The commercial aerospace market continues to “bump along the top.” Clients we speak to talk about confidence in a record backlog that they believe will lead to new aircraft production for the foreseeable future. At the Farnborough airshow, Boeing released its latest Commercial Market Outlook. That document forecasts demand for an astounding 40,000 new aircraft over the next 20 years. But increasingly we hear clients talk about being nervous that the cycle is peaking. Tier 2 and tier 3 suppliers, in particular, seem cautious about adding production capacity.
At Farnborough both OEMs secured a modest number of orders and indicated that book-to-bill ratios would be around one this year. But Airbus had to announce that A380 production would be cut in half and there was lots of talk about softness in the widebody market. So while M&A activity and multiples (multiples chart on the following page) reflect what most describe as a strong market, we increasingly hear participates wonder how long they will remain so robust.
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