10-K FY 2022 FINAL MOOG Inc - Flipbook - Page 38
Table of Contents
ECONOMIC CONDITIONS AND MARKET TRENDS
We operate within the aerospace and defense and industrial markets. Our businesses are facing varying levels of
supply chain and production level pressures from the residual impacts of the COVID-19 pandemic.
Our aerospace and defense businesses represented 70% of our 2022 sales. Within the defense market, our programs
are directly affected by funding levels, which have remained relatively stable. Our commercial aircraft market, which
represented 18% of our 2022 sales, is still recovering from the initial, dramatic, reductions in air travel at the onset of
the COVID-19 pandemic. While domestic travel has recovered, global international travel remains below prepandemic levels.
Within our industrial markets, which represented 30% of our 2022 sales, our programs benefited from increased order
demand within industrial automation, simulation and test and energy markets. However, as customer demand
increases across these markets, we are now experiencing supply chain pressures.
A common factor throughout our markets is the continuing demand for technologically advanced products.
Aerospace and Defense
Within aerospace and defense, we serve three end markets: defense, commercial aircraft and space.
The defense market is dependent on military spending for development and production programs. We have a growing
development program order book for future generation aircraft and hypersonic missiles, and we strive to embed our
technologies within these high-performance military programs of the future. Aircraft production programs are typically
long-term in nature, offering predictable capacity needs and future revenues. We maintain positions on numerous high
priority programs, including the Lockheed Martin F-35 Lightning II and V-22 Osprey. The large installed base of our
products leads to attractive aftermarket sales and service opportunities. The tactical and strategic missile, missile
defense and defense controls markets are dependent on many of the same market conditions as military aircraft,
including overall military spending and program funding levels. At times when there are perceived threats to national
security, U.S. defense spending can increase; at other times, defense spending can decrease. Future levels of
defense spending are uncertain, subject to presidential and congressional approval, and could increase in the nearterm given the current global tensions.
The commercial OEM aircraft market has depended on a number of factors, including both the last decade's
increasing global demand for air travel and increasing fuel prices. Both factors contributed to the demand for new,
more fuel-efficient aircraft with lower operating costs that led to large production backlogs for Boeing and Airbus.
While domestic air travel has recovered from the impact of the COVID-19 pandemic, international travel utilizing widebody aircraft will take longer to fully recover. Furthermore, as companies and employees become accustomed to
working remotely, business travel and the associated flight hours may not fully reach the pre-pandemic levels. As
such, we believe Boeing and Airbus will continue to directionally match their wide-body aircraft production rates with
the reduced, albeit recovering, air traffic volume, which has lowered their demand for our flight control systems. We
believe the commercial OEM market's recovery is heavily dependent on the return to pre-COVID-19 global
international air traffic activity levels, and therefore will face pressures for a prolonged period of time.
The commercial aftermarket is driven by usage and the age of the existing aircraft fleet for passenger and cargo
aircraft, which drives the need for maintenance and repairs. While there were initial dramatic reductions in flight hours
at the onset of the COVID-19 pandemic, we have seen a recovery in the demand volume for our maintenance
services and spare parts.
The space market is comprised of four customer markets: the civil market, the U.S. Department of Defense market,
the commercial space market and the new space market. The civil market, namely NASA, is driven by investment for
commercial and exploration activities, including NASA's return to the moon. The U.S. Department of Defense market
is driven by governmental-authorized levels of defense spending, including funding for hypersonic defense
technologies. Levels of U.S. defense spending could increase as there is growing emphasis on space as the next
frontier of potential future conflicts. The commercial space market is comprised of large satellite customers, which
traditionally sell to communications companies. Trends for this market, as well as for commercial launch vehicles,
follow demand for increased capacity. This, in turn tends to track with underlying demand for increased consumption
of telecommunication services, satellite replacements and global navigation needs. The new space market is driven
by investments to increase the speed and access to space through smaller satellites at reduced cost.
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