April 2, 2020
COVID-19 is unprecedented in many ways, including its impact on the aerospace & defense sector. The effects are already rippling through the industry. We offer guidance on how companies can protect their businesses and position themselves for the downturn.
The extraordinary efforts to contain the COVID-19 outbreak are hitting the aerospace & defense industries hard, with a drastic reduction in air travel. Carriers are already postponing and cancelling orders. Companies across the value chain are trying to avoid a cash crunch. And all signs point to a slow recovery after the crisis. Economists are predicting a long recession, changes in behavior during the COVID-19 shutdown (e.g., more telework and restricted business travel) may continue and depress demand, and there is no need for new defense spending, as there was in 2000 and 2008.
To meet this challenge, companies should be planning rapid and decisive action. We know from previous downturns that the companies that kept an eye on the future—even as they had to make dramatic cuts to overhead—did far better in recovery. They continued to invest in next-generation programs, they took advantage of M&A opportunities and they crafted strategy for the new normal. Companies that simply “hunkered down” and tried to ride out the storm, were left behind; some became acquisition targets.