily due to the
impacts of COVID-19 on commercial aerospace, as revenue passenger kilometers
plummeted by 66%.

Figure 1: Key industry metrics

2020 2019 Change
Revenue US$ 697 billion $754b -8%
Operating profit $25b $65b -61%
Operating margin 3.6% 8.6% -500 bps
Source: PwC analysis

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Heavy losses for Boeing, Airbus, Spirit AeroSystems and suppliers. Boeing’s
performance weighed heavily on industry results, with operating profit down nearly
$11 billion (making up more than a quarter of the total industry decline) because
of the combined effects of COVID-19, the grounding of the 737 MAX and charges
on 777X and defense programs. Airbus reported a $2.1 billion profit decline, with
revenue down $22 billion, and Spirit AeroSystems’ revenue plunged 57%. The four
largest tier 1 suppliers to commercial manufacturers, Raytheon Technologies, GE
Aviation, Rolls-Royce and Safran, reported an aggregate operating profit loss of
$1.4 billion for a decline of $16.3 billion. These seven companies represented more
than three-quarters of the overall industry profit decline. L3Harris Technologies
reported revenue growth of 42%, largely due to the first full year of the merger of
Harris and L3. SAIC moved up the revenue rankings by 12 spots, mainly a result of its
acquisition of Engility.

Lockheed Martin tops revenue ranking. Lockheed Martin reported revenue of $65
billion, up 9% over 2019, to become the industry’s largest company by revenue. The
growth was driven largely by expansion of the F-35 program and sharp decreases
at Boeing and Airbus. Lockheed Martin remained the largest company by profit,
reporting operating profit of $8.6 billion, for an increase of 1%.

Operating margins dive to 3.9%. Industry operating margin plummeted by 470

basis points to 3.9%, with Garmin Aviation capturing the industry’s best operating
margin at 72.7%

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Figure 2: Top 100 additions and deletions
Added to the list
PAE #46 IPO
RUAG #56
Axon Enterprise #88
Garmin Aviation #94
AeroVironment #100
Deleted from the list
Raytheon Acquired by UTC (now Raytheon Technologies)
Wesco Aircraft Acquired by Platinum Equity
Barnes Aerospace
Albany Engineered Composites
Esco Aerospace & Defense
Source: PwC analysis

Figure 3: Analysis highlights

Largest increase in revenue (dollars) Lockheed Martin +$5,586 million
Largest increase in revenue (percentage) L3Harris Technologies +42%
Largest increase in profit (dollars) L3Harris Technologies +$481m
Largest increase in profit (percentage) PAE +388%
Highest operating margin Garmin Aviation 72.7%
Largest increase in top 100 list SAIC +12
Largest decrease in revenue (dollars) Airbus -$22,011m
Largest decrease in revenue (percentage) Spirit AeroSystems −57%
Largest decrease in profit (dollars) Boeing -$10,792m
Largest decrease in profit (percentage) Boeing −546%
Largest decrease in top 100 list Spirit AeroSystems -20
Source: PwC analysis

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Figure 4: Companies with operating margins exceeding 20% reduced from 12
to five:
Top 100 rank Company Operating margin
15 Honeywell Aerospace 25.2%
27 Transdigm 34.3%
52 Aselsan 22.6%
65 Heico 21.1%
94 Garmin Aviation 72.7%
Source: PwC analysis

A&D deals: Thin in 2020

Mergers and acquisitions slumped in 2020, principally because many companies
were focused on liquidity during the COVID-19 crisis. The impacts of the pandemic
also contributed to canceled deals, including Boeing’s acquisition of Embraer’s
regional jet business and the Woodward-Hexcel merger. For more information on
M&A activity in 2020, please refer to PwC’s Aerospace and Defense Deals Insights:
2021 Outlook.

Notable 2020 (and early 2021) deals included:

— UTC’s $135 billion acquisition of Raytheon was completed in April 2020 — creating
an aerospace and defense behemoth with $74 billion in sales in the industry’s
biggest transaction ever.
— Lockheed Martin agreed to acquire Aerojet Rocketdyne Holdings, an aerospace
and defense rocket engine manufacturer, in a $4.4 billion deal.1
— Northrop Grumman agreed to sell its federal IT and mission support services
business to Peraton — provider of space, cyber, defense and communications
services — in a cash deal worth $3.4 billion.2
— Perspecta agreed (in early 2021) to be acquired by Peraton in an all-cash $7.1
billion deal.3

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— Power management company Eaton agreed (in early 2021) to acquire Cobham
Mission Systems from Cobham, a UK-based portfolio company of Advent
International, in a deal worth $2.8 billion (n.b., Advent had acquired Cobham, a
specialist in aviation technology, in 2020 for about $5.5 billion).4
— Cubic, a defense and transportation technology services provider, has been in play,
receiving interest from Singapore Technologies Engineering and private equity.5
— Teledyne Technologies, a maker of electronic sensor technology, agreed (in early
2021) to buy FLIR Systems, a developer of thermal image technology, in a cash-
and-stock deal valued at about $8 billion.6

PwC Aerospace and defense 8

Commercial aerospace

Key takeaways

Revenue passenger Airbus’ 17 years

kilometers plummet
66% amid COVID-19
66% of consecutive
record production
pandemic broken

737 MAX Airbus’ deliveries drop by Boeing’s by

completes
recertification 34% 57%

Super-jumbo Space comes

era sunsets of age

Commercial aerospace performance: 2020

Airbus delivered 566 aircraft in 2020, a 34% drop from 2019, breaking 17 years of
consecutive record production. Boeing delivered 157 aircraft, a 57% decline from
2019 and just 20% of 2018’s record production of 806, as the 737 MAX grounding
weighed heavily on orders and deliveries. The 737 MAX completed recertification
before the end of 2020 and is returning to service globally.
Airbus reported 268 net orders in 2020, a 65% decline from 2019. Boeing reported
−471 net orders, following −87 net orders in 2019, which was the first negative order
rate in at least three decades. As a result, industry backlog declined by 926 units and
$245 billion. However, industry backlog remains healthy at more than $600 billion and
nearly 12,000 units, which is more than seven years’ worth of production at 2019’s
record production level.

