Aerospace and defense - PwC · PwC Aerospace and defense 2 Methodology Our data is drawn from financial reports on fiscal year (FY) 2017, results for the largest 100 aerospace and

Aerospace and defense2017 year in review and 2018 forecast

How are aerospace and defense companies performing today?What challenges and opportunities do they face?PwC takes a look.

www.pwc.com/us/aerospaceanddefense

PwC Aerospace and defense 2

Methodology

Our data is drawn from financial reports on fiscal year (FY) 2017, results for the largest 100 aerospace and defense (A&D) companies by revenue (see Appendix A) and other publicly available information, such as company websites and press releases. Our cut-off date for publication was April 1, 2018.

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 at average exchange rates for years ending December 31, 2017 and December 31, 2016 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.


Aerospace and defense overview 4

Commercial aerospace 14

Defense 24

Mergers and acquisitions 32

Summary 34

Appendix 36

Additional resources 40


Aerospace and defense overview

2017 review

The aerospace and defense industry reported record profits of $77 billion in 2017, an 18% increase over the prior year, and surpassing the previous record set in 2014 by 5%. Industry revenue was $728 billion, an increase of 4% over 2016, and nearly matching the record revenues of $729 billion in 2014.

Boeing’s operating profit exceeded $10 billion, a first for any A&D company. Boeing’s $4.4 billion profit improvement exceeded the total profits for all but two other companies (GE Aviation and Lockheed Martin). Boeing’s performance catapulted it back to become the industry’s most profitable company by a large margin, an honor which was taken by GE Aviation in 2016. GE Aviation retained second place, with a 9% profit improvement to $6.6 billion.

Aerospace and defense industry reports record profit

Revenue increases 4%; operating profit increases 18%

Boeing reports > $10 billion in operating profit to regain “most profitable company” status

Commercial revenue passenger miles growth accelerates to 7.6%


The top 100 A&D companies (see Appendix A), by revenue, reported $728 billion in revenue and $77 billion in operating profit in 2017. Operating margin improved by 130 basis points to 10.6%. Industry operating margin has reached double digits only once before in 2014. The improvement in operating profit and operating margin were broad based. There were 13 companies with profit fluctuations greater than $400 million (see Figure 2).

Figure 1: Key industry metrics (US$ billions)

2017 2016 Change

Revenue $728 $704 4%

Operating profit $77 $65 18%

Operating margin 10.6% 9.3% 130 bps

Source: PwC analysis

Figure 2: Profit fluctuations > $400 million

(millions)

Boeing +$4,444

Rolls-Royce +$1,680

Airbus +$1,359

Cobham +$1,186

Triumph +$1,148

GE Aviation +$ 527

Safran +$ 485

Bombardier +$ 454

General Dynamics +$ 443

CSRA +$ 435

Mitsubishi -$ 951

Korea Aerospace Industries -$ 455

BAE Systems -$ 448



One trend we have been watching for several years is a shift in operating margin. The top quartile now reports operating margin on par or better than the industry average, due mostly to significant improvements at Boeing and Airbus, the industry’s two largest companies. Boeing’s operating margin is now 11%, slightly better than the industry average, while Airbus is less than half of that, at 5.1%, which included a non-recurring charge for A400M. Only the third quartile reported a decrease in operating profit and operating margin, which was mostly attributable to Korea Aerospace Industries’ performance. The improvement in the top quartile profitability was significantly influenced by Boeing’s performance. Profit improvement in the second quartile was primarily due to the absence of restructuring charges at Triumph Group ($1.1 billion profit improvement) and Cobham ($1.2 billion profit improvement).

Prospects continue to be bright for commercial aerospace. Growth in revenue passenger miles accelerated to 7.6% in 2017 (see Figure 11), more than twice global GDP growth. And that’s on top of the two preceding years above 6% growth and greater than 5% growth since the Great Recession of 2008-2009. This growth is driving demand for new equipment and aftermarket in the near and long term. Also, new aircraft deliveries increased 3%, and the industry set a new record of 1,481 large aircraft deliveries in 2017 (see Figure 10), 45 more than 2016 and a 45% increase since 2011, and further production increases are planned for narrowbodies. Book-to-bill was back above 1:1 in 2017, after a modest dip in 2016, which resulted in new record backlog in excess of 13,000 aircraft and approximately nine years of production at current rates.

Figure 3: Key metrics by quartile

RevenueOperating

profitOperating

marginChange

Top quartile 3.0% 17.3% 10.9% +140 bps

Second quartile 5.8% 55.3% 9.2% +290 bps

Third quartile 3.9% -6.2% 11.2% -120 bps

Fourth quartile 3.5% 10.6% 8.1% +50 bps



The defense industry reported accelerating revenue growth in 2017. In March 2018, President Trump signed the omnibus spending bill, which sets the Department of Defense (DoD) budget at $700 billion, about a 20% increase in two years. Therefore, we expect continued acceleration of revenue and profit in 2018.

During 2017 and into early 2018 the global threat environment continued to evolve. Coalition forces have substantially defeated ISIS. And while terrorist threats are likely to persist, the Pentagon is pivoting toward Russia, China, North Korea and Iran, particularly North Korea’s escalating nuclear missile program, causing the US to bolster its presence in the region. Furthermore, China’s military modernization is continuing to cause tension, particularly in the South China Sea. All these events underscore the complex and dynamic global security environment, which could cause rapid changes in US defense priorities.

There were few changes to the top 100 list in 2017. BWXT and VSE were added to the list and B/E Aerospace and Digital Globe were deleted. There were, however, some significant deal announcements, which are pending or have closed in 2018, including UTC’s acquisition of Rockwell Collins and Northrop Grumman’s acquisition of Orbital ATK.

