Aerospace industry “steady but unspectacular” in 2013: Conference Board

Canada’s aerospace industry had a year of “mixed results” in 2013, says a report from the Conference Board of Canada. However, global aircraft demand is expected to increase, leading to strong growth in coming years. That “cyclical upturn” in the global has led to record numbers of orders on the books for Canada’s aerospace companies. With more than three years of unfilled orders ahead of it, worth $49.2 billion in February 2014, the industry will see a period of solid growth, the Conference Board Spring Outlook says. The value of unfilled orders is $10 billion higher than it was at the same time last year.

The industry’s success in the long term will depend on its ability to capitalize on the demand for more fuel-efficient aircraft, particularly in emerging countries. In the airline industry, it is expected to be low-cost carriers that lead the growth. Single-aisle aircraft like Bombardier’s CSeries jets are designed to capture this market.

Another trend the report points to is that of consolidation, the integration of supply chains among manufacturers to control costs. Canadian suppliers, many of which are smaller firms, will have to upgrade their capabilities to work with the major manufacturers.

Success of Canada’s aerospace industry will depend on its ability to capture the growing market for low-cost fuel-efficient aircraft like the Bombardier CSeries, says a report from the Conference Board of Canada.

Production in the aerospace industry is forecast to grow by 6 per cent in 2014. Increased costs, however, have “tightened profit margins” and restrained profit growth. In fact, profits fell in 2013, dropping by more than half to $699 million. It was their lowest level in three years, and the Conference Board calls for profits this year to reach $787 million. Profits will not reach $1 billion until 2017, the report says.

The drop in 2013 was due to higher costs and the weaker Canadian dollar. Orders and production were actually higher, with production up 1.7 per cent over 2012. Revenues too grew, reaching $17.7 billion compared to $15.5 billion in 2012. “Steady but unspectacular” was how the report characterized the year.

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