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 Figure 5: Aircraft backlog (US$ billions)
12/31/20 12/31/19 12/31/18 12/31/17
Boeing $282 $377 $412 $421
Airbus* $325 $475 $486 N/A
Source: The Boeing Co. 2020 annual report; Airbus Group 2020 annual report
*Airbus did not report actual backlog prior to 2018.

Figure 6: Aircraft backlog (units)

Index Boeing Airbus Total
Net orders −471 268 −203
Deliveries 157 566 723
Backlog at Dec. 31, 2020 4,778 7,184 11,962

RPK down 66%. For 2020, the International Air Transport Association (IATA) reported
revenue passenger kilometers (RPK) dropped 66% — snapping consecutive annual
records since the 2008–09 financial crisis — as global airlines reported losses of
about $370 billion. Passenger load factors were 65% for the full year, after achieving
a record in 2019. The air cargo market dropped 11% during the year, but load factors
improved as capacity dropped at a steeper rate.

Figure 7: Key commercial aerospace metrics (year-over-year % change)

2020 2019 2018 2017
Revenue passenger miles −65.9% 4.2% 7.3% 8.0%
Load factor 64.8% 82.6% 81.9% 81.4%
Cargo freight ton miles −10.6% −3.3% 3.5% 9.0%
Load 54.5% 43.4% 48.8% 45.5%

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Notable developments
Commercial carrier closures spike. The end markets globally fared poorly,
experiencing the worst rash of carrier closures in the industry’s history. In 2020,
despite widespread government COVID-19 relief efforts, 34 (mostly regional) airlines
went out of business, including Air Italy, Flybe and Germanwings. This followed
2019’s 23 failed carriers.7

Race to Net Zero 50. At least 110 countries, as well as the European Union, have
pledged to achieve carbon neutrality by 2050; China says it will do so before 2060. In
February 2021, President Joe Biden said the US and Canada would “work toward”
net-zero 2050 goals.8,9

737 MAX recertified. After nearly two years of grounding, the Boeing 737 MAX
was recertified and, as of February 2021, was cleared to fly in a growing number of
countries, including the US, Canada, Mexico, Brazil as well as in Europe.10

Airbus’ A380 shuttered. Airbus announced in 2019 that it would shutter production
of its A380 four-engine civil aircraft after struggling to compete with the newer,
midsize, twin-engine aircraft.The last assembled A380 rolled out of Airbus’ Toulouse
facility in February 2020.11

Boeing moving forward with plans for -5X concept, midsize airliner. Boeing is
reportedly revisiting its New Midsize Airplane program — which has been shelved for
about two years — to develop narrow-body, single-aisle aircraft in an apparent bid
to compete in the increasingly popular midsize market and particularly with Airbus’
A321neo. The program aims to launch replacements for 757 and 767 aircraft.12

777X timeline moves back amid increased regulatory scrutiny. In January

2021, Boeing announced that it had pushed delivery of its 777X aircraft to late 2023
because of updated certification requirements following previous delays. The aircraft
had originally been planned for 2020.13

Rolls-Royce prepares for demo of next-generation, high-efficiency UltraFan

engine. Rolls-Royce continued preparations for a demonstrator of its next-gen
engine, the UltraFan. Ground tests for the engine — with a 84,000-pound thrust
and 140-inch-diameter composite fan — are slated for 2021 with initial production
versions expected to be delivered later this decade.14

Mitsubishi halts SpaceJet. Mitsubishi Heavy Industry froze development of its

beleaguered SpaceJet program in October 2020 because of diminished profits amid
the COVID-19 pandemic. SpaceJet had been billed as Japan’s first locally made
passenger jet.15

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Business jets activity lowest since Great Recession. Business jet operations
contracted by 22.8% in 2020 because of the COVID-19 pandemic, on the
heels of tepid growth (less than 1%) in 2019, according to the Federal Aviation
Administration.16 In April 2020 alone, operations had plunged by 74.9%, year-over-
year, as the pandemic peaked — resulting in the second-worst month for the industry
since February 2009, at the height of the financial crisis.17

FAA revises unmanned aircraft systems (UAS) Remote ID. The FAA revised its
Remote ID ruling for drones, requiring flying drones to broadcast their location and
serial number (i.e., digital license plate). The rule moves closer to establishing a traffic
management ecosystem for UAS flights. Drone makers are required to comply by
September 2022, and pilots must comply by September 2023.18

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Space developments
SpaceX awarded $2.9 billion by NASA for commercial lunar landing. NASA
awarded SpaceX a $2.9 billion contract to design and produce a spacecraft to send
two American astronauts to the moon as early as 2024, the space agency announced
in April 2021. Blue Origin and defense contractor Dynetics had also bid for the
contract, which is part of NASA’s Artemis program.19 Also, on May 30, 2020, the first
crewed orbital launch from the US in almost nine years occurred with a SpaceX Crew
Dragon spacecraft carrying two NASA astronauts lifted off by a Falcon 9 rocket from
the Kennedy Space Center en route to the International Space Station.20 The Crew
Dragon is the first spacecraft certified by NASA for regular crewed flights since the
space shuttle nearly 40 years ago.