Figure 4: Top 100 additions and deletions

Added to the list

BWXT #71 Spinoff from Babcock and Wilcox

VSE Corporation #92 Acquisitions and organic growth

Deleted from the list

B/E Aerospace Acquired by Rockwell Collins

Digital Globe Acquired by Maxar Technologies




Figure 5: Analysis highlights

Largest increase in revenue (dollars) Lockheed Martin +$3,800m

Largest increase in revenue (percentage)

Leidos +44%

Largest increase in profit (dollars) Boeing +$4,444m

Largest increase in profit (percentage) Rolls-Royce +2827%

Highest operating margin TransDigm 42.2%

Largest increase in top 100 list Serco +12

Largest decrease in revenue (dollars) Boeing -$1,179m

Largest decrease in revenue (percentage)

Korea Aerospace Industries

-31%

Largest decrease in profit (dollars) BAE Systems -$448m

Largest decrease in profit (percentage) HAECO -648%

Largest decrease in top 100 listKorea Aerospace Industries

-17


Revenue

Boeing was again the industry’s largest company in 2017. It reported $95 billion in revenue, which reflects a 2% decrease driven partly by defense revenues and lower commercial aircraft revenues due to mix of aircraft. Airbus reported flat revenue of €66.8 billion compared with €66.7 billion in the prior year, which resulted in a 2% increase in US dollars due to currency fluctuation. Lockheed Martin reported the largest revenue growth, for consecutive years, of $3.8 billion. Leidos reported the largest percentage growth in revenue, 44%, as a result of its acquisition of Lockheed Martin’s IS&GS business.


Profitability

• Boeing regained most profitable status in 2017, with $10.3 billion in operating profit, the first time any company in the industry has achieved the $10 billion mark.

• Boeing also reported the largest increase in profit of $4.4 billion, achieved mostly in its commercial aircraft segment.

• BAE Systems reported the largest decline in profit of $448 million.

Operating margin

Industry operating margin improved 130 basis points to 10.6% (see Figure 1), a record double-digit growth only previously achieved in 2014. Transdigm had the industry’s best operating margin at 42.2%, while GE Aviation improved 100 basis points to an operating margin of 24.3%, after achieving 20% for the first time in 2014.

Figure 6: Companies with operating margin > 20%

Top 100 rank # Operating margin

GE Aviation 6 24.3%Honeywell Aerospace 13 22.2%Transdigm 41 42.2%SES 53 30.0% Heico 74 20.1% Aselsan 76 21.9%Crane Aerospace & Electronics 92 23.2%Source: PwC analysis


Figure 7: A&D industry vs. S&P 500 total shareholder returns (2012–2017)

Source: S&P Global Market Intelligence, Capital IQ; PwC Leadership Information Console

Figure 8: A&D historical total shareholder returns

Index 1 year TSR 5 year TSR

A&D airframers 88.4% 30.7%

A&D prime 43.3% 26.3%

A&D index 39.9% 24.7%

A&D suppliers 31.9% 18.4%

S&P 500 21.8% 15.8%

Source: S&P Global Market Intelligence, Capital IQ; PwC leadership information console

0%

50%

100%

150%

200%

250%

300%

350%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

A&D peers

S&P 500

Total shareholder returns

The A&D industry delivered strong total shareholder returns (TSR) – defined as the annualized change in share value + dividends / buybacks – of 39.9% in 2017. These returns outperformed the S&P 500 TSR of 21.8% in 2017, continuing the sector’s outperformance over the last five years with the A&D index delivering 24.7% vs. the S&P 500’s 15.8%. Within the A&D index, the performance was led by the A&D airframers, which have delivered a 1 Year TSR of 88.4%, followed by the A&D primes’ 43.3% and suppliers’ 31.9%.


Figure 9: 1 Year total shareholder return disaggregation

IndexTSR impact of

profit growth

TSR impact of change in market

expectations

TSR impact of capital

distributionTSR

(2015–2016)

A&D airframers 47.6% 16.2% 24.7% 88.4%

A&D prime 13.6% 16.9% 12.8% 43.3%

A&D index 11.5% 16.5% 11.9% 39.9%

A&D suppliers 5.8% 16.4% 9.7% 31.9%

S&P 500 8.0% 5.4% 8.4% 21.8%

Source: S&P Global Market Intelligence, Capital IQ; PwC leadership information console

Shareholder returns are a factor of operating performance, and the market’s reaction to this operating performance in terms of future expectations and capital distribution (dividends and buy backs). Over the past year the overall A&D index TSR have been driven by an increase in market expectations of 16.5%, followed by capital distribution of 11.9% and profit growth of 11.5%. This increased market expectations for the 2017 TSR is true for each of the A&D segments, with the exception of A&D airframers, whose strong performance was driven by Boeing’s overall outstanding year.

The A&D index TSR driven by market expectations was 16.5%, roughly 11.1% higher than the S&P 500’s market expectations of 5.4%. This is consistent with capital distributions as the A&D index TSR driven by capital distributions was 11.9% vs. 8.4% for the S&P 500. Higher market expectations imply that investors anticipate A&D’s future performance to exceed its historical performance faster than the market. This will likely increase pressure on management to deliver improved operating performance in 2018 and beyond in order to maintain and increase its valuation. At the same time, high levels of capital distribution as a driver of TSR means that management will likely need to sustain this growth while still instituting a disciplined capital allocation process that returns excess cash to shareholders in the form of dividends or buybacks. A reduction in current levels of dividend and distributions could have a negative impact on TSRs going forward.


2018 forecastCommercial aviation manufacturers (OEMs) and the defense sector are expected to report continued strong revenue improvement in 2018, with projected increases in aircraft deliveries, aircraft aftermarket and substantial increases in defense spending. The industry is also expected to show modest continued improvement in operating margin. It is difficult to predict any future impairment or restructuring charges. In the absence of such charges, operating margin should remain above 10%. Accordingly, we expect continued improvement and a record year for revenue and operating profit in 2018.


Commercial aerospace

2017 review

Boeing delivered 763 aircraft in 2017, beating its previous record, set in 2015, by one aircraft. Airbus delivered 718 aircraft in 2017, an increase of 30 over the prior year, marking its 15th consecutive year of record production. Total deliveries of 1,481 set another industry record for output. Airbus reported 1,109 net orders and won the sales race with Boeing for a fifth consecutive year. Industry net orders were 2,021, 540 more than deliveries, such that unit backlog set a new record of 13,129. The backlog represents about seven years of production for Boeing and about 10 years of production for Airbus, at current production rates.

