Italy’s Leonardo forecasts $6.6 billion ‘upside’ from new wave of European defense spending
To deal with the changing geopolitical landscape, Cingolani called for “stronger alliances” and “industrial synergies.”
The M-346, produced by Leonardo, shows off some of its weapons options at the 2023 Paris Air Show. (Aaron Mehta/Breaking Defense)
BELFAST — As Europe races toward “strategic autonomy” in defense, Italian manufacturer Leonardo expects to generate new business in the region of €6 billion ($6.6 billion) should its home market and other European Union (EU) countries increase defense spending by a single GDP percentage point.
Based on financial analysis carried out by the company, the percentage point shift is estimated to return between €2 to €3 billion from Italy alone, matched by a further €2 to €3 billion from the rest of the EU, according to Leonardo CEO Roberto Cingolani.
He told investors during an industrial plan update today that in the case of Rome, a 1 percent GDP increase would amount to a defense budget jump of around €20 billion, roughly half of which would be reserved for procurement.
“Normally, one third of that procurement is captured by Leonardo,” he explained.
An EU single percentage point increase would amount to additional procurement funding worth between €18 billion to €30 billion, drawing a return of up to €3 billion for Leonardo, set against the company’s current 4 percent capture rate for the bloc as a whole, shared Cingolani, adding that the forecasted figures exclude future export orders.
He said that geopolitical threats and the urgent requirement that Europe rely less on the US are driving increases in defense spending and toward “a new normal in which governments will reinforce critical infrastructure using innovative technologies.”
“We have to make our defense effective because we know that after the wars in Europe, that we have to protect ourselves much more than in the past, especially if the relationship with the NATO alliance will change and the Americans will give less effort in protecting Europe,” he said.
A rearmament frenzy has gripped Europe in the wake of pressure from US President Donald Trump, who has publicly cast doubt on the NATO alliance and threatened not to come to the defense of any NATO nation who wasn’t spending enough on defense. The EU has pledged a new $843 billion ReArm package over four years in a bid to beef up the continent’s ammunition, air and missile defense, artillery systems, drones and missile capabilities, while France and Denmark have recently announced accelerated rearmament plans.
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To deal with the changing geopolitical landscape, Cingolani called for “stronger alliances” and “industrial synergies,” while stressing that since the launch of Leonardo’s five-year industrial plan last year, a number of high profile partnerships have been launched. Those include an agreement with Turkey’s Baykar to form a drone technologies joint venture and collaboration with Germany’s Rheinmetall to develop a future main battle tank and infantry fighting vehicles based off the Lynx platform. In the long term those new initiatives, together with the launch of Leonardo’s space division last year, are forecast to deliver €5.4 billion in new business, according to Cingolani.
Charting growth more broadly, he also said that Leonardo orders are expected to reach €26.2 billion in 2029 — the end of the five year plan — equivalent to an almost 6 percent uptick compared to €20.9 billion in orders recorded for 2024.
Leonardo is a key industry player involved in the British, Japanese and Italian-led Global Combat Air Programme (GCAP) sixth-generation fighter. Cingolani suggested that despite the deterioration security picture in Europe, it is “not realistic” to expect entry to service of the aircraft to be brought forward from a projected timeline of 2035 on account of technology challenges.
He noted, however, that 300 GCAP aircraft are expected to be sold, in addition to 10 prototypes set for development.
The future fighter is slated to replace UK Royal Air Force and Italian Air Force Eurofighter Typhoons as well as Japan Air Self-Defense Force F-2 combat jets.
Regarding mergers and acquisitions, Leonardo is progressing with five new leads, added Cingolani, though he did not provide additional detail.