Perseverance Mars landing. NASA’s Mars 2020 Perseverance rover landed safely
on Mars on February 18, 2021, following a 300-million-mile journey that began on
July 30, 2020, when it launched from Florida’s Cape Canaveral Air Force Station. The
successful mission is part of NASA’s Moon to Mars exploration approach.

Virgin Galactic’s crewed flight. Virgin Galactic achieved its first human rocket-
powered flight on SpaceShip Two from Spaceport America — the world’s first
commercial spaceport — in Albuquerque, New Mexico, marking an important
milestone in Virgin Galactic’s 15-year pursuit in commercial space travel.21,22

Blue Origin: Lunar landing concepts, New Shepard capsule. Blue Origin,
the prime contractor of a “National Team” developing lunar lander concepts for
NASA’s Artemis program, announced that it had delivered a mockup of a lander to
NASA’s Space Vehicle Mockup Facility at the Johnson Space Center for testing.23
The company also successfully launched an upgraded version of its New Shepard
capsule (from its West Texas site on January 21, 2021), designed to transport
humans into space. At this writing, Blue Origin has announced no specific date when
it expects to carry humans into space aboard the capsule.24

Vulcan’s successful test. Northrop Grumman carried out a successful rocket motor
ground test in February 2021 for United Launch Alliance’s next-generation rocket,
Vulcan Centaur. The test prepares for a first operational flight (planned for 2021) of a
private moon lander called Peregrine (produced by Pittsburgh-based Astrobotic).25

Dream Chaser flight postponed to 2022. Sierra Nevada pushed back its planned
flight date for its Dream Chaser space plane to 2022 from a planned September 2020
flight. NASA has selected the aircraft as one of the cargo vehicles to resupply the
International Space Station.26

Starlink satellite program expands. As of January 2021, SpaceX has launched

some 1,000 Starlink satellites and is manufacturing them at a rate of about 120 per
month. The satellites are part of SpaceX’s pursuit of building out a global network of
12,000 satellites to provide internet connections to every spot on the globe.27

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 Commercial aerospace outlook

IATA is forecasting about a 50% improvement in revenue passenger kilometers

for 2021, which would hit only about half of 2019 levels. Boeing has more than
400 737 MAX aircraft in inventory to deliver and has stated plans to ramp up
production of that model to 31 per month by 2022. Airbus plans to increase
production of A320s to 45 per month by the end of the year. 2021 looks to be a
year of substantial improvement, but full recovery is not expected until the end of
2023.
The unprecedented nature of the COVID-19 pandemic means that there is little
data upon which to base estimates. COVID-19 restrictions are expected to be
lifted during the course of 2021, as vaccination rates rise and the number of
infections declines. While it is projected that 2021 will be an improvement over
2020, travel restrictions will likely continue to have a significant negative impact on
the industry for the 2021 annual results. Furthermore, airlines have suffered long-
term damage by taking on large amounts of debt that could dominate their capital
allocation priorities for years to come.
In the long term, commercial aviation remains bullish. The current projections
are for 4% CAGR, or 60% above forecast GDP growth. Over the next several
decades, the industry will be focused on innovation and developing new products
that contribute to the net-zero carbon emissions goals. The forecast demand over
the next two decades supports an estimated 43,000 new aircraft deliveries and a
services market value greater than $9 trillion.

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Defense

Key takeaways

Revenue up 2% Lockheed
at top six US leads industry
defense companies 2% in revenue gain, 9%
up 9%

Operating margins US Space Force

slip for US defense ramping up
companies, rise at
European companies

Fourth-gen fighter Sixth-gen

comeback fighter debut

Defense performance: 2020

The top six US defense contractors combined reported a 2% increase in revenue
(5% increase adjusted for the acquisition of Raytheon by UTC) and an 18% decrease
in profit (6% decrease adjusted for the Raytheon acquisition). The drop in profit was
driven primarily by a 41% decline at Boeing Defense, Space & Security related to
charges recorded on the KC-46A Tanker and VC-25B programs.
The top five European defense companies combined reported flat revenue and a
20% increase in operating profit. The higher profit was driven primarily by a $1.5
billion improvement at Airbus Defence and Space and Helicopters due to charges
on the A400M program in 2019. This was partially offset by a $700 million decline at
Leonardo.

PwC Aerospace and defense 15

Lockheed Martin reported the strongest revenue improvement of $5.6 billion, or 9%;
that follows an increase of $6.1 billion in 2019, for a total of $11.7 billion (or 20%)
over two years. Lockheed’s performance is driven primarily by a ramp-up of F-35
production. L3Harris’ revenues increased by $2.4 billion, or 19%, primarily related to
the merger of the two companies, partially offset by some divestitures.
US operating margin decreased to 9.9% from 12.4%, while European operating
margin improved to 7.5% from 6.2%. Rolls-Royce Defence reported the highest
operating margin of 13.3%; Lockheed Martin was the top US company, reporting a
13.2% operating margin.

