Deloitte said the finding of its mid-year financial analysis of the global aerospace and defense industry for 2010 came from examination of quarterly financial statements released this year by the 25 top global aerospace and defense firms.
Sales revenue contraction was 1.01 percent, it said. Operating profit was off 1.92 percent and operating margins were down 0.92 percent, all reflecting flat financial performance.
But "despite these growth challenges, the industry remains resilient and performing better than many other sectors hit hard by the recession," said Tom Captain, vice chairman and Deloitte aerospace and defense sector leader. "The imperative now will be to cut costs and grow top line revenue in new areas to demonstrate to global stock exchanges the ability to grow profits again."
The analysis said spending by the U.S. Department of Defense is decreasing, with a 5 percent drop in research and development spending expected into FY2011, with a base budget increase of 1.8 percent, not enough to keep pace with inflation.
The United Kingdom is expected to have a steeper drop off in defense spending, the report said, but spending in India is expected to increase to $32 billion.
The report indicated key areas for generating new revenue sources include mission capability software integration, battle space simulation, directed energy, precision engagement and threat identification, as well as energy and infrastructure security.