Record deliveries and unit backlog

Figure 10: Aircraft backlog (US $billions)

12/31/17 12/31/16 12/31/15 12/31/14

Boeing $421 $473 $432 $440

Airbus* $1,071 $1,060 $1,001 $919

Sources: The Boeing Company 2017 annual report, Airbus Group 2017 annual report*at list price

Figure 11: Aircraft backlog (units)

Boeing Airbus Total

Backlog on Dec. 31, 2016 5,715 6,874 12,589

Net orders 912 1,109 2,021

Deliveries 763 718 1,481

Backlog on Dec. 31, 2017 5,864 7,265 13,129

Sources: The Boeing Company 2017 annual report, Airbus Group 2017 annual report.


For 2017, the International Air Transportation Association (IATA) reported revenue passenger miles growth of 7.6%, the third consecutive year above 6% growth, and marking the seventh consecutive year that air travel demand grew by more than 5%. It is also projected to grow by more than 6% in 2018. This level of demand supports Boeing’s 20-year forecast of approximately 41,000 new planes at a value of $6.1 trillion.1 Passenger load was above 80% for the full year for the third consecutive year, after achieving that milestone for the first time in 2015.

Figure 12: Key aerospace metrics

2017 2016 2015 2014

Revenue passenger miles 7.6% 6.3% 6.5% 5.9%

Load factor 81.4% 80.5% 80.3% 79.7%

Cargo freight ton miles 9.0% 3.8% 2.7% 4.5%

Load 45.5% 43.0% 44.1% 45.7%

Sources: : IATA press release, “2017 Marked by Strong Passenger Demand, Record Load Factor,” February 1, 2018; IATA press release, “Air Freight Demand up 9% in 2017, Strongest Growth Since 2010,” January 31, 2018.

1 The Boeing Company, Current Market Outlook 2017-2036, June 19, 2017.

Airbus posted a strong set of results for 2017, despite engine-driven delays on the A320neo and issues with the A400M. Airbus achieved many milestones in 2017, which included delivery of the 100th A350 XWB; delivery of the 50th A320 Family aircraft from Mobile, Alabama; delivery of Emirates’ 100th A380; first flight of the A330neo; certification of the A350-1000; first A321neos delivered with CFM and Pratt & Whitney (P&W) engines; and inauguration of the new A330 Completion and Delivery Centre in Tianjin, China, and its largest order ever in 2017 of 420 A320s to Indigo Partners. Airbus indicated that it is on track to achieve a production rate of 60 per month for A320s by mid-2019. A350 XWB production is expected to reach 10 per month by the end of 2018. Also in 2017, Airbus reached an agreement with Bombardier to take a controlling interest in the CSeries program.


Boeing achieved record production in 2017 and delivered more aircraft than Airbus for the sixth consecutive year. The company also achieved a production rate of 47 per month for the 737, including 74 of the MAX variant. The company also delivered 136 787s. In 2017, the 787 Dreamliner family racked up nearly 100 net orders and the 777 family captured 60 net orders. At the end of 2017, the company indicated that it was in negotiations with Embraer for a possible mergers and acquisitions (M&A) transaction.

At the 2017 Paris Air Show, Boeing provided some details about its 797 concept of a middle market widebody with the capacity to carry between 225 and 270 passengers, and a range of 5,000 nautical miles. The 797 would be a replacement for the 757, a narrowbody no longer in production, and would fill the gap between the largest 737 models and the smallest 787 Dreamliners. Boeing is refining the design requirements based on feedback from customers, and it is generally believed that Boeing will launch the 797 in 2018.2

We have seen strong aftermarket dynamics, particularly in the latter part of 2017, as reflected in the increased service revenues reported by key aftermarket players such as UTC, GE Aviation, Rolls-Royce, Safran, Meggitt and MTU.

2 Cecilia Goodnow and Josh Green, “1st 737 MAX 9 debuts as employees—and world—look on,” Boeing web story, March 9, 2017.


Aviation safety

2017 was the safest year on record for commercial aviation, marking the first year that there were no fatalities among the world’s airlines. On April 17, 2018 a passenger died on a flight, where a fan blade liberated in the engine and punctured the fuselage. It was the first fatality in the US in about nine years. The fatal accident rate is 1 in 16 million. There were 10 fatal accidents among cargo aircraft and turboprop planes.3 The last fatal accident in the US was in 2009. Just three years ago there was a string of mysterious and bizarre fatal incidents which included the disappearance of Malaysian Air 370, the missile strike on Malaysian Air 17, the mysterious crash of Air Asia 8501 in the Java Sea and the intentional crash of GermanWings 9525. None of those fatal accidents are believed to involve aircraft malfunctions.

Regional aircraft

In October 2017, Airbus and Bombadier announced a deal whereby Airbus will take a majority stake in the CSeries program for no investment and open an assembly line at its plant in Mobile, Alabama. The deal is expected to close in 2018. Airbus’ manufacturing scale, sales and support organization may give the program a significant boost.

By the end of 2017, Boeing and Embraer acknowledged that the companies were in negotiations whereby Boeing would take a stake in Embraer. However, details of the deal have not yet emerged, and the Brazilian government must approve any deal. Embraer’s 190-E2 received type certificate in February 2018 and is expected to enter service in 2018.

Mitsubishi’s Regional Jet (MRJ), Japan’s first locally made passenger jet, is currently undergoing some engineering changes and flight testing. The program has experienced a number of delays and is now scheduled to begin service in 2020 with ANA Holdings. There were no new orders in 2017.

3 David Shepardson, “2017 safest year on record for commercial passenger air travel: groups,” Reuters, Jan. 1, 2018.


Business jets

Business jet operations showed continuing modest improvement. According to the FAA, the year-over-year change in business jet operations was up by 3.2% in 2017,4 second best since 2010. However, business jet operations are still more than 9% below the peak in 2007. An improving forecast for economic growth combined with tax reform in the US (the largest market for business aviation) could energize the sector.

Unmanned aircraft systems (UAS)

Online registration for commercial operators of small drones (under 55 pounds) has continued to rise sharply since going live in April of 2016. As of January 2018, over one million drones are now registered5 with the FAA and over 70,000 remote pilot certifications have been issued.

