Aerospace & Defense 

AI-Powered Security & Strategy: The Digital Flight Plan

"As AI and advanced technologies reshape aerospace and defense – from fleet management to space exploration – staying ahead is no longer optional. Innovation drives efficiency, sustainability, and global competitiveness. With generative AI transforming talent strategies, the industry is seizing new opportunities to attract, retain, and reskill top talent, ensuring it remains at the forefront of progress and leadership."

Elizabeth Garforth
Partner, France
Global Sector Leader, Aerospace & Defense

• The aerospace & defense industry continues to grow despite challenges in recent years. Commercial aerospace recovered from the impact of the Covid pandemic, with global air passenger traffic up nearly 12 percent YoY in August 2024.
• Global defense spending, driven by intense geopolitical issues, exceeded $2.4 trillion in 2023, according to the Stockholm International Peace Research Institute (SIPRI). The combined military expenditure of NATO members in 2024 is estimated at $1.47 trillion. 
• These external factors are sharpening the focus most notably on leveraging technology to enhance fleet management and resiliency in the supply chain; the most prevalent technologies to watch being AI and machine learning (ML), generative AI, extended reality and advanced air mobility technologies (AAM).
• According to Deloitte, 81 percent of respondents in the aerospace & defense industry report use or planned use of AI/ML, with after-market companies also prioritising AI/ML, generative AI and extended reality.
• While a number of industries are bundling technology in a ‘tech stack’, organisations in aerospace and defense are bundling AAM technologies to transform the way people and goods are transported, simultaneously reducing emissions.
• AAM technologies include electric or hybrid vertical take-off and landing aircraft (including drones), AI and digital twin technology. Moving people and cargo more effectively, particularly in underserved environments, is gaining momentum in the United States through the Advanced Air Mobility Coordination and Leadership Act, introduced through the US Department of Transport and NASA, spurring innovation and private capital investment.
• Issues in the supply chain and a mismatch in fleet supply and demand are driving after-market services, supported by AAM, notably maintenance, repair and overhaul (MRO); integrated digital technologies here are delivering efficiency and cost-effectiveness. Looking ahead, intelligent MRO services will be used by commercial companies to secure aircraft availability and by defense organisations to ensure the supply of mission-capable aircraft.
• The classic twin view of aerospace & defense - commercial and military – becomes a kaleidoscope when looking at how AI is transforming space technology. AI/ML is being used in numerous different ways, such as: autonomous spacecraft operations; analysis of satellite data (for example deforestation and changes in sea levels); avoiding the impact of debris on valuable space assets; autonomous robotic exploration; space-based manufacturing processes; predictive maintenance for spacecraft; AI-powered astronaut assistance; space mission simulation; space agriculture; and exoplanet discovery (planets outside the solar system).
• Other important technologies shaping the future of aerospace and particularly defense, are solid rocket motor technologies, used in the development of air-to-air and air-to-ground missiles and in space-related innovation, such as satellite launchers. According to Defense News, the global rocket and missile propulsion market is considered to be worth nearly $60 billion and is expected to reach $93 billion by 2030.
• Tech-led breakthroughs are creating a space race for sovereignty. According to the Space Foundation, the space economy was worth $570 billion in 2023, a 7.4 percent YoY increase, driven mostly by the commercial sector, focusing on location-based services; this area is expected to grow by 155 percent by 2035.
• In 2025, the UK will host the first Farnborough International Space Show, connecting the space ecosystem across industry, defense, government and academia on a global scale.

Talent in an Era of AI-Driven Defense and Innovation

• Across all manufacturers, ‘attracting and retaining a quality workforce’ is seen by more than 67 percent of respondents in the National Association of Manufacturers survey as a primary business challenge. Hopes are high from both in-house and external recruiters that AI/genAI could play a meaningful role in enhancing traditional talent strategies.
• Performance is at risk due to competing with other sectors for top talent, hiring at sufficient pace, reducing time to proficiency and retaining key employees.
• According to McKinsey, for a median-sized aerospace & defense company, closing the gap between talent supply and demand could be worth more than $300 million in potential cost avoidance and bottom-line impact.
• In the United States, one organisation had to rehire retirees to restart production of Stinger missiles due to a lack of skills among the current workforce. In Europe, the aging workforce was highlighted as a critical issue in the European Defense Industrial Strategy, released by the European Commission in 2024.
• Traditional talent approaches in the US include a parallel focus on both national and local talent pools, with higher-than-average remuneration and opportunities to use complex technologies directed at engineers in national recruiting campaigns.
• For local recruitment, aerospace and defense organisations are expected to leverage public-private partnerships that create a supply chain of talent in production operations; this could include work-based learning programmes for students through primary and secondary schools and technical colleges.
• Globally, there are notable differences in the employee value proposition. McKinsey research finds that in Europe employees have stronger ties to their employers, and value compensation, career development and meaningful work. Employees in the US are more tied to the sector itself and value workplace flexibility and coworker relationships.
• In terms of retention, this industry struggles with turnover. According to Deloitte, members of the Aerospace Industries Association report turnover of approximately 13 percent in 2023, excluding retirement, compared with average turnover in the United States of 3.8 percent. With an aging workforce, and 25 percent at or beyond retirement age, traditional and high-tech knowledge transfer is a key element in future proofing the industry.
• The industry is expected to try to replicate its core capabilities in sales, product and operational planning in talent planning, increasingly supported and optimised through the use of AI and other digital technologies. This needs to include streamlining hiring processes, reskilling existing talent, focusing talent and culture on performance, and transforming the HR function to lead ROI in talent.

Read more on the topic: 

• Deloitte: 2025 Aerospace & Defense Industry Outlook
• SIPRI: Global military spending 2024
• Statista: NATO spending 2024
• BAE Systems: What is Advanced Air Mobility (AAM)?
• Defense News: Growing demand for solid rocket motors
• New Space Economy: Top 10 applications in space technology
• Farnborough Space Show: 2025 Event
• McKinsey: The talent gap in aerospace & defense
• McKinsey: Increasing the return on talent