Production, revenues up after two years of decline
OTTAWA—The Canadian aerospace industry is set to recover in production and revenues over the next two years thanks to more business and consumer spending on air travel.
But the strong Canadian dollar will limit industry profitability, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada‘s Aerospace Product Manufacturing Industry – Spring 2011.
“Air passenger and freight traffic have surpassed pre-recession levels in both domestic and international markets. Demand for commercial and private jets should follow suit,” said Michael Burt, associate director of industrial economic trends. “New orders are coming in, which will translate into higher production and revenues.”
This year, both production and revenues will begin to recover after two years of declines. Production shrank by nine per cent in 2010 but is expected to pick up in the second half of 2011, leading to a five per cent increase in 2012. Revenues will increase by 1.1 per cent in 2011, after falling by 26 per cent in the last two years.
Pre-tax profits are expected to climb 27 per cent in 2011 to $385 million, thanks largely to cost savings from outsourcing and increased use of imported components.
Profits will continue to grow as market conditions improve, but the strong Canadian dollar will keep margins thin. Because aircraft are priced in U.S. dollars, the strength of the loonie effectively reduces the sales price and related revenue in Canadian dollars for Canadian manufacturers. The profit margin will be at 2.7 per cent this year.