An analysis of the profitability of major defense aerospace contractors
Abstract
This study is a comparative analysis between the profitability
of defense and commercial aerospace business.
Corporate data including profit measures and the volume of
defense business were collected for a 22 year period from
1961 to 1982. The methodology uses regression analysis with
the percentage of defense business and the percentage of
capacity utilization within the aerospace industry as the
explanatory variables for profit. Finally, a brief analysis
of risk is included to provide a framework within which to
compare these profit levels. Briefly the findings indicate;
that defense contracting has, on the average, been less
profitable than commercial; that contractors earn more on
defense contracts during periods of increased capacity
utilization, and that defense contracting involves higher
risk. The author concludes that government acquisition
managers must be continuously aware of the implications of
these findings for individual contractors as well as for the
entire defense industrial base.
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