Revenues in the European aerospace and defence (A&D) sector are on the up, but profitability still remains a problem, according to Deloitte, a professional services firm. A recent study by Deloitte, which analysed the financial performance of 100 major global A&D companies, found that revenues at European-based A&D firms grew by 5.4% in 2013. However, their profits were down 3.6% compared with 2012. 

Growth among European A&D firms, Deloitte experts claim, can be attributed to a solid financial performance of commercial aerospace firms. Last year was particularly good for Airbus, Europe's leading aerospace manufacturer. The company delivered its Airbus 626 jetliners to 93 customers, the highest output in the company's history. It also secured bookings for 1503 aircraft, an industry-wide record.

Other European companies that performed particularly well in 2013 include Rolls-Royce, a UK aero engines producer, Dassault Aviation, a Paris-headquartered company specialising in military, regional and business jets, and Zodiac Aerospace, a French producer of on-board systems and cabin interiors. The revenues of these companies grew year on year by 27%, 16.5% and 13.1%, respectively.

According to the study, revenues of European A&D companies will grow further in 2014, fueled by the expected rise in orders from the commercial aerospace sector. But, despite rising revenues, profitability among European A&D still remains a problem. The Deloitte study points to difficulties in rationalising assets and reducing labour costs by European companies as the main reasons behind the 3.6% year-on-year profit contraction.

Among proposed solutions aiming at increasing the profitability of European A&D companies, Deloitte experts point to regional consolidation. “In the European A&D sector, country-specific defence budgets supporting the individual country industrial base may not be large enough to achieve competitive efficiencies. Thus, the European A&D sector may benefit from a certain level of regional consolidation in order to gain scale economies, should that coincide with national employment and defence policies,” the company's experts claim.

Meanwhile, inward FDI into the A&D sector in Europe was down from 48 projects in 2012 to 30 in 2013, data from greenfield investment monitor fDi Markets shows. The biggest contractions were recorded in the UK, which recorded six A&D projects in 2013 compared with 18 a year earlier, and Poland, which saw project numbers drop from eight to two over the period. France recorded the biggest increase in crossborder projects in the sector, securing five new ventures in 2013, up from one in 2012.