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Aerospace Manufacturing: Still in Growth Mode
June 2008 |
Canada’s aerospace industry will post its highest profit level in five years this year, as production is expected to surpass its previous peak, according to the Conference Board’s Canadian Industrial Outlook: Canada’s Aerospace Product Manufacturing Industry – Spring 2008.
“The global aerospace industry is hanging tough despite the slowing US economy, and Canada is landing its share of the market,” said Valerie Poulin, economist. “In both the business and commercial jet markets, the Canadian industry is benefiting from healthy economic growth in emerging markets and increasing global demand for air transportation.”
Rising costs and declining prices have limited the aerospace industry’s profit growth in recent years. But production has been growing at a healthy pace since 2004, and this year it is expected to surpass the industry’s pre-9/11 peak. As a result, profits are expected to reach $533 million this year, their highest level since 2003. From 2009 to 2012, double-digit profit growth is forecast each year, but margins will remain thin by the industry’s historical levels.
The report notes that record oil prices and the strong Canadian dollar pose risks to the industry. Fuel costs threaten the profitability of airline carriers, which in turn affects their investment in new aircraft, although fuel prices are spurring some airlines to invest in even more fuel-efficient planes. The value of the loonie, meanwhile, makes Canadian production less competitive compared to other manufacturing locations. As a result, future production—including components of Bombardier’s planned CSeries 100-to-149 seat jets being considered for launch this year—may move to other countries.
www.conferenceboard.ca
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