The aerospace and defense industry enters 2026 at a critical inflection point where digital transformation, supply chain volatility, talent constraints, and geopolitical pressures converge with emerging technologies, including agentic AI, autonomous systems, and advanced analytics. Commercial aerospace faces persistent aircraft production backlogs, prompting operators to extend fleet life and invest heavily in reliability and maintainability. Defense priorities shift toward accelerating AI-enabled systems and collaborative combat aircraft, where speed to field becomes the unifying performance metric. This transformation requires supply chains that simultaneously achieve greater efficiency and enhanced resilience—objectives that historically have been considered mutually exclusive.
Key Takeaways
- Agentic AI yields productivity gains with 36% of aerospace manufacturing tasks benefiting from augmented human capabilities through AI systems
- Aftermarket MRO demand projected to grow 3.2% annually through 2035 with engine segment share rising to 53% of total maintenance spending
- Supply chains must simultaneously achieve efficiency and resilience through vertical integration, distributed networks, and digital visibility tools
- AI-related job skills including data science and analysis projected to grow from 3-9% to 5-14% of industry postings by 2028
- US aerospace and defense AI spending expected to reach $5.8 billion by 2029, representing 3.5x growth from 2025 investment levels
Agentic AI Reshapes Operations and Decision-Making
Artificial intelligence and its more advanced form, agentic AI, are reshaping aerospace and defense operations unevenly as most organizations remain in early adoption stages due to operational risks and regulatory requirements. Despite cautious implementation, agentic AI already yields notable productivity gains. Research from Deloitte estimates that 36% of tasks performed across industrial products manufacturing could benefit from augmenting human capabilities with agentic AI.
The US Department of Defense positions AI as a foundational capability across missions, including modeling and simulation, operator assistance, and command and control. The Air Force completed Decision Advantage Sprint experiments demonstrating how AI helps operators make faster decisions in complex battlespaces. Rather than viewing agentic AI in isolation, organizations must position it within broader operational frameworks that span drones, connected devices, data fabrics, and open interfaces, supporting the DoD's Combined Joint All Domain Command and Control vision for data-centric, multidomain interoperability.
The Space Force's Data and AI Strategic Action Plan prioritizes enterprise-wide governance, a data-driven culture and workforce development, rapid adoption of analytics, and deeper partnerships across government, industry, and academia. Mission systems trial AI for autonomous planning, real-time collision avoidance, and geospatial targeting, while both government and private organizations explore agentic AI for operational planning, situational simulations, and autonomous navigation.
Commercial aviation leverages AI for flight scheduling, crew management, and enhancing the passenger experience. Aftermarket companies pilot AI-driven maintenance diagnostics and predictive health monitoring to improve equipment inspection and optimize inventory. Manufacturing presents complex challenges due to stringent safety requirements, legacy system dependencies, and high failure costs, though investment prospects remain strong with US aerospace and defense AI spending expected to reach $5.8 billion by 2029—3.5 times 2025 levels according to International Data Corporation forecasts.
Aftermarket Services Drive Predictive Maintenance Evolution
Aftermarket services and sustainment remain among the industry's most resilient revenue streams. Aftermarket companies report robust momentum with double-digit growth, record sales, and substantial backlogs driven primarily by engine maintenance activity. Higher utilization rates and continued shop visit demand sustain strong engine maintenance, repair, and overhaul pipelines plus parts and spares flows. Aviation Week projects global commercial aftermarket MRO demand will grow at 3.2% compound annual growth rate between 2026 and 2035, with engine segment share rising to 53% of total MRO demand.
Technology integration remains critical for aftermarket operations. Many firms are piloting AI-enabled inspection systems to accelerate turnaround times and improve accuracy, reflecting broader industry efforts to embed digital tools into aftermarket processes and transition toward predictive, condition-based maintenance models. Data shows clear shifts from isolated analytics to orchestrated embedded workflows spanning inspection, predictive health monitoring, inventory positioning, and repair scheduling.
Traditional original equipment manufacturers expand service capabilities to capture higher-margin aftermarket revenues. Several firms announced ambitious capacity increases targeting 40-50% expansions over five years, driven by surging demand for engine maintenance and airframe support. Regional markets, particularly in the Middle East, are rapidly expanding MRO networks as emerging players invest heavily in facilities and capabilities to reduce reliance on concentrated hubs and align capacity closer to operating fleets.
Trax's approach to freight operations demonstrates similar predictive maintenance principles—AI Extractor and Audit Optimizer use machine learning to identify patterns and automate exception handling before problems compound into costly operational disruptions.
