Industry Update: Aerospace
Aerospace Association calls for action, government responds
December 1, 2009
Claude Lajeunesse, president and CEO of the Aerospace Industries Association of Canada (AIAC), had stern words for stakeholders in the Canadian aerospace industry attending the association’s 48th annual general meeting and conference.
He also sent a powerful call to action and for better collaboration in order to compete and benefit from the opportunities awaiting the industry’s future.
Lajeunesse also revealed the results from a recent AeroStrategy study commissioned by the AIAC and Industry Canada on the impact of globalization on Canada.
“Today, Canada is absent from the top 10 countries in the world for investment in aerospace R&D, manufacturing, and MRO [maintenance, repair, and overhaul],” said Lajeunesse. “Canada has not sufficiently taken advantage of the ‘investment boom’ of the past 20 years.”
Based on research of 121 leading aerospace suppliers, fewer than five investments per year was the norm among the sample group in the early 1990s, but by 2008, that number had reached 63 investments per year.
“The most popular destinations for engineering centers are Russia, the United States, India, and Singapore,” said Lajeunesse. “In manufacturing, OEMs are dispersing labor-intensive activities to ‘low-cost poles,’ the most popular destinations being Mexico, China, the United States, and Russia. In comparison, Canada, a knowledge-industry country, has attracted few R&D centers from non-Canadian firms.”
This call for action follows Canada’s fall to fifth position in terms of worldwide aerospace production from its traditional fourth-place position.
“While we have taken justified pride in being fourth in the world, we have now officially slipped to the fifth position. Other nations are aggressively pursuing our market shares and, clearly, maintaining our current level of investments will not be enough to guarantee our status as a world leader,” he said.
Far from delivering a defeatist address, Lajeunesse showed optimism when looking at the many future opportunities the Canadian aerospace industry can seize, and reaffirmed his faith in both the sector’s capacity to innovate and its work force.
“The opportunities before us are phenomenal,” he said. “According to Boeing and Airbus forecasts, assuming an annual increase in passenger traffic of 4.9 percent and 5.4 percent for freight, corresponding to an average annual growth of 3.1 percent of the global economy, the world will require between 25,000 and 29,000 new aircraft at a cost of over $3 trillion in the next 20 years.”
This estimate also does not take into account defence procurement, MRO, or space opportunities.
“Canada has the track record and the capacity to reap these opportunities, if we make the right decisions today,” added Lajeunesse. “Other countries have invested massively in creating an industry of their own. My message today is a call for action. A call for all players: industry, government, and all other partners. If the Canadian aerospace industry of the future is to meet the expectations we all have, then each and every one of us has a role to play.”
Canadian Government Speaks
It has been a century since the first flight above Canadian soil and 25 years since the nation took to the stars with the Human Spaceflight Program.
In his speech to the AIAC at the annual general meeting, Minister of Industry Tony Clement examined the past, present, and future of the Canadian aerospace sector and touted the importance of this industry to the nation.
“Canada’s aerospace industry is a critical economic engine,” said Clement. “It employs more than 83,000 skilled professionals in over 400 firms across the country. And the industry is responsible for generating significant revenues — over $23 billion annually.”
Like many other segments of the manufacturing industry, aerospace has been affected by the global recession.
“Many Canadian companies have had to make some difficult business decisions. But, in the end, I remain optimistic that Canadian aerospace will prevail, as our opportunities for growth are enormous,” said Clement.
Recognizing that a commitment to innovation and competition is necessary is the big first step. Keeping Canadian manufacturing strong is one way to allow the country to maintain its position as one of the top aerospace nations in the world.
However, government procurement is also necessary, and Clement used the AIAC venue to reiterate political policy.
“Through the Canada First Defence Strategy, we are in the midst of updating our equipment for our Canadian Forces. And I am sure that most of you are aware of the potential benefits that will be generated as a result of these procurements and the application of the Industrial and Regional Benefits (IRB) policy,” said Clement.
According to the Department of National Defence (DND), the Canada First Defence Strategy calls for stable, predictable defence funding for personnel, equipment, readiness, and infrastructure. It also should present opportunities for Canadian industry in the sector’s supply chain.
An important element of the procurement process is the IRB policy. The government of Canada plans to leverage major investments in military equipment to encourage long-term industrial development and significant economic activity. This is occurring, according to Clement.
“Since June 2006, the government has leveraged nearly $4.5 billion in contractual commitments, which come back into our economy in the form of jobs, investments in research and development, and other economic activity,” he said.
He cited Boeing as an example, which has announced new business investments that are a direct result of Canada’s purchase of 15 Chinook helicopters.
“Our IRB policy will ensure that 100 percent of that $1.156 billion purchase will be reinvested in the Canadian economy,” said Clement. “We expect these and other improvements will help drive more investments in our aerospace and defence sector and deliver significantly more opportunities for Canadian companies.”
An additional $200 million in funding for the Strategic Aerospace and Defence Initiative (SADI) also was recently announced.
“SADI will continue to focus on the leverage of private sector investment in research and development, attracting international investment to Canada and developing a highly skilled work force,” Clement said.
For more information, visit www.aiac.ca.
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