Aerospace & Defence (Private Sector)
Deals Activity: Moderate
Restructuring Activity: High
Deals activity in Aerospace & Defence (Private)
- 1. The sector has seen a low but relatively steady flow of deals in recent quarters.
- 2. There has been a steady uptick – from a low base – in activity in recent quarters.
- 3. Potential deal activity could be driven by recent commitments around the world to increase defence spending over time.
Restructuring activity in Aerospace & Defence (Private)
The impact of the pandemic on consumer demand for aviation prompted an increase in restructuring activity throughout 2021 and into 2022.
Meanwhile, activity in the defence sector remained steady, albeit companies were impacted by staff absenteeism and skills shortages, as well as supply chain issues.
Commercial flight demand has seen a post-pandemic recovery, meaning airlines are beginning to return to profitability after a three year industry slump. This comes from passengers caution around travel significantly decreasing in the latter quarters of 2022.
The war in Ukraine has meant re-routing of international fights, as well as increased defence spending. This therefore means the Ukrainian airspace is closed, placing a halt to the movements by air of nearly 3.3% of the total air passenger traffic in Europe and with Russia banning flights over their enormous land mass meaning certain journeys add up to an extra hour to journey times leaving considerations around whether offering these flights are commercially viable.
Aerospace & Defence (Private Sector)
COVID restrictions have hit sales and deliveries as the sector was buffeted by successive lockdowns.
Yet the post-pandemic recovery has been remarkably swift. Airlines have resumed deliveries and orders of planes. Airbus has a backlog of about 7,000 planes and hopes to increase production of its A320neo airliners to 75 a month by 2025.
How this recovery will be sustained considering elevated oil prices and global economic volatility remains to be seen. Climate change, environmental regulations and consumer demand will drive innovation across the industry. There is potential significant disruption from the production of Sustainable Aviation Fuels (SAFs), more energy efficient models and a shift towards narrowbody planes, as well as an emphasis on 'point-to-point' flights.
The geopolitical challenges of recent months are unlikely to go away anytime soon. In the West, many national governments – which have historically failed to fulfil their NATO obligation to spend 2% of GDP on defence – are committing to investing heavily in their armed forces. Spending in the sector is expected to increase as a result, alongside more investment in new technologies.
Challenges remain for the industry. A limited supply of critical components, notably electronics, is set to continue. Historic overspends and delays on projects will become increasingly acute. And manufacturers will seek to manage competing priorities and navigate global political tensions to maximise output.
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. Nicky Ogden 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