The Asia-Pacific military aircraft modernization and retrofit market is projected to grow with a CAGR of more than 4% during the forecast period.
- The economic growth, territorial disputes, and the military's modernization plan to replace the aging defense equipment have propelled the growth in the defense spending of the countries over the last decade, and it reached USD 506.9 billion in 2018.
- The rising threat of terrorism has also fostered the urgency to induct new aircraft with advanced ISR capabilities to ensure tracking of any sort of hostile activity in high-risk areas and neutralizing the threat prior to escalation.
- The regional drive to develop indigenous military aircraft has driven the administration to draft favorable policies for the market players to promote a R&D intensive environment, thereby acting as a growth driver for the market.
Key Market Trends
R&D of Next-Gen Military Aircraft Necessitating Integration of Advanced Systems
The augmented role of combat aircraft in a critical situation has led several countries to induct a new fleet in an effort to modernize their aerial defense. These efforts are not limited to just combat aircraft, and also encompass multirole aircraft, stealth bombers, ISR capable strategic aircraft and military transport that can suffice the variety of requirements of the troops during an armed conflict. On this note, several nations are engaged in procuring new aircraft, either through indigenous R&D or through the transfer of technology. Several contracts have been penned between interested nations around the world and numerous deliveries have been made during the past five years.
For instance, Japan previously planned to acquire 42 F-35A models. However, in December 2018, Japan announced its plans to procure approximately 150 F-35 stealth fighter jets from the United States as part of Japan’s new defense plan. In October 2019, the United States State Department approved the foreign military sale to Japan for the upgrade of 98 F-15J aircraft to a Japanese Super Interceptor (JSI) configuration, for an estimated cost of USD 4 billion. Similarly, HAL, the state-owned defense aircraft manufacturer of India, is currently developing a fifth-generation fighter aircraft under the Advanced Medium Combat Aircraft (AMCA) program. The first flight of a full-scale prototype is expected to be scheduled in 2032. Such developments are envisioned to foster the growth of the market in focus during the forecast period.
China is Projected to Continue its Dominance in the Market
China currently has the highest market share in the Asia-Pacific military aircraft modernization and retrofit market. The country is next to the United States in military spending, and it increased its spending significantly until 2018. In 2018, it increased its spending by approximately 9.7% compared to 2017 and reached USD 250 billion. In early 2019, the government announced the defense budget of CNY 1.19 trillion (USD 177.61 billion), with an increase of 7.5% compared to the previous year's budget allocation. This rising military investment is to gain upper hand in various political and border disputes, like the South China Sea tension with several sovereign states within the region, border issues with India, and the prevailing tensions between the United States and China. In 2017, the government announced its plan to complete the modernization of its armed forces by 2035 and build a world-class military that can counter any type of threat against the country by 2050. To achieve this goal, the country has been continuously expanding its indigenous manufacturing capabilities over the years. It has successfully launched its first domestically manufactured aircraft carrier in April 2018, with two more aircraft carriers in construction. The country’s state-owned enterprise, Chengdu Aerospace Corporation, developed and commissioned Chengdu J-20, the stealth fifth-generation fighter aircraft, in March 2017. The advancements in technology and growing in-house capabilities are anticipated to support the growth of the Chinese segment of the market in focus during the forecast period.
The Asia-Pacific military aircraft modernization and retrofit market is dominated by players such as Lockheed Martin Corporation, Raytheon Technologies Corporation, Elbit Systems Ltd., Northrop Grumman Corporation, and BAE Systems plc. These market players focus on designing, engineering, and manufacturing aerostructures, subassemblies, and systems. Several companies have formed long-term partnerships with the air forces to upgrade and enhance the military aircraft capabilities as well as for the development of future aircraft modernization programs of the defense ministry.
Aircraft system manufacturers invest in developing advanced systems for integration in modern aircraft to complement or enhance their performance characteristics, including safety. Such programs expose companies to certain risks associated with design responsibility, the development of new production tools, more capital and funding commitments, delivery schedules, and unique contractual requirements. Also, new aircraft programs may be subjected to cost-overruns and delays or even termination, depending on market conditions. Moreover, there are certain risks associated with the transfer of technology, knowledge, and tooling, which can affect the financial status of aircraft system manufacturers and expose them to revenue fluctuations.
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