Figure 8: Backlog of defense orders (US$ billions)

12/31/20 12/31/19
Lockheed Martin $147 $144
Northrop Grumman $81 $65
General Dynamics (excl. Gulfstream) $78 $74
Raytheon $67 $49
Boeing Defense, Space & Security $61 $64
BAE Systems $58 $58
Airbus Defence and Space and Helicopters $44 $49
Leonardo $40 $41
Thales $39 $38
L3Harris $22 $20
Total $637 $602
Source: Company reports

PwC Aerospace and defense 16

Notable developments
Department of Defense (DoD) modernization strategy. The DoD’s latest
modernization plans prioritize artificial intelligence technology, directed energy,
small satellites, hypersonics, a 5G network and unmanned aerial systems. Initiatives
moving into testing phases include: low Earth orbit satellites to bolster command,
control and communications systems; several hypersonic prototypes (including
an air-breathing cruise missile); and experimentation with artificial intelligence for
multiple applications.28

Space Force comes of age. The US Space Force (USSF), which celebrated its first
anniversary on December 20, 2020, was appropriated a budget of $15.2 billion for
FY 2021, up from $40 million in 2020.29 The new armed service is expected to grow
from 160 military and civilian personnel to over 10,000 in 2021.30 Meanwhile, Kratos
announced that it is investing in a concept for a Space Force Mission trainer for the
USSF designed to train space warfighters to fight through satellite threats.31,32

DoD earmarks nearly $500 million in counter-UAS. The DOD spent about $900
million on counter-UAS solutions in 2019 and requested $500 million for counter-
UAS funding for fiscal 2020. In FY 2021, the DOD plans to spend at least $404 million
on counter-UAS (C-UAS) research and development and $83 million on C-UAS
procurement.33,34

USAF’s sixth-generation fighter. The US Air Force (USAF) reportedly recently

designed, built and tested a prototype of its new sixth-gen fighter jet, known as the
Next Generation Air Dominance or Penetrating Counter Air. The aircraft is anticipated
to have range and payloads exceeding those of fifth-generation fighter aircraft, to
carry hypersonic weapons and a high-energy laser that can slice enemy aircraft in
half. The jet has a planned 2030 delivery timeline.35

F-35s orders up, costs trimmed. Lockheed Martin expects to increase delivery
numbers of its F-35 fighters every year through 2023, when it hits peak production
of roughly 170 planes. The company also expects to cut production costs; the
average price of a F-35A is estimated to have fallen by up to 13% over the 2019-
2022 period.36,37 The initial proposed in-country delivery date for the jets is reportedly
2027.38

PwC Aerospace and defense 17

B-21 Raider procurement set for 2022. The Pentagon is projecting to budget over
$10 billion through 2025 to buy Northrop Grumman’s new stealth bomber, the B-21
Raider, with procurement planned to begin in 2022 and a requested FY 2022 budget
of $193 million. Further procurement projections include: $2.3 billion in FY 2023,
$3.4 billion in FY 2024, and $4.3 billion in FY 2025. The Air Force announced in 2019
its plans to purchase at least 100 Northrop long-range bombers expected to be
operational in the mid-2020s.39

USAF developing hypersonic cruise missile. The US Air Force announced that
it had selected Boeing, Lockheed Martin and Raytheon to develop a solid-rocket,
air-breathing hypersonic cruise missile that can be launched from fighter or bomber
aircraft. USAF said it planned to award contracts in the first quarter of FY 2021.40

Boeing producing T-7A jet trainers. Boeing entered the production phase of its
new T-7A Red Hawk advanced jet training aircraft for the USAF. In September 2018,
the USAF had awarded Boeing a $9.2 billion contract to produce 351 T-7As and 46
ground-based training simulators as part of a joint Boeing-USAF flight-test program.
The first T-7 aircraft is expected to be delivered to the USAF in 2023, with production
expected to run over the next couple of decades.41

USAF opens bids for upgraded B-52 engines. The USAF accepted proposals from
aviation companies to be considered for a program to replace engines of its fleet of
B-52 Stratofortress bombers, calling for 608 new engines, spare parts and service to
stretch the aircraft’s service through 2050.42

Nuclear weapons modernization. Northrop Grumman signed a USAF $13.3 billion

contract to develop the next intercontinental ballistic missile, part of an $85 billion
program to replace the Minuteman III. The first missile could be delivered in 2029.43
The new class of warheads (dubbed W76-2) are the first new US nuclear weapons in
decades and are designed to arm submarine-launched Trident II missiles.

MQ-25 UAV successfully tested. Boeing and the US Navy carried out a test
flight of the MQ-25 test asset T1. Boeing’s MQ-25 Stingray is a next-generation
unmanned aerial vehicle designed to offer carrier-based unpiloted aerial refueling.
Initial operational capability of the aircraft is expected by 2024. In April 2020, Boeing
received an $84.7 million contract modification from the US Navy for three more MQ-
25 UAVs, bringing the total order to seven.44

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Skyborg could reach IOP by 2023. The Air Force Research Laboratory expects
that its Skyborg program — an initiative to develop low-cost, autonomous drones
designed to team with piloted fighters — could achieve initial operating capability by
2023.45

XQ-58A Valkyrie. The Air Force Research Laboratory and Kratos made a fourth
successful test flight of the XQ-58A Valkyrie, an unmanned combat air vehicle.
The drone is designed as a reusable, low-cost, remotely piloted air vehicle and is
envisioned as a wingman for piloted fighters to perform tasks such as carrying extra
weapons and jamming radars.46

