Aerospace & Defence (Private Sector)

As travel restrictions and quarantine rules endure in 2021, risk of failure within supply chains continues to be high with strong liquidity pressure.

Sector trends & challenges

  • Reduced aviation activity

    Airlines are still having to contend with reduced passenger volumes as we move towards the end of 2021. Quarantine rules continue to deter international travellers which is increasing pressure on company balance sheets.

  • Reduced servicing requirements

    Reduced flying hours are leading to earlier aircraft retirements, especially of older less-efficient models. As airlines operate smaller fleets, there remains reduced demand for aftermarket parts and MRO services.

  • Changing business models

    COVID-19 and the ever-increasing focus on ESG have combined to lead to a shift away from older, less fuel efficient aircraft models, with reduction in long haul travel expected to remain into 2023/4.

Sector rating profile

Since the pandemic, the collapse in air travel has had knock-on demand both for new orders and maintenance of existing planes. Aviation recovery has been slower than expected with demand for international travel still markedly down on the pre-pandemic level. Whether company balance sheets can weather the storm into 2022 and beyond depends on the funding and strategy options available to those specific businesses.


We have seen significant transactional activity throughout the past 12-18 months, with private equity seeing opportunities to invest in under-valued assets across the sector owing to depressed activity levels. In addition to this the general cost and cash flow pressure in supply chains has led to a shift towards consolidation of suppliers to achieve the scale necessary to thrive in a future of uncertain demand levels.

Aerospace & Defence (Private Sector)


Up to early 2020, the aerospace sector had been relatively buoyant with record order books building across the industry over the last 10 years and several major new aircraft models going through final assembly phases. This, we anticipated, would lead to the focus of businesses within the supply chain being away from sales and development activities towards driving efficient and cost-effective production and order book delivery.

Fast forward 18 months, and COVID-19 continues to leave it’s mark right across the sector. From cancelled or delayed orders through to reduced demand for maintenance and servicing activity, the whole sector remains in limbo, with forward demand levels highly uncertain.

As the acute phase of COVID-19 is behind us and the economy emerges into a new reality, the aerospace sector continues to be one of the slowest to recover. Aviation demand, particularly long-haul demand, will be subdued for the foreseeable period, with airlines unlikely to be seeking to increase aggregate capacity in the near-term. The risk of corporate failure within the supply chain is similarly elevated, necessitating careful risk management to reduce financial and operational exposure.

Climate change and environmental regulations will drive innovation across the sector as airlines move from large wide-body planes to fuel-efficient narrow-body jets. There is mid-term potential for significant disruption as sustainable aviation fuels and similar green agenda items dominating discussions on where to focus investment. The push for more efficient models is likely to remain as governments grapple with the demand and desires for international travel with the demands placed upon them to reach carbon ‘Net Zero’ in the next few decades.



In March 2021 the UK Government unveiled its latest defence spending review. Titled ‘Defence in a Competitive Age’, the paper outlines proposals to update the UK’s defence capabilities against emerging threats.

For defence contractors, the proposals provide both opportunities and threats. On the one hand, £3bn has been set aside for new vehicles, drones, electronic warfare and such like, providing clear new opportunities for contractors specialising in, or diversifying into, non-conventional defence capabilities. On the other, it’s also clear that investment in conventional military equipment may stagnate or diminish over time. As an example, one-third of the Army’s 227 Challenger tanks are due to be scrapped as a result of the review (though the remainder will be upgraded).

Monarch Airlines

We were appointed as Joint Administrators to MAEL, which provided aircraft maintenance services.

We were able to protect over 100 jobs through transfer of specific MAEL operations to new operators. We also realised value for creditors through the sale of over 6,000,000 parts held in inventory, as well as hangars at two airports.

Find Your Expert

Kenny McKay is Interpath Sector Leader for Industrials, which includes Aerospace & Defence as one of three core segments.  Roraigh Kirkness leads our approach to the Aerospace & Defence sector nationally.  For a full list of our senior people with experience in this sector use the button below.

Our senior team