The commercial UAS fleet is expected to increase from nearly 111,000 in 2017 to around 452,000 by 2022. The FAA said the number of UAS pilots will go from 74,000 in 2017 to 301,000 by 2022.6 “While the introduction of UAS into the National Airspace System (NAS) has opened up numerous possibilities, it has also created unique operational challenges,” the FAA’s 20 year forecast report said. “Despite these challenges, the UAS sector holds enormous potential, with commercial applications ranging from aerial photography to package delivery.”7

On April 27, 2017, the FAA published more than 200 facility maps to streamline the commercial drone authorization process. The maps depict areas and altitudes near airports where UAS may operate safely. But drone operators still need FAA authorization to fly in those areas. FAA air traffic personnel will use the maps to process Part 107 airspace authorization requests. Altitudes that exceed those depicted on the maps require additional safety analysis and coordination to determine if an application can be approved.

4 Federal Aviation Administration, “Business Jet Report,” March 2018.5 Federal Aviation Administration, “FAA drone registry tops 1 million,” UAS

Magazine, January 12, 2018.6 Patrick C. Miller, “FAA forecasts phenomenal growth for UAS industry,” UAS

Magazine. March 27, 2018. 7 Ibid.


The FAA continued to publish additional maps every 56 days through the end of 2017. The updates coincided with the agency’s existing 56-day aeronautical chart production schedule. Maps that are not yet available can be expected in future releases. The facility maps are an important accomplishment as the FAA collaborates with industry to safely integrate drones into NAS. They will help improve the safety of drone and traditional aircraft operations.

In November 2017, the FAA deployed the Low Altitude Authorization and Notification Capability (LAANC, pronounced “LANCE”) for drone operators at several air traffic facilities in an evaluation to see how well the prototype system functions and to address any issues that arise during testing. LAANC enables access to controlled airspace near airports through airspace data provided by the FAA UAS Facility Maps.


In March 2018, the FAA announced it was expanding tests of the LAANC automated system. The agency conducted a nationwide beta test beginning April 30 that deployed LAANC incrementally at nearly 300 air traffic facilities covering approximately 500 airports. The final deployment will begin on September 13, 2018. The FAA expects LAANC will ultimately provide near real-time processing of airspace authorization requests for drone operators nationwide. The system is designed to automatically approve most requests to operate in specific areas of airspace below designated altitudes.

The first meeting of the UAS Identification and Tracking Aviation Rulemaking Committee (ARC) took place on June 21-23, 2017, advancing key policies of concern to the FAA, industry and law enforcement. During this initial meeting, the ARC considered issues such as existing regulations applicable to drone identification and tracking, air traffic management for drones, concerns and authorities of local law enforcement, and potential legal considerations. The group developed some preliminary questions and identification parameters, and reviewed a sample of existing identification technologies.

In December 2017, the committee submitted a report and recommendations8 to the agency on technologies available to identify and track drones in flight and other associated issues. The ARC’s recommendations and suggestions covered issues related to existing and emerging technologies, law enforcement and security, and implementation of remote identification and tracking.

8 Federal Aviation Administration, “UAS Identification and Tracking ARC Recommendation Final Report,” December 19, 2017.


Space-related services

SpaceX landed one of its reusable Falcon 9 rockets on a drone ship in the water in April 2017. It was the company’s first successful water landing. This was the first launch of a previously recovered rocket, marking a major milestone for orbital rockets, and it is critical to the company’s stated business strategy of reusing rockets as a way to curb the costs of space flight. The launch carried the Bigelow Expandable Activity Module (BEAM) to the International Space Station (ISS). The BEAM is an expandable habitat technology that may provide a comfortable living and workspace for astronauts. In early 2018, SpaceX successfully tested its Falcon Heavy rocket and launched a Tesla roadster into solar orbit, and then simultaneously landed the two boosters.

During 2017, Blue Origin announced its first three revenue contracts with Eutelsat, OneWeb and mu Space Corp. The missions are expected to use Blue Origin’s New Glenn orbital launch vehicles beginning in 2022. A 750,000 square foot factory is currently under construction at the Kennedy Space Center in Florida, where Blue Origin will manufacture New Glenn orbital rockets, using seven BE-4s as the main engines. United Launch Alliance plans to launch its Vulcan launch vehicle in 2019, also using BE-4 engines from Blue Origin. The BE-4 engine is competing against Aerojet Rocketdyne’s AR1 engine.

In November 2017, Sierra Nevada Corporation announced that it successfully completed a free flight test of its Dream Chaser spacecraft. In February 2018, the company received a launch window from NASA for the first mission of the Dream Chaser in late 2020.

NASA continues to work on the Orion Multi-Purpose Crew Vehicle, with first launch targeted between 2021 and 2023. Lockheed Martin and Airbus are the principal manufacturers of the Orion vehicle, while Boeing and Orbital ATK are developing the Space Launch System.


9 Jon Ostrower, “Boeing’s 2018 goal: A new plane every 11 hours,” CNN Money, January 31, 2018.

10 Daniel McCoy, “Airbus expects to close the delivery gap on Boeing in 2018,” Wichita Business Journal, February 15, 2018.

2018 forecastFor 2018, Boeing expects to deliver between 810 and 815 aircraft,9 which would be record output, and a 6% increase. Airbus is forecasting around 800 deliveries in 2018,10 an increase of about 11%, which would represent its 17th consecutive year of record production. The commercial aftermarket should sustain growth in response to the continuing increase in the installed base and consistently strong demand in revenue passenger miles.


Long-term forecastThe long-term forecast for commercial OEM aircraft, according to Boeing, is about 41,000 deliveries over the next 20 years, at a value of approximately $6.1 trillion.11 This forecast is based on air traffic growth of 4.7%, which is rather conservative when compared with recent history. Some have raised questions about the impact that long-term low fuel prices could have on the demand for replacement aircraft. However, about 60% of deliveries are for market growth, while the remaining 40% is for replacement aircraft. Many of the replacement aircraft are needed based upon the age of the fleet, rather than efficiency, as the principal driver. Furthermore, low oil prices may also add to market growth forecasts by keeping airline ticket prices low, which would partially offset any replacement delays. With long-term demand at about 2,000 aircraft per year, and current production rates at 1,500 per year, the industry could potentially support an additional 30% growth in OEM production, providing a considerable cushion for any softening in demand.

Strong growth has also attracted new competitors. On May 5, 2017, Commercial Aircraft Corporation of China (COMAC) conducted its maiden flight of the C919. The C919 has 785 orders, mostly with Chinese airlines and leasing companies, and expects to sell more than 2,000 planes. The C919 is expected to enter service in 2021. While the C919 is full of parts from Western suppliers, the Chinese government has plans to leverage it to develop an indigenous aerospace industry. The C919 narrowbody is intended to compete with the Airbus A320 and Boeing 737.