BAE’s Tempest expected to reach operational capacity by 2035. BAE Systems’

Tempest, Britain’s sixth-generation, low-cost fighter, is expected to reach initial
operating capability in 2035. The aircraft, central to the UK’s development of a next-
gen network of air power platforms, includes a wearable cockpit with digital inputs,
an augmented reality display technology and artificial intelligence-aided functions.
The Tempest program is estimated to cost at least $32.5 billion.47

Defiant-X unveiled. Boeing and Sikorsky unveiled their Defiant-X, a refined version
of the SB>1 prototype of a Future Long-Range Assault Aircraft developed to replace
the UH-60. Some refinements introduced to the Defiant-X version include new
landing gear including a nose wheel, a reduced “thermal signature” of its exhaust
system (making it stealthier) and a more highly angled nose cone.48

Resurgence of the fourth-generation fighter. The F/A-18E/F, F-15EX and F-16 are
experiencing a surprising resurgence under the USAF’s revised procurement strategy.
The US Navy committed to buying 78 F-18s, and the USAF is considering ordering
F-16s beginning in 2023. The USAF in July 2020 placed a $1.2 billion order for a first
lot of eight fourth-gen Boeing F-15EXs.

Rafale expected to stay in service through 2070. Greece agreed to purchase 18

secondhand Rafale fighter aircraft from France’s Dassault Aviation for $3 billion,
scheduled for delivery, in tranches, from July 2021 through early 2023. The deal
follows France’s announcement that the aircraft would be upgraded and remain in
service to about 2070.49,50

PwC Aerospace and defense 19

 Defense outlook

The defense sector is stable, and companies are generally forecasting moderate
growth for 2021. Some industry observers believe that defense budgets will
inevitably come under heavy pressure in the near future as world governments
grapple with the massive cost of COVID-19 relief.
The Biden administration plans to request $715 billion for military spending for
FY 2022, up from $704 billion (or about 1.5%) allocated by lawmakers in FY
2020, despite calls by some Republicans for a major increase in the Pentagon’s
budget.51 In Europe, the elevated levels of terror threat and continuing tensions
with Russia marked a turning point, and we expect defense budgets to grow
modestly in 2021 and beyond. The UK, Germany and France all confirmed their
intention to reinforce their defense capabilities. However, this may not result in a
large number of new programs because of the asymmetric nature of the threat.
Instead, European defense contractors will need to develop new intelligence and
cyber capabilities rapidly, while facing competition from nontraditional technology
companies.
The global security environment continues to be dynamic, with tensions rising
among the West and Russia, China, Iran and North Korea. The coming year is
likely to usher in additional repercussions on defense policies, given the continuing
crises around the world.
In recent years, we have seen a focus on market growth and a pivot from a “return
of capital to shareholders” strategy to an “invest for growth”. The latest examples
include Lockheed Martin’s acquisition of Aerojet Rocketdyne, the Harris-L3
Technologies merger, Northrop Grumman’s acquisition of Orbital ATK, and General
Dynamics’ acquisition of CSRA. While the defense sector has been relatively
insulated from the COVID-19 crisis, it had created an environment of caution in
the short term. We expect to see moderate increases in the levels of M&A and
investment in research and development.

PwC Aerospace and defense 20

In summary

The performance of the top 100 A&D companies is a barometer for the health of the
industry.
Commercial aviation has become a critical part of our global infrastructure. COVID-19
has put the industry into crisis, and a full recovery is not expected until the end of
2023. Furthermore, many airlines will likely be hampered by large amounts of debt
that could dominate their capital allocation strategy. In the past two decades, aviation
has become increasingly inelastic, as witnessed by its resiliency during the last
recession and subsequent recovery. Globalization and increases in the global middle
class have spurred demand. Even as there is a trend toward moderating — or even
reversing — globalization (as supply chains are moved closer to their end markets),
the long-term forecast for commercial aerospace nevertheless appears positive. Just
consider, for example, that 82% of the global population has yet to set foot in an
airplane; and, with the global middle class projected to grow from 25% to 60% by
2030, there is an enormous untapped segment of new customers.
The outlook for defense remains strong. Global defense budgets are plateauing but
at healthy levels. While escalating deficits pose a risk to defense spending, global
threat levels remain elevated in some regions, including those undergoing military
modernization programs.
Furthermore, the restructuring actions begun by commercial aerospace companies in
2020, combined with digital transformation and process improvements, will improve
competitiveness for many years and position the industry for a profitability boom as
end markets recover.

