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Executive Summary

The National Aerospace and Defence Strategic Framework is a comprehensive framework of programs and policies to support the growth of Canada's aerospace and defence industry from coast to coast, and build on its strong globally competitive position. The Framework recognizes that both industry and government must consider new realities and develop a renewed framework for collaboration.

The Framework is national in scope and represents a collaborative way forward, drawing upon private sector dynamism and public sector commitment. It looks out over a 20-year time horizon and endorses a vision to the year 2025. It identifies the factors and forces facing the industry, recommends specific actions and promotes the use of evaluation and priority-setting tools to guide strategic choices. The Framework addresses both short- and long-term issues, with the ultimate goal of enhancing and sustaining the competitiveness and capabilities of the Canadian aerospace and defence sector. The Framework will guide future government policy and program decisions and present a basis for collaboration among stakeholders.

The Framework was developed in close collaboration with stakeholders across the federal community and in consultation with industry leaders through the Canadian Aerospace Partnership. In addition, there was input from stakeholders and the public during broad consultations in all regions of Canada.

The Framework is not about picking winners. The goal is to help a crucial industrial sector identify where, and how, it can be globally competitive. This includes the federal government doing its part in helping articulate the path for the industry to grow and compete over the next 20 years. The government will continue to work with all stakeholders in identifying critical issues and developing appropriate responses. The Framework defines the first of a series of actions the federal government will take and invites all stakeholders to actively participate in the realization of the vision through concrete action.

The Canadian Aerospace and Defence Industry

Canada is an important player in the global aerospace and defence industry. In terms of commercial aerospace, we are the world's fourth-largest producer (after the United States, the United Kingdom and France). Canadian aerospace and defence products and services are competitive in many market segments, including: regional and business aircraft; small gas turbine engines; commercial flight simulators; aerostructures; landing gear systems; helicopters; armoured vehicles; space-based robotics; remote sensing systems and satellites; avionics and mission systems; and, maintenance, repair and overhaul services. Canadian industry is a world leader in many of these segments.

The aerospace and defence industry is a significant contributor to Canada's economic performance, with a strong presence in all regions across Canada. The Canadian aerospace industry generated revenues of $21.7 billion in 2004, of which 84 percent came from exports. Collectively, the Canadian aerospace and defence sector contributed $9.2 billion toward Canada's gross domestic product (GDP), accounting for more than 5 percent of Canada's total manufacturing GDP. The industry invested more than $1.2 billion on research and development (R&D) in 2004. In fact, the industry ranks as one of the top manufacturing sectors in terms of R&D intensity, export intensity and value-added per employee. It provides high-quality employment for upwards of 73 000 Canadians. As well, spin-offs from the aerospace and defence industry have a significant impact on other sectors, such as medical devices, Earth observation, agriculture and transformative technologies. The sector also contributes strongly toward achieving public policy goals and objectives in a wide variety of areas including defence, national security and protection of the environment.

Global aerospace sales are expected to reach US$2 trillion over the next 20 years. The global industry is shifting, and the past decade has seen dramatic changes in the way business is conducted and how industry is organized. Furthermore, Canada's mature product base puts it at a critical juncture where it needs to make substantial investments in R&D and new-generation technology, product and capability development to take advantage of these opportunities.

Global aerospace competition is fierce, and other countries are adopting aggressive strategies to advance their aerospace and defence sectors. Emerging aerospace countries are seeking to establish indigenous capabilities by attracting major investments in exchange for potential market access. Low labour costs are also posing a critical challenge to Canadian industry, underlining the importance of moving to higher-value-added products and improved productivity.

Aerospace and defence stakeholders across Canada have recognized the opportunities and the challenges that lay ahead. The Canadian Aerospace Partnership, whose membership includes senior executives from industry, provincial governments, labour groups and academia, was established in April 2005. Its focus is to enhance the competitiveness of the Canadian aerospace and defence industry and to set out a vision and a plan of action with respect to all stakeholders.

The National Aerospace and Defence Strategic Framework

A Vision to 2025

The government endorses the vision developed by stakeholders across the industry:

Canada will be home to a growing, innovative and diversified industry, recognized as a leader in serving global aerospace and defence markets and a preferred location for investment.

With the Framework, the government commits to working with the Canadian aerospace and defence industry and other stakeholders toward ambitious, achievable goals.

Through the work, commitment and collaborative partnership of governments, companies, workers, academic groups and other stakeholders, Canada will create an aerospace and defence industry that is a:

  • globally recognized brand of Canadian excellence and source of national pride;
  • creator of national wealth and provider of challenging and rewarding jobs for Canadians;
  • key contributor to security and military readiness in Canada and among our allies; and,
  • lever for effectively achieving a wide range of public policy objectives and needs.

Achieving the Vision

All aerospace and defence industry stakeholders will have to work together to achieve key objectives. The Framework directs industry and government action in pursuit of these goals. Specifically, the Framework directs collaborative action to ensure a Canadian industry that:

  • comprises a critical mass of top-tier platform original equipment manufacturers (OEMs), each with a world-leading position in its respective market segment;
  • possesses robust design and systems integration capabilities throughout the supply chain;
  • offers comprehensive, in-service support solutions over the complete product life cycle;
  • serves a diversified, global customer base;
  • is at the forefront of technological innovation and productivity;
  • outperforms the global industry in selected niche markets and sustains a "Top 5" global ranking overall;
  • achieves an above-average compound annual growth rate and delivers above-average returns on investment relative to other international competitors; and,
  • sustains a level of domestic value-added commensurate with that of its principal competitors.

