Aerospace industry looking to catch global upswing
Industry production is expected to grow by 6% this year.
Conference Board of Canada
OTTAWA — While the Canadian aerospace industry experienced mixed results in 2013, rising global aircraft demand should lead to strong growth in the years to come, according to the Conference Board of Canada’s Spring 2014 outlook.
“A cyclical upturn in the global aerospace industry has led to an order book that stretches to almost three years of production — a record for the Canadian industry,” said Michael Shaw, Economist. “As these unfilled orders translate into production, the industry will enter a period of solid growth.”
The order backlog for Canadian aircraft manufacturers is now equivalent to 33 months of production, a record for the industry.
Medium- and long-term success will hinge on its ability to capitalize on demand for fuel-efficient aircraft.
Airlines in developed markets are retiring their older, less fuel-efficient aircraft and carriers in emerging countries are increasing their fleets, adding to long-term demand for new production. Low-cost carriers are expected to lead growth in the sector.
The Canadian industry’s success will hinge on its ability to capitalize on demand growth. Single-aisle airplanes are a potential opportunity. Bombardier’s CSeries is intended to capture some of this market.
Another trend in the industry is consolidation and integration of supply chains among manufacturers to control costs. Canadian suppliers, many of them smaller firms, will have to be able to upgrade their capabilities to work with major manufacturers.
Industry production is expected to grow by 6% this year. However, increasing costs have tightened profit margins and restrained profit growth. Industry profits are forecast to reach $787 million in 2014, and will not exceed $1 billion until 2017, when profit margins reach 5%.