PwC Aerospace and defense 21

Endnotes

1 “Lockheed Martin to Acquire Aerojet Rocketdyne, Strengthening Position as Leading Provider of Technologies
to Deter Threats and Help Secure the United States and Its Allies,” Lockheed Martin press release, prnewswire.
com, December 20, 2020.
2 “Northrop Grumman to Sell Federal IT and Mission Support Business to Veritas Capital for $3.4 Billion,”
Northrop Grumman company website, December 7, 2020.
3 “Perspecta Inc. acquired by Peraton,” securityinfowatch.com, February 9, 2021.
4 “Advent’s Cobham set for $2.8B divestiture,” pitchbook.com, February 2, 2021.
5 “Cubic Announces Receipt of Unsolicited Acquisition Proposal from ST Engineering,” Cubic press release,
businesswire.com, March 22, 2021.
6 “Teledyne to Acquire FLIR Systems; $8 Billion Cash-and-Stock Deal,” securitytoday.com, January 6, 2021.
7 Joanna Bailey, “Which Airlines Ceased Operations In 2020?”, simpleflying.com, February 9, 2021.
8 “The Race to Zero Emissions, and Why the World Depends on It,” un.org, December 2, 2020.
9 “Biden Says U.S., Canada to Work toward Achieving Net Zero Emissions by 2050,” Reuters, February 23,
2021.
10 “Boeing 737 MAX Recertified: Pilot Training Requirements,” aerotime.aero, February 18, 2021.
11 Linnea Ahlgren, “The End Is Near for Airbus A380 Production,” simpleflying.com, February 10, 2021.
12 Pilar Wolfsteller, “Why Boeing Needs to Work Quickly on NMA Decision,” flightglobal.com, February 9, 2021.
13 Tom Boon, “British Airways Says It Will Take Its First Boeing 777X In 2024,” simpleflying.com, February 26,
2021.
14 Guy Norris, “Test Progress Keeps UltraFan Demo on Track to Run in 2021,” aviationweek.com, July 20, 2020.
15 Rytis Beresnevicius, “Is This the Sunset for the Mitsubishi SpaceJet?”, aerotime.aero, January 12, 2021.
16 Federal Aviation Administration, “Business Jet Report,” February 2021.
17 Ibid.
18 Greg Reverdiau, “FAA Releases Remote ID, the Largest Regulatory Change for Drones In Years,” nextgov.com,
February 16, 2021.
19 “‘NASA rules,’ Musk Says as SpaceX Wins $2.9 Billion Moon Lander Contract,” Reuters, April 17, 2021.
20 Jeff Foust, “Crew Dragon in Orbit after Historic Launch,” spacenews.com, May 30, 2020.
21 Valerie Stimac, “Virgin Galactic Gears Up for First Powered Space Flight from New Mexico,” Forbes.com,
December 10, 2020.
22 Susan Montoya Bryan and Paul Davenport, “Virgin Galactic Makes First Flight from New Mexico Site,” apnews.
com, December 12, 2020.
23 Jeff Foust, “Blue Origin Team Delivers Lunar Lander Mockup to NASA,” spacenews.com, August 20, 2020.
24 Fabienne Lang, “Blue Origin Successfully Tests Upgraded Capsule Built for Crewed Flights,”
interestingengineering.com, January 15, 2021.
25 Elizabeth Howell, “Northrop Grumman Test-Fires Rocket Motors for New Vulcan Centaur Booster,” space.com,
February 4, 2021.
26 Nola Taylor Redd, “Dream Chaser Space Plane’s First Flight Slips to 2022 Due to Pandemic-Related Delays,”
space.com, January 12, 2021.
27 Michael Sheetz, “SpaceX Looks to Build Next-Generation Starlink Internet Satellites after Launching 1,000 So
Far,” cnbc.com, January 29, 2021.
28 David Vergun, “DOD Officials Describe Modernization Priorities That Will Benefit Warfighters,” US Department
of Defense, defense.com, September 10, 2020.
29 Meredith Roaten, “Space Force Looking to Bring Biden Administration Up to Speed,” nationaldefense.com,
February 3, 2021.
30 “US Air Force Financial Management & Comptroller,” www.saffm.hq.af.mil/, accessed on March 13, 2021.

PwC Aerospace and defense 22

Endnotes

31 Kratos.com company website https://www.kratosdefense.com/systems-and-platforms/training-systems/

simulation-systems/space
32 Mandy Mayfield, “Pentagon, Industry Investing in Space Force Simulations,” nationaldefensemagazine.org,
December 7, 2020.
33 Stephanie Kanowitz, “DOD Invests in Counter-Drone Technologies,” Defense Systems, December 11, 2019.
34 “Department of Defense Counter-Unmanned Aircraft Systems,” Congressional Research Service, January 11,
2021.
35 “Top Sixth-Generation Fighter Jets,” airforcetechnology.com, November 20, 2020.
36 Garrett Reim, “Lockheed Martin Delivers 134 F-35 Stealth Fighters in 2019,” FlightGlobal, January 3, 2020.
37 Loren Thompson, “Ten Reasons the F-35 Fighter Is Poised to Have a Super Year In 2020,” Forbes.com,
January 9, 2020.
38 “UAE Signs Deal with U.S. to Buy 50 F-35 Jets and up to 18 Drones: Sources,” Reuters, January 20, 2021.
39 Roxana Tiron and Tony Capaccio, “Pentagon Seeks $10.3 Billion to Buy the Stealthy B-21 Raider,” Bloomberg
News, February 10, 2020.
40 Sara Sirota, “Air Force to Award Three Initial Contracts for New Hypersonic Cruise Missile Program,”
insidedefense.com, August 6, 2020.
41 Jamie Hunter, “Boeing’s T-7 Red Hawk Trainer Enters Production in the U.S.,” skiesmag.com, February 26,
2021.
42 “Never Been a Better Time to Re-engine: Committed to the B-52’s Future,” aerotechnews.com, March 12,
2021.
43 “Northrop Gets $13-Billion Air Force Contract to Develop ICBM,” Los Angeles Times, September 8, 2020.
44 “MQ-25 Stingray Unmanned Aerial Refuelling Aircraft,” naval-technology.com.
45 Theresa Hitchens, “Skyborg Could Develop Multiple Drones for Many Missions,” breakingdefense.com,
February 4, 2021.
46 Holly Jordan, “AFRL XQ-58A Valkyrie Expands Flight envelope in Fourth Test,” Wright-Patterson AFB, January
24, 2020.
47 Mark Episkopos, “Yes, There Will Be Two European Sixth-Generation Stealth Fighters,” nationalinterest.org,
February 25, 2021.
48 Sydney J. Freedberg Jr., “Defiant-X: Sikorsky, Boeing Unveil FLRAA Design,” breakingdefense.com, January
25, 2021.
49 Christina Mackenzie, “Greece and France Ink $3 Billion Contract for Rafale Fighter Jets,” defensenews.com,
January 25, 2021.
50 Gareth Jennings, “France Lays Out Rafale Upgrade Path to 2070,” janes.com, November 13, 2019.
51 Connor O’Brien and Andrew Desiderio, “Biden to Request $715B for the Pentagon, Slight Increase from Last
Year,” Politico, April 8, 2021.

