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Canadian aerospace gets boost from U.S.

April 21, 2009, Montreal - Canadian aerospace companies will win some and lose some as the Obama administration adjusts its defence spending over the coming year.


April 21, 2009
By Carey Fredericks

April 21, 2009, Montreal – Canadian aerospace companies will win some and lose some as the new Obama administration adjusts its defence spending priorities over the coming year, an industry analyst said Tuesday.

The proposed four per cent defence budget increase should assuage fears of investors who feared the Democratic administration would significantly reduce military spending, Cameron Doerksen of Versant Partners wrote in a report.

In a speech earlier this month, Defence Secretary Robert Gates outlined the government’s spending priorities. High among them is support for the F-35 Joint Strike Fighter. Gates is recommending that American forces buy 30 of the first generation tactical fighters for US$11.2 billion in fiscal 2010, up from the 14 purchased last year for US$6.8 billion.

That’s good news for Heroux-Devtek (TSX:HRX) and Magellan Aerospace (TSX:MAL), which have large content on the still-in-development F-35.

Also positive is the U.S. desire to spend US$500 million more to field and sustain more helicopters. This could help Northstar Aerospace (TSX:NAS) and Vector Aerospace (TSX:RNO), although the financial impact will likely be minimal, he added.

The focus on military helicopters is good for Heroux-Devtek, which is developing and will manufacture landing gear for the CH-53K.

Reduced production of the F-18, termination of the F-22 program and completion of the C-17 airlift program are all negatives.

But Doerksen said the impact of these decisions are not as material as the potential upside from the other programs.