In addition, United Aircraft Corporation of Russia is working on a narrowbody medium range aircraft, the MC-21, which took its maiden flight on May 28, 2017. The aircraft – powered by Pratt & Whitney PW1000G engines or the Russian-made PD14 – is scheduled for certification in 2018. The aircraft has over 200 orders. No delivery date has been announced.

In May 2017, COMAC and United Aircraft formed a joint venture to develop and build a widebody aircraft.

11 The Boeing Company, Current Market Outlook 2017-2036, June 19, 2017.


Defense

Top six US defense contractors reported higher revenue Revenue increases 3%

During 2017 and into early 2018, we saw a continuation of M&A activity focused on portfolio realignment and consolidation of government services companies. The multi-year trend is summarized as follows:

• General Dynamics acquires CSRA• DXC spins off Perspecta• Perspecta merges with Vencore

and Keypoint• Veritas acquires PwC’s public

sector practice

• KeyW acquires Sotera

• CSC spins off government services business• CSC government services acquires SRA• Engility acquires TASC

• Leidos acquires IS&GS from Lockheed Martin

• SAIC acquires Scitor• CACI acquires L-3 Stratis

• L-3 spins off Engility

• Vencore acquires Qinetiq North America

• Engility acquires Dynamic Research Corporation

2018 2017 2016 2015 2014 2012

2017 review

The top six US defense contractors reported a 3% increase in revenue and profit, while the top six European defense companies reported flat revenue and lower operating profit by 14%.

Lockheed Martin reported the best revenue improvement of $4.0 billion, or 8%. BAE Systems reported the largest revenue decline of $2.1 billion, or 8%. Boeing reported the best profit improvement of $257 million, or 13%, while Airbus reported the largest profit decline of $653 million, or 65%, which included a €1.3 billion charge related to A400M.

US operating margin was flat at 11.3%, while European operating margin declined 120 basis points to 7.5%. Rolls-Royce Defence Aerospace reported the highest operating margin of 16.4%, although it declined 100 basis points from the prior year. Raytheon had the highest operating margin among US companies at 13.1%, a decline of 60 basis points from the prior year.


Since 2009, European governments had made austerity-driven decisions resulting in a decline in military spending. However, recent growing threat perceptions marked a turning point, and European countries started to reshape their views on military expenditures. In Central and Eastern Europe, it is the perception of growing threat from Russia that triggered the growth in military expenditures.

The impact of the UK’s withdrawal from the EU on European defense is unclear, but Brexit definitely changes the game for the European Commission’s Common Security and Defense Policy (CSDP). The UK will remain a key member of NATO and will likely abide by the 2014 European Council call on member states to deepen bilateral cooperation on improving defense. The UK/France agreement for the development of a future Unmanned Combat Air Vehicle (UCAV) is an example of such a collaboration. However, Brexit is a defining moment for the CSDP, and will require redefining a governance model and a new core.

US defense export authorizations in 2016 (the most recent year of data) hit the lowest level since 2005 (see Figure 14). The statistic is somewhat counterintuitive given the significant levels of global tension. However, the amount of new authorizations had been declining after a build up from 2006 to 2012. That trend changed significantly during President Trump’s visit to Saudi Arabia in June 2017, which included about $100 billion of defense deals. In April 2018, The Trump Administration announced a new policy designed to encourage more US exports of drones. In addition, the US is encouraging its allies to increase defense spending, which will likely result in renewed growth in exports.


Figure 13: Backlog of defense orders (US$ billions)

12/31/17 12/31/16

Lockheed Martin $100 $96

Boeing Defense, Space & Security $50 $57

BAE Systems $53 $57

Airbus Defense & Space and Helicopters $55 $53

General Dynamics (excl. Gulfstream) $51 $50

Northrop Grumman $43 $45

Leonardo $38 $39

Thales $36 $38

Raytheon $38 $37

Total $464 $472

Source: Company reports

Figure 14: US foreign military sales (FMS) agreements and direct commercial sales authorizations

Sources: US Department of Defense, “Fiscal Year Series”; US Department of State, “Section 655 Annual Military Assistance Reports”

0

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201620152014201320122011201020092008200720062005200420032002200120001999

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FMS agreements Direct commercial sales authorizations


Export controls and sanctions

The US government continues to overhaul its primary export control regime for authorizing the export of defense articles, technical data, and defense services known as the International Traffic in Arms Regulations (ITAR). This effort includes reviewing and transferring items from the US Munitions List (USML) to the Commerce Control List (CCL) under the Export Administration Regulations (EAR). In 2017, reviews were conducted on USML Category V – explosives and energetic materials, propellants, incendiary agents, and their constituents; Category X – personal protective equipment; and Category XI – military electronics.

In mid-2017, the US Congress passed the “Countering America’s Adversaries Through Sanctions Act” (CAATSA), which includes specific sanctions against Iran, North Korea, and Russia as well as restriction of defense exports to Syria. Aerospace and defense companies with international supply chains may find themselves impacted by ongoing sanctions activity including additions to the Specially Designated Nationals and Blocked Person List (SDN List), maintained by the Office of Foreign Assets Control (OFAC), US Department of the Treasury.


Key upcoming regulatory changes include a new export control bill introduced in early 2018. The Export Control Reform Act of 2018 would repeal the Export Administration Act of 1979 (EAA) and replaces it with strengthened authorities for administering and enforcing military and dual-use export controls and antiboycott provisions including greater Congressional oversight for rescinding the designation of a country as a “State Sponsor of Terrorism”. It will also carry forth sanctions on commercial sales and proliferation of certain ballistic missiles and related technologies as well as chemical and biologic weapons proliferation. Notably, the Export Control Reform Act of 2018 includes a requirement for ongoing review of the CCL as well as creation of an interagency process to identify emerging technologies that may be of national security concern.

In addition to the changes in sanctions regulations, the US Congress is considering the Foreign Investment Risk Review Modernization Act of 2017, which seeks to modernize how the Committee on Foreign Investment in the United States (CFIUS) reviews foreign acquisitions of US assets including critical and emerging technologies that may impact the US aerospace and defence industry. Specifically the new bill defines critical technologies to include items listed on the USML, and defines transactions that should be disclosed to CFIUS as foreign investment in a critical technology.


