by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.
As political change sweeps across the U.S. and the U.K, defense – following several years of governmental austerity – appears set for a rebound. As do opportunities for BAE Systems.
To answer the triple threats of terrorism, the ongoing conflict in Syria, and a belligerent Russia, the administrations in the U.S and U.K. – the “home” markets of BAE – are looking to increase military spending.
This comes as welcome news for a defense contractor that has been limited in its diversity vis-à-vis commercial opportunities. While BAE is not broadly diversified across many disparate markets, it is strongly diversified in defense. The firm is well positioned to support changing program priorities across air, land, sea, and cybersecurity markets. The group is leveraging its positions in electronic warfare and infrared technologies – as well as in a variety of commercial and civil government businesses in such areas as ship repair, information technology, and commercial aviation – to maintain stability in changing markets.
While U.K. aerospace manufacturers are facing an uncertain outlook due to the decision to leave the European Union, BAE Systems is not. Thanks to earlier expansion into the U.S. and Saudi Arabia, the company’s sales are geographically diverse. Further, the defense strategy of the U.K. is unlikely to change, leading to continued stability for military contractors in-country.
With a refocused strategy underway, BAE Systems is adapting its operations to the new environment of defense austerity. It will not be easy. But, by taking action now to adjust operations, diversify within markets, and expand into complementary segments, the company should be prepared for the “new normal” of future defense spending.
The Defense & Aerospace Companies series focuses on worldwide aerospace and defense prime contractors and subcontractors. Concise reports provide data on individual corporations regarding recent mergers, restructurings, and joint ventures, along with a Strategic Outlook that examines the company’s strengths, weaknesses, and opportunities. Also included in each report are financial and industrial segment data, snapshot coverage of major programs, and recent U.S. Department of Defense contract awards.
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