Deloitte has recently released its Midyear Aerospace and Defense Industry Outlook that has analyzed the effects of the COVID-19 pandemic on the commercial aerospace, defense sectors and Mergers and acquisitions (M&A) activity, the company reported on Thursday.
Commercial aerospace has experienced a drastic decrease in demand for passenger travel and changing customer behaviors with the recent distancing restrictions, which could result in a higher demand for narrow-body aircraft. The impact of COVID-19 has also affected the commercial aerospace manufacturing supply chain, particularly for mid-to-lower-tier suppliers.
Deloitte has reported that the defense sector has remained stable and military projects have held strategic priority as the federal government continues to strengthen the defense industrial base (DIB).
The company noted that while the defense sector’s rate of growth may decrease in 2020, companies were largely insulated from large-scale disruption by steady defense budgets and beneficial policy decisions by the Department of Defense (DoD). While the sector has experienced temporary disruptions to defense supply chains, delays are expected to be minor.
In addition, M&A activity is expected to decrease as companies focus on liquidity as opposed to expansion. Deloitte’s report noted that companies are likely to become cautious within M&A. New policies that have restricted foreign investment in key components of the defense industrial base (DIB) could prevent international M&A deals in the near term.
To combat the challenges the COVID-19 pandemic has posed, Deloitte stated that digital technologies were identified as the most important factor to combat fallout. These technologies will enhance productivity, efficiency and workplace safety.
Advanced technologies are expected to drive survival and recovery of companies and enable them to better position themselves by accelerating the adoption of advanced robotics and automation, which will make the manufacturing process more efficient as companies operate with reduced workforces.
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