PwC Aerospace and defense 23

Appendix

Methodology
Our data are drawn from financial reports on FY 2020 results for the largest 100 A&D
companies by revenue (see below) and other publicly available information, such
as company websites and press releases. Our cutoff date for publication was April
1, 2021.
A&D companies include those that generate the majority of revenue from aerospace
or defense activities or, for diversified companies, those reportable segments that
derive a majority of their revenue from A&D activities. The results are reported in US
dollars. Foreign currencies were translated, for the top 100 list, at average exchange
rates for years ended December 31, 2020, and December 31, 2019, respectively.
Our report also expresses PwC’s point of view on topics affecting the industry,
developed through interactions with our clients and other industry leaders
and analysts.

PwC Aerospace and defense 24

 A&D top 100 companies (ranked by 2020 revenue)

Revenue Operating Profit

(US $ millions) (US $ millions)
# Company 2020 2019 Change 2020 2019 Change
1 Lockheed Martin 65,398 59,812 9% 8,644 8,545 1%
2 Boeing 58,158 76,559 -24% (12,767) (1,975) -546%
3 Airbus 56,912 78,923 -28% (582) 1,499 -139%
4 Raytheon Technologies 56,587 45,349 25% (1,889) 4,914 138%
5 General Dynamics 37,925 39,350 -4% 4,133 4,570 -10%
6 Northrop Grumman 36,799 33,841 9% 4,188 3,978 5%
7 BAE Systems 24,746 23,348 6% 2,478 2,422 2%
8 GE Aviation 22,042 32,875 -33% 1,229 6,812 -82%
9 Thales 19,372 20,606 -6% 1,542 1,437 7%
10 Safran 18,812 28,105 -33% 1,922 4,278 -55%
11 L3Harris 18,194 12,856 42% 1,175 694 69%
12 Leonardo 15,291 15,436 -1% 590 1,291 -54%
13 Rolls Royce 15,178 21,157 -28% (2,671) (1,087) -146%
14 Leidos 12,297 11,094 11% 998 912 9%
15 Honeywell Aerospace 11,544 14,054 -18% 2,904 3,607 -19%
16 Huntington Ingalls 9,361 8,899 5% 799 736 9%
17 Textron 8,596 9,766 -12% 630 1,025 -39%
18 Booz Allen Hamilton 7,464 6,704 11% 669 602 11%
19 Mitsubishi Aircraft, Defense and Space 6,605 6,216 6% (1,955) (343) -470%
20 Bombardier Aviation 6,488 7,501 -14% (125) 531 -124%
21 SAIC 6,379 4,659 37% 370 220 68%
22 Dassault Aviation 6,262 8,254 -24% 281 891 -69%
23 CACI 5,720 4,986 15% 458 378 21%
24 Babcock International Group 5,712 5,708 0% (212) 251 -184%
25 Howmet Aerospace 5,259 7,098 -26% 626 579 8%
26 Singapore Technologies 5,191 5,768 -10% 407 479 -15%
27 TransDigm Group 5,103 5,223 -2% 1,751 1,926 -9%
28 Kawasaki Aerospace Systems 5,038 4,367 15% 400 299 34%
29 Serco 4,987 4,189 19% 230 131 75%
30 AVIC Aircraft Company 4,853 4,964 -2% 142 89 60%
31 Elbit Systems 4,663 4,508 3% 326 322 1%
32 MTU Aero Engines 4,535 5,183 -12% 474 848 -44%
33 Perspecta 4,504 4,030 12% (504) 241 -309%
34 IHI Aero Engines and Space Operations 4,493 4,516 0% 377 426 -12%
35 Rheinmetall Defence 4,245 3,944 8% 472 384 23%

