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Leonardo's Aeronautica Division: Soaring to New Heights in Global Defense

Victor HaleWednesday, May 7, 2025 6:28 pm ET

14min read

In a rapidly evolving defense and aerospace landscape, Italian multinational Leonardo SpA has positioned itself for dominance with the establishment of its new Aeronautica Division, led by seasoned executive Stefano Bortoli. Merging the company’s Aerostructures and Aircraft divisions, this strategic move aims to capitalize on rising global defense spending, technological innovation, and strategic partnerships. Here’s why investors should take note.

The Strategic Vision: Bortoli’s Leadership and the Aeronautica Division

Under Bortoli’s leadership, the Aeronautica Division consolidates over 11,000 employees and focuses on three core areas:
1. Aerostructures: Advanced aircraft components for programs like the Boeing 787.
2. Fixed-Wing Systems: Including participation in the Global Combat Air Programme (GCAP), a next-generation fighter jet initiative with BAE Systems and Japan.
3. Unmanned Systems (UAS/RPAS): Leveraging a joint venture with Turkey’s Baykar to develop cutting-edge drones.

Bortoli’s career, spanning decades in finance and aviation (from CFO roles at Alenia Aeronautica to CEO of ATR), provides the expertise needed to navigate this complex sector. His experience aligns with Leonardo’s ambition to become a leader in multidomain systems, blending air, land, sea, and space capabilities through technologies like Digital Twin and AI-driven command systems.

Key Growth Drivers and Financial Targets

The division’s strategic initiatives are underpinned by ambitious financial and operational goals:

1. Order Growth and Revenue Expansion

Aircraft Division:
Orders: 12% CAGR through 2029, driven by GCAP and tilt-rotor technology.
Revenues: 8% CAGR, with EBITA margins growing 4% annually.
Aerostructures Division:
Orders: 15% CAGR, targeting €16 billion in revenues by 2029.
EBITA breakeven by 2028, after addressing past supply chain challenges.

2. Strategic Partnerships and Joint Ventures

Leonardo Rheinmetall Military Vehicles (LRMV): A joint venture producing advanced tanks and armored vehicles, targeting €1 billion in upside by 2029.
Baykar JV: A drone partnership expected to generate €600 million in orders by 2029, combining Leonardo’s expertise with Baykar’s operational prowess.

3. Capacity Boost and Efficiency

The Capacity Boost program aims to optimize production lines and reduce bottlenecks, supported by €1.8 billion in efficiency savings by 2029. This aligns with Leonardo’s broader goal of achieving double-digit EBIT margins by 2026.

Risks and Challenges

While the strategy is robust, risks persist:
- Supply Chain Volatility: Geopolitical tensions and inflation could disrupt production timelines.
- Competitor Pressure: Rivals like Boeing, Lockheed Martin, and Airbus are also investing in digitalization and joint ventures.
- Regulatory Compliance: Sustainability targets (e.g., decarbonization, circular economy) require ongoing investment.

Conclusion: A Solid Foundation for Growth

Leonardo’s Aeronautica Division is poised to capitalize on the €2–€3 billion annual rise in European defense spending and the global shift toward multidomain security systems. With €118 billion in cumulative orders projected by 2029, the division’s focus on partnerships, technological leadership, and operational efficiency creates a compelling investment case.

Crucially, Leonardo’s 2025 dividend increase (€0.52/share, a 90% rise) signals confidence in its financial health. Combined with a disciplined capital allocation strategy and Bortoli’s seasoned leadership, the company is well-positioned to outperform peers in this high-growth sector.

Investors should monitor milestones like GCAP’s first prototype delivery (targeted for 2027) and the LRMV’s production ramp-up, which will validate the division’s execution capabilities. With a €24 billion revenue target by 2029, Leonardo is not just flying high—it’s aiming to dominate the skies.

In summary, Leonardo’s Aeronautica Division blends strategic vision, proven leadership, and a focus on innovation to address the security needs of the 21st century. For investors seeking exposure to global defense modernization, this is a flight worth taking.

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