Related Fitch Ratings Content: Fitch Ratings 2022 Outlook: Global Aerospace & Defense

Fitch Ratings-New York-03 December 2021: Fitch Ratings views the 2022 Aerospace & Defense (A&D) sector outlook as improving following a bottoming out in early 2021 and a moderate improvement in 2H21.

"The A&D sector is improving but vulnerable as the world gradually recovers from the coronavirus pandemic. Fitch expects aircraft deliveries to materially increase during 2022 and original equipment manufacturers (OEMs) to drive much of the industry improvement, supported by leisure air traffic demand recovery," said Director Nicholas Varone. "Fitch expects the rebound for many aerospace suppliers to lag OEMs as production rates begin to ramp up and aircraft manufacturers continue to destock inventory. Defense contractors will likely remain stable, although Fitch recognizes there is some risk that defense spending on certain programs may be reduced."

Fitch expects commercial aircraft delivery rates to materially increase over the course of the next year as airlines look to add capacity and refresh fleets in response to pent up demand and improving air traffic.

A&D will also continue to benefit from a wide distribution of COVID-19 vaccines across the globe and the general easing of travel restrictions. The 737MAX returned to the air in more than 175 countries in 2021, leading to a lower than expected but steady pace of deliveries that should continue and improve into 2022. Fitch expects many of the remaining countries, including China, will recertify the aircraft before the end of 1Q22 and support improved delivery and production rates during the year.

However, certain considerations present risks to Fitch's sector outlook. Defense spending will likely remain flat to modestly positive in 2022 compared with 2021, although certain programs and areas of spending will outpace others. The aerospace suppliers and aftermarket will also lag the OEMs, partially due to a greater degree of inventory destocking as production rates increase at a slower pace through the year.

"Fitch Ratings 2022 Outlook: Global Aerospace & Defense" is available at www.fitchratings.com.