PwC Aerospace and defense 25

 Revenue Operating Profit
(US $ millions) (US $ millions)
# Company 2020 2019 Change 2020 2019 Change
36 Israel Aerospace Industries 4,184 4,108 2% 195 121 61%
37 Saab 3,849 3,747 3% 143 311 -54%
38 Embraer 3,771 5,463 -31% (323) (77) -319%
39 Melrose / GKN Aerospace 3,599 4,913 -27% 18 522 -97%
40 Spirit AeroSystems 3,405 7,863 -57% (813) 761 -207%
41 Trimble 3,148 3,264 -4% 420 376 12%
42 Hindustan Aeronautics Limited (HAL) 3,133 2,924 7% 574 547 5%
43 Triumph Group 2,900 3,365 -14% 58 (275) -121%
44 MOOG 2,885 2,905 -1% 185 285 -35%
45 Parker Hannifin Aerospace 2,735 2,511 9% 477 488 -2%
46 PAE 2,715 2,764 -2% 83 17 388%
47 Korea Aerospace Industries 2,638 2,391 10% 234 133 76%
48 CAE Aviation Defense and Security 2,609 2,490 5% 431 371 16%
49 ManTech International 2,518 2,223 13% 158 138 14%
50 Curtiss-Wright 2,391 2,488 -4% 289 404 -28%
51 ViaSat 2,309 2,068 12% 38 (61) -162%
52 Aselsan 2,292 2,289 0% 518 460 13%
53 Eaton Aerospace 2,223 2,480 -10% 414 595 -30%
54 Meggitt 2,162 2,903 -26% 245 514 -52%
55 SES 2,138 2,222 -4% 94 410 -77%
56 RUAG 2,133 2,010 6% (7) 107 -107%
57 BWXT 2,124 1,895 12% 359 326 10%
58 Austal 2,086 1,851 13% 130 93 40%
59 Aerojet Rocketdyne 2,073 1,982 5% 241 238 1%
60 AAR 2,072 2,052 1% 41 98 -58%
61 Oshkosh Defense 2,030 2,032 0% 184 203 -9%
62 Larson Toubro 1,947 1,894 3% 181 195 -7%
63 FLIR Systems 1,924 1,887 2% 317 273 16%
64 Signature Aviation 1,921 3,017 -36% 153 441 -65%
65 Heico Corporation 1,787 2,056 -13% 377 457 -18%
66 Ball Aerospace 1,741 1,479 18% 153 140 9%
67 Maxar Technologies 1,723 1,666 3% -46 83 -155%
68 Bharat Electronics 1,701 1,733 -2% 335 395 -15%
69 Woodward Aerospace 1,591 1,881 -15% 310 389 -20%
70 Hexcel 1,502 2,356 -36% 14 425 -97%
71 Swire Pacific / HAECO 1,480 2,029 -27% (12) 134 -109%
72 Cubic Corporation 1,476 1,497 -1% 62 86 -28%
73 Vectrus 1,396 1,383 1% 43 52 -17%
74 Qinetiq 1,377 1,162 19% 151 145 4%
75 Subaru Aerospace 1,332 1,222 9% 47 55 -13%
76 Constellium Aerospace & Transport 1,169 1,637 -29% 121 228 -47%
77 Allegheny Technologies High Performance Metals 1,165 1,979 -41% 52 271 -81%
78 Ultra Electronics 1,104 1,052 5% 162 151 7%
79 Smiths Detection 1,035 1,018 2% 73 116 -37%
80 OHB Technology 1,003 1,125 -11% 48 55 -13%

PwC Aerospace and defense 26

 Revenue Operating Profit
(US $ millions) (US $ millions)
# Company 2020 2019 Change 2020 2019 Change
81 SIA Engineering 994 1,021 -3% 68 57 19%
82 Kongsberg Gruppen Defense and Aerospace 903 890 1% 123 89 38%
Teledyne A&D Electronics and Engineered
83 874 1,066 -18% 131 180 -27%
Systems
84 Jamco Corp 858 761 13% 17 40 -57%
85 Mercury Systems 797 655 22% 91 77 18%
86 Kaman Aerospace 784 761 3% (70) 56 -225%
87 Kratos Defense & Security Solutions 748 718 4% 29 38 -24%
88 Axon Enterprise 681 531 28% (14) (6) -133%
89 Senior Aerospace 675 1,065 -37% 8 97 -92%
90 VSE Corporation 662 753 -12% 14 60 -77%
91 Crane Aerospace & Electronics 651 799 -19% 101 193 -48%
92 Ducommun 628 721 -13% 47 56 -16%
93 Garmin Aviation 623 735 -15% 453 543 -17%
94 FACC 601 876 -31% (84) 67 -226%
95 Indra Security & Defense 594 634 -6% 29 77 -62%
96 Magellan Aerospace Corp 555 766 -28% 14 68 -79%
97 Chemring 517 427 21% 59 40 49%
98 Astronics 503 773 -35% -101 2 NM
99 Latecoere 471 798 -41% (197) (11) NM
100 Aeroviroment 367 314 17% 47 34 38%
Total 696,698 754,189 -8% 25,199 64,864 -61.2%

PwC Aerospace and defense 27

Additional resources
Aerospace manufacturing
attractiveness ranking
The analysis looks at how
various countries and the United
States compare in terms of their
attractiveness as locations for
commercial aircraft manufacturing.
Global A&D deals insights
A quarterly analysis of global merger
and acquisition (M&A) activity in the
A&D industry provides an overview of
the most recent M&A results and our
expectations for future deal activity.
PwC
Industrial Insights blog
The PwC industrial insights blog
features perspectives on critical
business issues facing A&D
companies today.
Fit for Growth
PwC’s Fit for Growth aligns strategy,
cost and organization to power your
transformation and help you prepare
for the known and the unknown.
Aerospace and defense 28
 Contact
To have a deeper conversation about how this subject
may affect your business, contact:

Scott Thompson
Global aerospace and defense leader
1.413.441.2703
scott.thompson@pwc.com

DISCLAIMER: This paper makes a number of predictions and presents PwC’s vision of the future environment for the
aerospace and defense industry. These predictions are, of course, just that – predictions. These predictions of the future
environment for the A&D industry address matters that are, to different degrees, uncertain and may turn out to be materially
different from what is expressed in this paper. The information provided in this paper is not a substitute for legal, investment
or any other professional advice. If any reader requires legal advice or other professional assistance, each such reader
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