The world aerospace industry produced direct revenues of US$838 billion in 2017. This is the top line number from Aerodynamic Advisory and Teal Group’s joint research project, aimed at quantifying the industry looking solely at direct revenues. Our study uses consistent definitions and parameters for all segments and countries.

For the study, Aerodynamic and Teal carefully examined numbers reported by national aerospace industries associations, harmonized them with our definitions, and verified them with our companies’ proprietary databases covering hundreds of aerospace companies, markets, and programs. We have carefully removed work done by companies in countries outside their national homes and counted that revenue where it is actually performed.

Even though the report uses consistent revenue numbers, it’s important to note that countries and market segments have radically different characteristics. Military programs often produce higher profits than civil ones. Aftermarket work is generally more profitable than new build work. Some countries are more export-oriented, while others are geared toward domestic needs.

For an outlier, consider China, which now has the third-largest aerospace industry in the world, but almost none of its products are exported, and overall profitability is highly uncertain. The other countries in the top five – the U.S., France, the UK, and Germany – all enjoy a very high ratio of exports to total output and are generally quite profitable.

The study also reveals an industry dominated by the most successful players. U.S. industry, boasting deep and broad civil and military clusters, represents nearly half of global output. The top ten countries produced US$731 billion in output last year, or 87% of the world total. By major region, the Americas comprises 54% of activity, followed by EMEA (31%) and Asia (15%).

The activity breakdown of the US$838 billion industry reflects the growing importance of maintenance, repair and overhaul, which is just over US$220 billion in output, including “wrench turning” activities, upgrades, and associated parts and components. Much of this activity isn’t captured in conventional aerospace industry estimates. Military aircraft maintenance is a good example. Approximately US$70 billion is spent annually, with a significant portion performed by uniformed personnel for field and depot maintenance, as well as aircraft upgrades. Military maintenance organizations usually don’t belong to national industry associations.

Civil and military aircraft and engine manufacturing, including extended supply chains, account for 54% of the global aerospace activity. Here, AeroDynamic and Teal analyzed activity the multi-tier supply chains of OEMs. Aircraft OEMs, for example, procure 60-70% of the cost of an aircraft from suppliers. Tier 1 system and aerostructures suppliers, in turn, source 40-60% of the cost of their products from sub-tier suppliers. The same is true for Tier 2 and 3 suppliers.

Other notable categories include satellites & space (7%) and missiles & UAVs (5%). Despite the growth of UAV fleets, output of these air vehicles comes to just under US$3 billion annually. This is around 10% of the value of crewed combat aircraft.

There is little evidence of any serious economic or technological disruption to these segment ratios on the horizon. But historically, the strongest long-term growth has come from the large commercial jet transport segment, and its associated supplier companies and service providers. Strong global travel indicators imply that these segments will continue to grow their shares of the total industry.

This year’s study represents a snapshot of revenues in 2017. In the future, we plan to add historical and forecast numbers, to establish trends. But looking at our program and market databases, it’s clear that the industry is now at near-record numbers, with additional growth guaranteed for the coming year or two, at least.

Richard Aboulafia is analysis vice president at Teal Group Corp.; Kevin Michaels is managing director at AeroDynamic Advisory.