Significant developments in 2017

F-35

In August of 2016, the US Air Force said the F-35A was ready for limited combat operations. The previous year, the Marines deployed the first squadron of F-35B fighters. In April 2017, the Pentagon announced that it will deploy F-35s to Estonia, along the Russian border. In May 2017, the first F-35B assembled outside of the US, rolled off the line in Italy. The development phase of the F-35, a family of single-seat stealth fighters, is scheduled to end this year. It will then enter into initial operational test and evaluation (IOT&E) before moving to full-scale production.12 The F-35B, the variant that has a short takeoff and can land vertically (STOVL), can operate from Marine Corps bases and ships that do not have space for conventional aircraft. It has just begun its first maritime deployment on board the USS Wasp, a small aircraft carrier.

B-21

The B-21 is in the critical design review phase that precedes formal construction. This phase will focus on developing stealth capability that promises to enable undetectable flight, even against the latest and best radar technology. The US Air Force expects the aircraft will be ready for delivery in the mid-2020s. The administration asked for $2.3 billion for the program in FY19.13 On March 3, 2018, Brigadier General Carl Schaefer, speaking at a regional business conference, indicated that the aircraft would be tested at Edwards Air Force Base and that it would take place in the near future.

T-X trainer

The Air Force is set to award a contract for 350 new T-X trainer aircraft this spring. The Joint Base San Antonio-Randolph will be the first location to get the aircraft, beginning in 2022. The three prime contractors still in the running for the award are Lockheed Martin, Boeing and Leonardo DRS.

12 Valerie Insinna, “Pentagon’s weapons tester slams new F-35 modernization plan as unrealistic,” Defense News, Jan. 25, 2018.

13 Arms Control Association, “U.S. Nuclear Modernization Programs. Fact Sheets and Briefs,” March 2018.


US nuclear modernization program

The February 2 release of the Nuclear Posture Review (NPR) indicated the current administration will continue President Obama’s blueprint for modernizing the nation’s nuclear arsenal. The latest NPR includes the development of several new nuclear weapons, including two types of submarine-launched missiles. President Trump requested $11 billion to fund the National Nuclear Security Administration’s efforts for FY19. This is a 19% increase over the FY17 appropriation.14

This significant jump in the amount of funding requested is a clear indication of the administration’s posture in relation to nuclear defense.

14 Ibid.


2018 forecastThe outlook for defense contractors is strong and improving. On March 23, 2018, President Trump signed the 2018 omnibus spending bill, which includes $700 billion for the DoD, an increase of more than 20% since 2016. President Trump continues to encourage allies to also increase defense spending, particularly NATO allies currently spending less than 2% of GDP on defense.

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 2018 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 due to the asymmetric nature of the threat. Instead, European defense contractors will need to develop new intelligence and cyber capabilities rapidly, while facing competition from non-traditional technology companies.

The global security environment continues to be dynamic, with increasing tension between the West and Russia, North Korea, China and Iran. The coming year is likely to have additional repercussions on defense policies, given the continuing crises around the world.

In recent years, we have seen market contraction become a catalyst for industry consolidation and portfolio realignments. But now we are seeing a focus on market growth and a pivot from “return of capital to shareholders” to “invest for growth”. Examples include Lockheed Martin’s acquisition of Sikorsky, Northrop Grumman’s acquisition of Orbital ATK and General Dynamics’ bid for CSRA. But we also expect to see increased levels of investment in research and development.

Defense revenue is expected to show accelerating growth in 2018 due to increased defense budget. The industry is also experiencing some favorable pension cost trends as a result of market conditions and the “pension harmonization” rules for cost allowability. Therefore, operating profit and margin are also expected to improve in 2018.


Mergers and acquisitions

A record $72 billion in deal value was announced in 2017, 7% higher than the previous record set in 2015 and 79% higher than 2016. Commercial aviation remains strong. However, increasing competition and pressure on profit margins have been catalysts for industry consolidation and have resulted in some of the largest acquisitions in industry history as suppliers seek synergies.

Deal activity in defense was also strong this year, mostly due to geopolitical tensions, emphasis on missile defense, and the Trump administration’s increasing defense budgets. Defense contractors have been planning ahead by making investments in technologies such as autonomy, artificial intelligence, robotics and cybersecurity. We expect these trends will continue through 2018.

The aircraft and parts category continues to account for the majority of deal value in the sector. Aircraft parts suppliers are looking to strengthen core capabilities and mitigate risks from increasing market competition. The arms and vehicles category doubled in deal value this year, as increasing geopolitical tensions drew large transactions in China, South Korea, and the US.

Tax reform will provide increased liquidity which, combined with continued strong growth in aviation and a return to growth in defense, should result in another strong year of M&A in 2018.

A strong end to 2017 Aerospace & Defense M&A bodes well for 2018 activity and beyond


Figure 15: Top 10 aerospace and defense deals in 2016

Target Acquirer Status Deal value* Category

Rockwell Collins Inc.United Technologies Corp.

Pending $30,000Aircraft and parts

Orbital ATK Inc.Northrop Grumman Corp.

Pending $9,171Arms and vehicles

Zodiac Aerospace SA Safran SA Pending $7,839Aircraft and parts

Gemalto NV Thales SA Pending $5,398Software and security systems

Wuchang Shipbuilding Industry Group Co. Ltd.

China Shipbuilding Industry Co. Ltd.

Pending $3,549Arms and vehicles

DigitalGlobe Inc.MacDonald Dettwiler & Associates Ltd.

Completed $2,134Software and security systems

Hyundai Heavy Industries Co. Ltd.

Hyundai Robotics Co. Ltd.

Completed $1,268Arms and vehicles

Daewoo Shipbuilding & Marine Engineering Co. Ltd.

The Export-Import Bank of Korea {KEXIM}

Completed $1,127Arms and vehicles

Soares Ltd.

China Merchants Industry Holdings Co. Ltd.

Completed $1,100

Raw materials and supplies

Harris Corp.-Government IT Services Business

Veritas Capital Partners LP

Completed $690Software and security systems

Source: PwC, “Global Aerospace and Defense M&A Deals Insights,” January 25, 2018.


In summary

The performance of the top 100 A&D companies is a barometer for the health of the industry. The industry continues to perform at record levels.

