Fitch Ratings: The European aerospace and defense sector is strengthened due to political focus on national defense.

On July 17, Fitch Ratings stated in a new report that the European aerospace and defense sector will continue to develop in the first half of 2025, in line with Fitch's expectation of a positive industry outlook. The issuer's credit rating benefits from strong and high-quality order backlogs, as well as a shift in demand structure in the defense end-market. However, expected growth in commercial aerospace production may be hindered by ongoing supply chain issues. The Russia-Ukraine war and uncertainty about the U.S. commitments to NATO have prompted countries in the region to increase efforts towards achieving defense self-sufficiency. We expect this to drive an increase in orders for defense contractors, leading to clearer revenue growth and cash flow generation. We anticipate continued strong recovery in the commercial aviation sector from the pandemic, with a 28% increase in deliveries of large commercial aircraft in 2025. Recent positive rating actions are driven by expanding EBITDA margins and stronger free cash flow generation capability. However, supply chain issues - particularly in engine supply, labor shortages, and recalls of some engines - may persist in 2025 and 2026, limiting growth in target output.