US/NATO/Israel Airborne Ammunition Market, 2024-2026

Airborne Ammunition is Experiencing Transformational Growth Due to Conflict on NATO's Doorstep, in Israel, and Political Change in the United States

The global airborne ammunition market has seen significant growth in recent years, driven by technological advancements, evolving defense requirements, and increased demand for precision-guided munitions. Airborne ammunition, including both air-to-air and air-to-ground missile systems, plays a critical role in modern military operations, with rising demand for versatile, precise, and reliable solutions across various platforms, including fighter jets, helicopters, and unmanned aerial vehicles (UAVs).

Heightened geopolitical tensions, particularly in the Asia-Pacific and Middle East regions, are pushing defense budgets higher, which translates into increased procurement of advanced airborne munitions. This is driving growing collaboration between defense contractors, governments, and military organizations, which has become more pronounced in the airborne ammunition sector. Joint ventures and partnerships between global defense companies such as Raytheon Technologies, MBDA, Rafael, and Lockheed Martin are facilitating the development and distribution of advanced missile systems, enabling military forces to upgrade their capabilities with the latest technologies.

This unique market research report from the Aerospace & Defense practice at Frost & Sullivan elaborates on current industry trends, drivers, and restraints, alongside business opportunities, challenges, and future growth in the airborne ammunition sector.

The Impact of the Top 3 Strategic Imperatives on the US/NATO/Israel Airborne Ammunition Market

Geopolitical Chaos

Why

• The ongoing conflicts in the Middle East and Eastern Europe have highlighted the critical need for advanced airborne ammunition as a cornerstone of modern military projection.
• In response, the United States, its NATO allies, and Israel are intensifying efforts to mobilize the defense industry and address rising aerial munitions demand in the airborne ammunition market.

Frost Perspective

• The surge in ammunition deliveries to Ukraine-where usage outpaces NATO production capacity-is disrupting the industry's linear growth in the airborne ammunition market.
• This trend will continue to strain new production lines and force NATO members to make difficult procurement choices between supporting Ukraine and meeting their own growing domestic needs, impacting the airborne ammunition demand market.

Industry Convergence

Why

• The Western airborne ammunition industry is undergoing significant transformation, driven by rapid technological advancements and rising demand for aerial platforms-both manned and unmanned-and the munitions they require in the airborne ammunition market.
• Vendors are driving this shift by modernizing supply chains and production lines and integrating advanced materials and manufacturing technologies, which is also reflected in the precision-guided munitions market.

Frost Perspective

• Airborne ammunition production lines are set to undergo major changes, including the establishment and modernization of facilities and the integration of digital technologies to boost output and efficiency.
• These shifts will likely reinforce the dominance of prime vendors, keeping the airborne ammunition market heavily concentrated and monopolized, while further evolving the precision-guided munitions market.

Disruptive Technologies

Why

• Several key advancements are driving disruptive technologies into the airborne ammunition industry, including hypersonic systems, electro-optical/inferred (EO/IR) sensors, precision-guided munitions, and electromagnetic warfare (EW) capabilities. Defense primes are currently focusing on next-generation warhead technologies and disruptive C2 communication methods, such as two-way datalinks and multi-mode seekers crucial to the air-to-air and air-to-ground missile systems market.

Frost Perspective

• Disruptive technologies are reshaping traditional airborne ammunition, with strong potential for deployment on next-generation platforms during the forecast period.
• While leading OEMs will continue to dominate, market share and revenue are likely to shift within the airborne ammunition and precision-guided munitions market as new technologies gain ground.

Growth Drivers

The Changing Nature of Warfare

• The nature of warfare has significantly evolved with the introduction of stealthy 5th generation fighter jets and UAVs into modern military operations. As the Russo-Ukraine War shows, "Drone Warfare" is now a reality-reshaping both aerial combat and strategic military ConOps, highlighting the need for advanced airborne munitions.
• With these platforms gaining importance, global demand for advanced airborne munitions is rising across all missile categories and in the airborne ammunition demand market. This growth stems from the integration of cutting-edge technologies that enhance platform lethality and operational effectiveness. As a result, market expansion increasingly depends on vendors' ability to embed such technologies, further stressing the needs of the airborne ammunition market.

Increasing Defense Expenditures

• The expected growth in the military airborne ammunition market stems largely from rising global defense expenditures and the proven operational effectiveness of such munitions in recent conflicts, particularly in the precision-guided munitions market. As countries expand military build-up programs focused on airborne ammunition, air domain arms exports-such as US Foreign Military Sales (FMS)-are accelerating, while ad-hoc DIBs from non-US sources are also emerging, feeding into the airborne ammunition demand market.

Technological Advancements

• As technology plays a critical role in accelerating weapon systems, the airborne ammunition industry is experiencing a dramatic boost, driven by rising R&D investments in emerging advancements such as precision-guided munitions (PGMs), conventional loitering munitions (LMs), and hypersonic weapons technology. The industry is also pursuing innovative paths in advanced directed energy technologies, including directed energy weapons (DEW), high-energy lasers (HEL), and high-power microwaves (HPMs), further enhancing the air-to-air and air-to-ground missile systems market.

Growth Restraints

Supply Chain Disruptions

• Ongoing global inflation and geopolitical instability continue to affect the DIB, particularly impacting the airborne ammunition market. Conflicts such as the Russo-Ukrainian war and the Red Sea crisis involving Yemen have intensified supply chain disruptions in the aerospace and defense sector, increasing uncertainty-particularly for vendors operating under fixed-price contracts. This environment is slowing the pace of long-term contract awards and delaying new military procurement programs across NATO markets, as well as in regions like the Middle East and APAC.
• Current stockpiles of precision munitions and airborne ammunition production capacities fall short of meeting the potential demands of large-scale conflict, significantly impacting the airborne ammunition demand market. This shortfall is putting upward pressure on both costs and availability, causing delivery delays that directly impact military operational readiness.

Cost Pressure

• The airborne ammunition industry remains highly concentrated, shaped by past mergers and the growing dominance of prime defense OEMs. This consolidation has reduced competition and created a more monopolized market-less fragmented than other defense segments. As a result, the market's structure limits pricing flexibility, which is crucial in the airborne ammunition market. For instance, a single AIM-120D AMRAAM costs $1,370,000 as of FY24.
• As demand for airborne ammunition rises, rapid production expansion is further constraining price flexibility. The widening cost gap between defensive missiles and offensive AAMs has triggered intense debate within the defense sector. In response, manufacturers and suppliers are pursuing innovative, agile approaches to address the issue, particularly within the precision-guided munitions market.
• Their primary goal is to develop more cost-effective missile systems that can economically compete with offensive alternatives-without sacrificing performance or reliability, which is essential for sustaining the airborne ammunition demand market.