Commercial aviation has become a critical part of our global infrastructure. Revenue passenger miles increased above 7% in 2017 and above 6% for the third consecutive year and are projected to achieve similar results in 2018. Demand for aviation-related services has become increasingly inelastic, as witnessed by its resiliency during the last recession and subsequent recovery. Globalization and an increasing reliance on intellectual capital have resulted in businesses relying more on the global deployment of human resources. Furthermore, an improving economic outlook, coupled with US corporate tax reform, may be the catalyst to finally get business aviation growing at a faster pace again.

The outlook for defense has significantly improved with the US defense budget showing an increase of 20% over 2016. At the same time, the administration is strongly encouraging allies to also increase defense spending, particularly NATO allies currently spending less than 2% of GDP on defense. There is also increasing tension between the West and Russia, North Korea, China and Iran, which could result in new defense priorities.

The near- and long-term forecasts for commercial aerospace are full of optimistic predictions for growth. Aviation is expected to continue to grow faster than the overall economy because of its critical role in the global economic infrastructure, bolstered by economic growth in Asia, the Middle East, Eastern Europe and Latin America. Meanwhile, defense is likely to see its biggest improvement in many years. Overall, the industry performed at record levels in 2017 and is poised for significant growth and new records in 2018.

Moderate growth expected for the A&D industry in 2018



Appendix: A&D Top 100 companies

US1 Boeing3 Lockheed Martin4 General Dynamics5 United Technologies6 GE Aviation7 Northrop Grumman8 Raytheon13 Honeywell Aerospace15 Leidos16 Textron17 L-3 Technologies20 Huntington Ingalls21 Spirit AeroSystems22 Rockwell Collins24 Harris Corp26 Booz Allen Hamilton30 CSRA32 Orbital ATK 35 SAIC36 CACI39 Triumph Group40 Israel Aerospace Industries41 TransDigm Group43 Elbit Systems46 Trimble50 Teledyne Technologies 51 MOOG52 BBA Aviation

54 Parker Hannifin Aerospace55 Curtiss-Wright56 Allegheny Technologies High Performance Metals57 Delta Tucker Holdings / DynCorp International58 Esterline Technologies 61 Hexcel62 Engility63 Aerojet Rocketdyne66 Oshkosh Defense67 FLIR Systems68 AAR69 Eaton Aerospace70 ManTech International71 BWXT72 Maxar Technologies73 ViaSat74 Heico Corporation75 Cubic Corporation77 Wesco Aircraft Holdings78 KLX80 Woodward Aerospace82 Vectrus83 SIA Engineering87 Ball Aerospace92 VSE Corporation93 Kratos Defense & Security Solutions98 Kaman Aerospace99 Crane Aerospace & Electronics

Canada18 Bombardier Aerospace59 CAE Aviation Defense and Security94 Magellan Aerospace Corp

Brazil25 Embraer


China34 AVIC Aircraft Company

Australia85 Austal

France11 Safran12 Thales27 Zodiac29 Dassault Aviation96 Latecoere

Spain100 Indra Security & Defense

Japan19 Mitsubishi Aerospace and

Integrated Defense37 IHI Aero Engines and

Space Operations44 Kawasaki Aerospace81 Subaru Aerospace (formerly Fuji)97 Jamco Corp

Hong Kong64 HAECO

Singapore31 Singapore Technologies

India45 Hindustan Aeronautics Limited (HAL)79 Bharat Electronics

Turkey76 Aselsan

Italy14 Leonardo

South Korea65 Korea Aerospace Industries

Germany28 MTU Aero Engines42 Rheinmetall Defence89 OHB Technology

Netherlands2 Airbus

Norway95 Kongsberg Gruppen Defense and Aerospace

Sweden38 Saab

Austria91 FACC

Luxembourg53 SES

UK9 BAE Systems10 Rolls Royce23 Babcock International Group33 GKN Aerospace47 Cobham48 Meggitt49 Serco UK Central Government and Americas

84 Qinetiq86 Ultra Electronics88 Senior Aerospace90 Smiths Detection

Switzerland60 RUAG


Revenue (US $ millions)

Operating Profit (US $ millions)

# Company 2017 2016 Change 2017 2016 Change1 Boeing 93,392 94,571 -1% 10,278 5,834 76%2 Airbus 75,275 73,652 2% 3,857 2,498 54%3 Lockheed Martin 51,048 47,248 8% 5,115 5,100 0%4 General Dynamics 30,973 30,561 1% 4,177 3,734 12%5 United Technologies 30,851 29,359 5% 3,830 3,843 0%6 GE Aviation 27,375 26,261 4% 6,642 6,115 9%7 Northrop Grumman 25,803 24,508 5% 3,299 3,193 3%8 Raytheon 25,348 24,124 5% 3,318 3,295 1%9 BAE Systems 23,590 24,026 -2% 1,906 2,353 -19%

