Aerospace industry taking off
Montreal's aerospace industry has been one of the few bright spots in the local economy in recent years.
It has managed to shake off the lingering effects of both the last recession and the rise in oil prices as it waits for a durable recovery to kick in.
Now, there are signs that it's about to take off. At the big aerospace industry trade show in Paris this week, Montreal companies have been piling up new orders from customers.
Bombardier Inc. announced a couple of key deals to sell its highly touted CSeries passenger jets, while equipment-makers CAE and Héroux-Devtek obtained significant new orders as well.
Companies such as enginemaker Pratt & Whitney are talking about expanding their local presence. In Pratt's case, it may build a new generation jet engine for the Airbus 320neo at its facility in Mirabel.
Meanwhile a French aircraft maintenance company, AAA Canada, said it will expand here and add more than 200 jobs.
All of this is encouraging news for Montreal, says Karl Moore, a management professor at McGill University. Aerospace companies "seem to have come out of the recession pretty well and are poised to grow."
He notes that next to big sectors of the local economy like retailing, government and universities, aerospace is a major player. "It's probably the most important industry" in Montreal's private sector, says Moore. Other industries like pharmaceuticals, information technology and video games are significant, but aerospace is the key to Quebec's manufacturing and export economy.
"Almost everything they make is exported, or 90 per cent of it."
It's a spur to innovation because of all the investment in research and development. As such, it's critical to Montreal's knowledge-based economy, drawing on a pool of skilled talent trained at its universities and colleges.
"When you look at companies like Bombardier, CAE and others, they're headquartered here, which makes a big difference because decisions are taken locally."
The existence of an industry cluster is mutually reinforcing for member firms, allowing Pratt & Whitney to hire people from Bombardier and vice versa. The outlook for aerospace should improve over the next year or two, according to an economic forecast released Tuesday by National Bank of Canada.
"Quebec exports should pick up steam for the rest of 2011," it noted. "The fact that U.S. economic growth will be based more on business fixed investment should benefit Quebec exports, especially aerospace products, information technology and communications equipment."
It's not a completely rosy picture, to be sure. Bombardier, for one, is encountering difficulty in selling its portfolio of smaller regional jets, which had been its bread and butter for many years. But it continues to rack up impressive sales numbers in the business-jet market, which is on the rebound after the last recession.
On Tuesday, it clinched two firm orders for 16 widebody Global 7000/8000 business jets, set to enter service in 2016 and 2017. The orders, from Switzerland's VistaJet and Australia's AV West, are worth more than $1 billion in total at list prices.
"We view these orders as positive developments, as they indicate that the business jet market continues to recover and that Bombardier's product is well received by the market," noted analyst Benoit Poirier at Desjardins Securities.
"These orders will have a positive contribution to margins, as wide-body business jets provide better margins than regional aircraft and smaller business jets."
A big part of Bombardier's sales strategy is focused on Asia, says McGill University's Moore, reflecting the fact that economic growth is hotter there than elsewhere. Tuesday's news that Korean Air has signed a letter of intent to buy up to 30 CSeries jets "might entice other fast growing Asian customers to place orders" for the plane, said Desjardins analyst Poirier.
It's been a halting start, to say the least, for the CSeries sales campaign, mostly because airlines have had trouble securing financing for new aircraft purchases. But it looks like the market is finally start to heat up.
Read full article: The Gazette, June 22, 2011