Increase in deliveries bodes well for aerospace outlook despite supplier risks, says Moody's

The outlook remains favorable for the defense and aerospace industries, although supply chain hiccups pose a risk to the commercial aircraft sector and Pentagon acquisition reform could pressure contractors, according to a new report.

Moody's Investor Service predicts "strong aircraft order backlog" will fuel 10 percent growth in the aerospace industry's delivery ramp-up, which will boost profits and cash flow for companies.

"We anticipate a period of elevated execution risk over the next 12 to 24 months as Boeing and Airbus ramp up their narrowbody production rates," Moody's said. "Supply chain manufacturers have been making significant capacity investments to meet the production rate increases."

Boeing currently has a backlog of 4,413 planes for its 737 narrowbody jet, and the company has previously said it plans to boost production to 52 planes per month in 2018 and 57 in 2019. Moody's noted that the 2017 rate for the 737 model is 47 planes per month.
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