10 Rolls Royce 20,996 20,209 4% 1,657 59 2689%11 Safran 19,099 17,457 9% 3,124 2,639 18%12 Thales 17,808 16,466 8% 1,740 1,498 16%13 Honeywell Aerospace 14,779 14,751 0% 3,288 2,991 10%14 Leonardo 12,996 13,277 -2% 1,202 1,086 11%15 Leidos 10,170 7,043 44% 559 417 34%16 Textron 9,843 9,994 -2% 857 961 -11%17 L-3 Technologies 9,573 9,210 4% 1,020 957 7%18 Bombardier Aerospace 8,913 9,907 -10% 156 (298) -152%19 Mitsubishi Aviation and Integrated Defense 8,791 9,505 -8% (214) 737 -129%20 Huntington Ingalls 7,441 7,068 5% 688 858 -20%21 Spirit AeroSystems 6,983 6,793 3% 569 725 -22%22 Rockwell Collins 6,822 5,259 30% 1,326 1,115 19%23 Babcock International Group 6,717 6,543 3% 740 729 1%24 Harris Corp 5,900 5,992 -2% 905 884 2%25 Embraer 5,839 6,218 -6% 397 206 93%26 Booz Allen Hamilton 5,804 5,406 7% 484 445 9%27 Zodiac 5,780 5,761 0% 245 299 -18%28 MTU Aero Engines 5,678 5,236 8% 684 501 37%29 Dassault Aviation 5,421 3,967 37% 392 241 63%30 CSRA 4,993 4,250 17% 622 187 233%31 Singapore Technologies 4,794 4,838 -1% 401 341 17%32 Orbital ATK 4,764 4,455 7% 529 472 12%33 GKN Aerospace 4,684 4,623 1% 225 458 -51%34 AVIC Aircraft Company 4,586 3,762 22% 70 45 55%35 SAIC 4,450 4,315 3% 271 227 19%36 CACI 4,355 3,744 16% 297 265 12%37 IHI Aero Engines and Space Operations 4,209 4,596 -8% 473 533 -11%38 Saab 3,676 3,342 10% 252 210 20%39 Triumph Group 3,533 3,886 -9% 57 (1,091) -105%40 Israel Aerospace Industries 3,520 3,577 -2% 121 106 14%41 TransDigm Group 3,504 3,171 11% 1,480 1,268 17%42 Rheinmetall Defence 3,423 3,259 5% 194 163 19%43 Elbit Systems 3,378 3,260 4% 319 299 7%44 Kawasaki Aerospace 2,942 3,234 -9% 223 420 -47%45 Hindustan Aeronautics Limited (HAL) 2,676 2,515 6% 506 489 4%46 Trimble 2,654 2,362 12% 246 181 36%47 Cobham 2,643 2,625 1% 134 (1,052) -113%48 Meggitt 2,610 2,690 -3% 500 513 -3%49 Serco UK Central Government and Americas 2,605 2,790 -7% 93 120 -23%50 Teledyne Technologies 2,604 2,150 21% 336 254 32%51 MOOG 2,498 2,412 4% 250 238 5%


Revenue (US $ millions)

Operating Profit (US $ millions)

# Company 2017 2016 Change 2017 2016 Change52 BBA Aviation 2,371 2,149 10% 361 303 19%53 SES 2,294 2,289 0% 689 907 -24%54 Parker Hannifin Aerospace 2,285 2,260 1% 337 338 0%55 Curtiss-Wright 2,271 2,109 8% 340 308 10%

56Allegheny Technologies High Performance Metals

2,067 1,930 7% 246 169 46%

57 Delta Tucker Holdings / DynCorp International 2,004 1,836 9% 103 25 312%58 Esterline Technologies 2,002 1,993 0% 265 241 10%59 CAE Aviation Defense and Security 1,998 1,810 10% 304 269 13%60 RUAG 1,986 1,886 5% 121 153 -21%61 Hexcel 1,973 2,004 -2% 351 360 -3%62 Engility 1,932 2,076 -7% 127 122 4%63 Aerojet Rocketdyne 1,877 1,761 7% 114 96 19%64 HAECO 1,867 1,773 5% (27) 5 -648%65 Korea Aerospace Industries 1,836 2,663 -31% (185) 270 -168%66 Oshkosh Defense 1,820 1,351 35% 208 123 69%67 FLIR Systems 1,800 1,662 8% 290 296 -2%68 AAR 1,768 1,699 4% 80 64 24%69 Eaton Aerospace 1,744 1,753 -1% 332 335 -1%70 ManTech International 1,717 1,602 7% 98 91 8%71 BWXT 1,688 1,551 9% 309 239 29%72 Maxar Technologies 1,631 1,557 5% 291 223 30%73 ViaSat 1,559 1,417 10% 36 41 -12%74 Heico Corporation 1,525 1,376 11% 307 265 16%75 Cubic Corporation 1,486 1,462 2% 25 11 127%76 Aselsan 1,471 1,246 18% 322 268 20%77 Wesco Aircraft Holdings 1,429 1,477 -3% (209) 159 -231%78 KLX 1,420 1,341 6% 239 221 8%79 Bharat Electronics 1,367 1,098 25% 240 178 35%80 Woodward Aerospace 1,342 1,233 9% 257 232 11%81 Subaru Aerospace (formerly Fuji) 1,237 1,405 -12% 81 167 -51%82 Vectrus 1,115 1,191 -6% 41 43 5%83 SIA Engineering 1,104 1,113 -1% 72 104 -31%84 Qinetiq 1,008 1,021 -1% 171 101 69%85 Austal 1,003 995 1% 35 (99) -136%86 Ultra Electronics 998 1,062 -6% 80 122 -34%87 Ball Aerospace 991 818 21% 98 88 11%88 Senior Aerospace 933 898 4% 88 86 1%89 OHB Technology 931 805 16% 50 48 4%90 Smiths Detection 885 710 25% 133 93 42%91 FACC 796 642 24% 30 (19) -262%92 VSE Corporation 760 692 10% 54 52 4%93 Kratos Defense & Security Solutions 752 669 12% (6) (19) -68%94 Magellan Aerospace Corp 747 757 -1% 104 93 12%95 Kongsberg Gruppen Defense and Aerospace 742 751 -1% 22 62 -64%96 Latecoere 736 725 2% 14 53 -74%97 Jamco Corp 730 841 -13% 19 81 -76%98 Kaman Aerospace 725 702 3% 120 115 4%99 Crane Aerospace & Electronics 691 746 -7% 160 150 7%

100 Indra Security & Defense 679 663 2% 41 44 -7%Total 728,198 703,797 3.5% 77,215 65,339 18.2%


Additional resources

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Industrial Insights blog

The PwC industrial insights blog features perspectives on critical business issues facing A&D companies today.

Aerospace manufacturing attractiveness ranking

The analysis looks at how various countries, as well as states in the US, compare in terms of their attractiveness as locations for commercial aircraft manufacturing.

Workforce initiative

The Aviation Week data on workforce and compensation represents a comprehensive strategic view about the people who make up the industry. PwC is proud to be a sponsor of this initiative.

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.


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 should consult his or her own legal or other professional advisors and discuss the specific facts and circumstances that apply to the reader.\.

© 2018 PwC. All rights reserved. PwC refers to the US member firm and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only and should not be used as a substitute for consultation with professional advisors. 450151-2018 VC

To have a deeper conversation about how this subject may affect your business, contact:

Scott ThompsonAerospace and Defense leader, PwC US703 918 [email protected]

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Aerospace and defense - PwC · PwC Aerospace and defense 2 Methodology Our data is drawn from financial reports on fiscal year (FY) 2017, results for the largest 100 aerospace and

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