Aerospace Outlook: High fuel prices drive jet orders
While our neighbours to the south whine in protest over how rising fuel prices are causing cancelled or postponed orders for US jet makers, Canada is posting its highest profit levels in five years.
According to a report by the Conference Board of Canada called Canadian Industrial Outlook: Canada’s Aerospace Product Manufacturing Industry, the Canadian aerospace industry’s profits are expected to reach $533 million this year. The last time Canada saw profit levels this high was pre-9/11.
But an article published in the Wall Street Journal entitled Oil Spike May Cost Jet Makers Orders, reported even the strongest airlines [in the US] are struggling. Airlines, such as JetBlue Airways Corp. and Delta Airlines Inc. are deferring or cancelling orders just to stay afloat. Others are parking “gas guzzlers” and selling their newer jets to leasing companies. Many commercial airlines can’t afford to buy new, more fuel-efficient planes. Fuel is almost 80% of commercial airline costs, and some US airlines, such as Frontier, Skybus and ATA, have filed for bankruptcy or gone under.
“It’s a bad time for commercial flights. The US airline industry has been hit harder than anywhere else,” says Valerie Poulin, economist and author of the Conference Board report. “Competition for air transportation in the United States is more intense than in Canada because they have more companies. They have the world’s biggest market, but if it crashes, it crashes hard.”
Marc Duchesne, public relations spokesperson for Bombardier says the company used to have a 70% customer base in the US. Now it’s 30 per cent. “We’re still selling a lot of business jets in the US, but we’re selling more outside.”
In fact, most of Canada’s aerospace business is coming from within or abroad. “Almost 80% of production is exported,” says Poulin. “We export more to Italy, Japan, China, India and Brazil.”
Actually, none of Bombardier’s orders have been affected. Duchesne says the rising fuel prices have had a positive effect on aerospace business. Major airlines are thinking of getting rid of larger aircraft and turning to smaller regional jets.
“It has definitely created more demand for fuel-efficient aircraft,” says Duchesne. “Just like a couple of years ago, when the industry wanted to forget about triple-prop engines. We kept our assembly line active. And now airlines, such as Porter at the Toronto Island Airport, are only flying triple-prop Q400s.”
Jean-Daniel Hamelin, spokesperson for Pratt & Whitney Canada, concurs. “There’s a growing market with that type of engine. With the Bombardier Q400 and the ATR 42, these regional aircraft require turbo props versus turbo fans. And many airlines are looking for aircraft that consume less fuel.”
Bombardier launched its CSeries regional jet in July at the 2008 Farnborough International Airshow. This new commercial aircraft incorporates the latest fuel-efficient technology. Made with up to 70% composite materials, which makes the aircraft lighter and corrosion free, it has an impressive 20% fuel-burn reduction, and a 15% savings in cash operating cost compared to other competing products. Main components of the aircraft, such as the cockpit and fuselages, will be manufactured at Bombardier’s Montreal plant. And the final assembly line will be at a new plant in Mirabel, Que., just north of Montreal. Bombardier has already lined up five potential customers for more than 200 aircraft.
“That will create 3,500 jobs over 20 years. It’s a major positive impact on the Canadian Aerospace Industry,” says Duchesne.
Pratt & Whitney, a world leader in design, manufacturing and servicing of aircraft engines, is singing the same tune. “We’re a leader in green technology,” says Hamelin. “For the past 10 years we’ve put a lot of effort into working on greener engines, reducing emissions for both CO2 and NOx. So it’s definitely a plus for us.”
The company’s newest engines, the PW800 family with TALONX combustion technology, has been selected by Cessna Aircraft Co. to power its new Citation Columbus business aircraft. This is the most powerful family of engines currently being manufactured by Pratt & Whitney, and it covers the gamut of aircraft, from business—mid-sized to long-range cabins—to regional aircraft. With the PW800 family and TALONX technology you will see a NOx reduction of 50% and a reduction of more than 35% of CO2 compared to other existing engines.
“We have plenty of work,” says Hamelin. “We’re running full speed in every segment…business, regional, helicopters…it’s keeping us busy full-time.”