Seven Pillars of the National Aerospace Strategic Framework

The Framework presents the goals, and calls upon all stakeholders to focus effort and investment on seven strategic areas that will enable the industry's future success.

Securing Strategic Aerospace and Defence Investments

Large, multi-year international projects in the aerospace, defence and space sectors represent some of the best long-term growth opportunities for the Canadian industry, and are critical to its success. Beyond the business benefits of participation, major platforms represent opportunity for technology access and development, as well as the establishment of long-term relationships. This access is critical as our industry competes for future business from around the world.

The government is committed to supporting Canadian industry through a number of initiatives, including: the adoption of a robust and coherent decision-making framework; the development of policy and analytical tools for assessing Canadian benefits and participation; and, supporting Canada's participation in strategic projects consistent with Canada's international trade obligations.

Technology Development and Commercialization

The aerospace and defence industry is founded upon products that have the highest level of technology and growth in the most successful aerospace and defence firms is directly linked to the investments in R&D. For the industry to remain successful, there will need to be sustained investment in product and process innovation at all levels of the supply chain, from companies and governments alike.

The government is committed to working with the industry to increase the levels of aerospace R&D performed in Canada. The government will create an aerospace and defence risk-sharing investment program, thus contributing to industry-led R&D projects that promote the development and application of the technologies that will define the growth of Canada's aerospace and defence sector. The program will invest in several areas covering the continuum of R&D, including a focus on the development of clusters of capabilities across Canada. The government will also promote research partnerships and collaboration among companies, universities, industry, government and not-for-profit organizations.

The government will also work with public institutions and with the industry to enhance and promote aerospace-related research by mobilizing and linking researchers in Canadian universities with researchers in the private, public and non-profit sectors.

Skills Development

A labour force that is well trained and adaptable underpins strong R&D performance and world-class manufacturing and business processes. Canada's aerospace and defence workforce has helped us achieve an enviable world ranking; however, Canada faces challenges in maintaining its position as the workforce ages and retirements occur.

The government will support innovative skills development projects in the aerospace and defence sector through existing and upcoming programs at Human Resources and Skills Development Canada, such as the recently announced Workplace Skills Strategy.

Trade Policy and Trade Development Initiatives

Canadian aerospace and defence products and services are world-class and can compete successfully in international markets. To maintain this position, industry requires the promotion of, and access to, an equitable international marketplace in which it can compete for business opportunities in both established and emerging markets. In addition, since the Canadian industry is highly integrated with that of the United States, both large and small businesses will benefit from a constructive bilateral relationship with the US.

The government commits to developing a comprehensive investment and trade strategy, focussing on foreign direct investment and promoting Canadian capabilities abroad. Canada will participate aggressively in international aerospace and defence events and will continue to disseminate market information and intelligence about international business opportunities to Canadian aerospace and defence firms. Canada will also proactively seek global opportunities to increase industry participation on major aerospace and defence platforms and defence procurements.

Sales Financing

The ability to access sales financing support is imperative for the success of the Canadian aerospace and defence industry. Government sales financing support complements that provided by commercial lenders. Sales financing allows Canadian firms to compete with companies supported by their national governments, thereby allowing them access to new and developing markets.

The government will establish an Aircraft Sales Financing Framework that is consistent with Canada's international trade obligations. This framework will provide competitive and defensible sales financing in a fiscally prudent manner to support the sales of Canadian-manufactured aircraft. The government commits to actively participate in the current Organisation for Economic Co-operation and Development discussions on the Aircraft Sector Understanding.

Security and the Environment

The aerospace and defence industry plays a key role in helping the government protect Canadian interests and laws and helps ensure they are being respected and enforced. It also provides invaluable support to Canadian efforts to monitor and protect our environment.

The government is committed to participating in the major international security, defence and space programs that support Canada's security and industrial interests. It recognizes the importance of working with international partners on space exploration and defence and security research. In addition, the Framework commits the government to better use of Department of National Defence equipment procurements and technological innovations as levers for Canadian aerospace and defence industrial participation.

Procurement

Given Canada's relatively small domestic defence requirements and its open market policies, there is growing pressure on domestic firms to shift work to other jurisdictions in order to assure access to those markets. A government procurement environment is needed to better use the opportunities presented by public procurement to promote innovation and commercialization by Canadian firms.

The government commits to developing a framework designed to better leverage industrial development from procurement. This includes considering policy options that would make the Industrial and Regional Benefits Policy more focussed on the aerospace and defence sector and the technologies that will be key to the sector's future success.

A Continuing Commitment

The Canadian aerospace and defence sector has enjoyed tremendous success and continues to be one of Canada's most important high technology sectors. However, changing realities require all stakeholders to commit to a shared vision.

The federal government has played a vital role in the growth, development and success of the aerospace and defence industry in Canada. The Framework continues the government's commitment to the industry, through a coordinated strategy and a commitment to continuing dialogue with all stakeholders. The Canadian Aerospace Partnership, which was instrumental in the Framework's development, will play a particularly important role.

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