Aerospace industry recovery delayed until 2011
Nov. 30, 2010, Ottawa - The slowdown of the global economic recovery will delay a rebound in Canada’s aerospace industry until next year, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Aerospace Product Manufacturing Industry – Autumn 2010.
“Renewed weakness in business confidence has delayed the recovery in demand for business jets. As well, countries with large budget deficits are cutting defence spending,” said Michael Burt, Associate Director, Industrial Economic Trends. “Improving market conditions for commercial jets means that new orders are now coming in for the industry, albeit at a modest pace.”
The industry’s pre-tax profits are forecast to fall in 2010 by 47 per cent, to $152 million, because of weak sales and declining prices. However, most of the drop in sales occurred at the end of 2009. Profits have already begun to rebound on a quarter-over-quarter basis, although they remain below 2009 levels.
Production is expected to improve beginning in 2011. As order books gradually expand and inventories of existing aircraft are sold, the pace of production will increase. By 2014, production is expected to surpass its pre-recession peak, making it an exception among industries within Canada’s manufacturing sector.
Profits are forecast to rise to $308 million in 2011, but margins are expected to remain thin due to continued strength in the Canadian dollar. Since most of the aerospace industry’s products are sold in U.S. dollars, the strong Canadian dollar detracts from industry pricing and profitability.