Supply Chain Resilience Demands Efficiency Paradox Resolution
Persistent demand growth occurs alongside shortages of materials and skilled labor, as well as geopolitical disruptions, keeping aerospace and defense supply chains under pressure through at least 2027. The industry faces a fundamental paradox: supply chains must simultaneously become more efficient and more resilient—objectives that require creative approaches, from vertical integration in select components to strategic partnerships with trusted international suppliers.
Supply chain fragility impacts delivery credibility beyond just costs. The strain intensifies as defense primes increase output of missiles, munitions, drones, and various defense equipment, while aircraft manufacturers push ambitious production rate increases, stressing every supplier tier. Some US companies pursue supply chain consolidation, centralizing storage and sourcing domestically to reduce uncertainty. Conversely, international customers encourage diversification, building distributed networks, and expanding access beyond US-centric suppliers.
Companies increasingly turn to structural moves, including vertical integration, expanded local footprints, multi-country manufacturing, long-dated supply contracts, and supplier development, alongside digital solutions that address dynamic challenges such as visibility, compliance, and counterfeit parts prevention. Organizations that invest in redundancy, supplier development, data integration, and digital visibility can better mitigate risks from external factors, such as tariffs and demand surges.
Prime contractors continue investing in tools, quality systems, and capital to transform fragile lower-tier suppliers into predictable partners. Although capital constraints limit widespread adoption of dual sourcing, resilience requires ongoing capability building rather than one-time fixes. In environments where tariffs shift and defense output targets climb rapidly, becoming simultaneously efficient and resilient demands sustained strategic focus.
Workforce Transformation Requires Multidisciplinary AI Skills
Competition for AI-capable talent intensifies, compelling organizations to move beyond competitive compensation toward continuous learning and AI skill development opportunities. Entry-level professionals are expected to rapidly acquire and apply AI competencies through accessible technology-enabled training. Senior leaders generally express optimism about AI's transformative potential, but middle management often remains skeptical, untrained, and risk-averse—sometimes resisting change due to concerns about disruption or uncertainty.
Demand for AI talent shifts from narrow big data or general programming expertise toward integrated multidisciplinary skill sets. Deloitte analysis reveals that data science, data engineering, AI, data analysis, machine learning, and statistical analysis represent the fastest-growing skills between 2024 and 2028. The percentage of industry-wide job postings requiring data analysis skills is projected to increase from 9% in 2025 to nearly 14% by 2028, while data science skill demand grows from 3% to 5% during the same period.
Building this talent base requires targeted workforce development initiatives, leadership programs, and strategic hiring focused on specialized skills and security clearances unique to aerospace and defense technology applications. Organizations deepen partnerships with educational institutions to cultivate AI-competent talent pipelines. The focus shifts from hiring AI specialists to embedding AI fluency across entire workforces—fostering greater resilience and adaptability and positioning organizations to thrive in digital environments.
Contracting and Procurement Innovation Accelerates Competition
Recent US acquisition reforms are actively transforming competition mechanics, emphasizing speed, a preference for commercial solutions, and expanded vendor access. Executive actions and agency guidance expand the use of commercial solutions, opening Other Transaction Authority to attract nontraditional suppliers and compress timelines. Legislative advances, including Federal Acquisition Regulation changes and the DoD Software Acquisition Pathway, reinforce this shift by establishing dedicated pathways for outcome-focused, software-driven procurements.
These reforms enable smaller software-centric firms to scale rapidly. Companies combining modular hardware platforms with continuously developed software leverage these pathways to compete with established primes, often with increased agility and shorter development cycles. Industry incumbents deploy strategies ranging from internal investment and faster capability delivery to partnerships and acquisitions with emerging players—raising important questions around intellectual property and data rights.
Despite advances, procurement readiness remains critical with new vendors planning for multi-quarter or multi-year ramp-up periods from first engagement to contract award. Two emerging market trends warrant observation: increasingly shorter procurement processes that foster collaborative bids but intensify IP negotiations, and notable shifts toward self-funded research and build-first models, with both primes and new entrants investing ahead of contracts.
Analytics, Embedded Sustainment, and Digital for Operations
Aerospace and defense supply chains are undergoing a fundamental transformation as commercial operators manage production backlogs and aging fleets, while defense priorities shift toward autonomous systems and advanced weapons platforms. Digital transformation through AI, advanced analytics, and embedded sustainment strategies becomes essential rather than aspirational. Growth depends on the industry's ability to sustain and optimize existing assets while fielding next-generation capabilities. Organizations that prioritize digital infrastructure, invest in workforce AI literacy, and operationalize advanced systems position themselves to capture opportunities and navigate challenges, defining the 2026 operational protocol.
Contact Trax to learn how AI-powered freight data normalization and predictive analytics deliver the supply chain resilience and efficiency that aerospace and defense operations require. Source: Deloitte 2026 Aerospace and Defense Industry Outlook