Encouraged by signs that sector growth will offset political and cash deployment risks for the global aerospace and defence (A&D) sector, Fitch Ratings has changed its sector outlook from stable to positive in 2017. The company explains that the change reflects a projected 8% increase in large commercial aircraft (LCA) deliveries and 3% forecast growth in relevant defence markets. It says that the ratings outlook remains stable, with the strong sector dynamics mitigated by cash deployment risks.

Fitch believes industry deliveries for commercial aircraft could approach a peak in 2018, and says that a key question will be whether deliveries will be sustained or start a modest decline after that year. Fitch expects LCA deliveries from Airbus and Boeing to rise to approximately 1,540 aircraft in 2017 (up 8%) and 1,600 aircraft in 2018 (up 4%). Bombardier and Embraer will likely deliver 140-145 aircraft in 2017.

It expects the relevant parts of the addressable global defence market to rise between 3% and 5% over the next three years. Fitch estimates this market in 2016 is approximately $400bn-$425bn.

Fitch notes that more restrictive U.S. trade policies could disrupt the global aerospace supply chain. The future of the US Export-Import Bank (Ex-Im) is another development to watch, as shutting the Ex-Im bank could negatively affect the competitiveness of US-based aerospace manufacturers.