Mumbai: Standard & Poor''s Ratings Services has said that it is maintaining a stable outlook on about 80 per cent of the commercial aerospace companies globally mainly due to an increasing demand for new jetliners from global airlines, in particular those from Asia and the Middle East. S&P said that its robust outlook on the sector is also derived from a healthy growth in the global economy, which is contributing to a growth in air traffic.
This all round growth, S&P said, has positively impacted not only the fortunes of many airlines globally, but also that of aerospace companies.
It also said that its near-term outlook of the US and European defence sector was stable on the back of brisk government spending, but warned that deferments or cancellation of major projects was likely.
Commenting about the two leading commercial airplane manufacturers, Boeing and Airbus, S&P said that though these aerospace giants continued to see strong demand for their jetliners during 2005 to 2007, with existing backlogs equivalent to more than five years of production, it warned that this strong demand did not seem sustainable and future orders were likely to be smaller, and would match deliveries more closely.
It also said that the current surge in the fortunes of Boeing and Airbus was likely to be extended as several large US legacy carriers that had postponed their fleet renewal plans were expected to order new jetliners over the next three years.
The long-term prospects of aerospace companies continued to remain ''solid'', S&P said, on the back of projected air traffic growth of about 5 per cent per year.
Though business jet deliveries soared in 2007 and strong demand still continues, S&P said that a slowing US economy could likely impact demand. It however clarified that strong backlogs and a rise in international demand was likely to cushion the impact. The rating agency retained a ''mixed outlook'' for regional jets.
On the defense sector, S&P said that the US government''s defence spending remains strong because of a higher-than-expected 2008 budget request, but growth rates were likely to slow with possible reduced or delayed funding for certain programmes. The 2008 defence budget request is more than 10 per cent higher than that of 2007, excluding the costs of the Iraq and Afghanistan wars.
However, with war costs rising and competing domestic spending priorities acting as a counterpoint it was likely that a new administration in 2008 could reduce, stretch out or cancel some programmes in future budgets, S&P said.
It also said that the near-term credit outlook for European defence contractors remained stable, supported by modest growth levels in government spending along with favourable prospects in export markets, particularly the Middle East.
However, it warned that Europe''s two defense heavyweights, the UK and France, were likely to experience only marginal increases in defence spending and may also need to cut back as projected cost growth on ongoing programmes exceeded planned budgetary growth.
It also warned that the UK government would need to make tough choices about military equipment priorities over the next few years as a clear shortfall existed between the defence equipment procurement plan and the funds available.