The View From 40 000 Feet: Canada's Aerospace and Defence Industry
The Canadian aerospace and defence industry is a major and innovative contributor to Canada's economic performance. The industry is composed of three main elements: aerospace, defence and space (Figure 2). The industry's contribution to the economy is illustrated by aerospace, which contributed an average of $5.9 billion annually to Canada's gross domestic product from 1994 to 2003.
The aerospace and defence industry is present in all provinces of Canada, with key industry clusters located in Montréal, Toronto and Winnipeg. The industry also has a significant presence in British Columbia, Saskatchewan, Alberta and the Atlantic region.
Canada's aerospace and defence industry has several major indigenous firms, including Bombardier, CAE, CMC Electronics, Heroux Devtek, Magellan Aerospace, SNC and MDA. It has also attracted significant direct investment by several major foreign-owned firms, such as Pratt & Whitney Canada, Bell Helicopter Textron, Boeing, Honeywell, Goodrich, Messier-Dowty, Rolls-Royce and General Dynamics. Like many industries, it is highly concentrated, with the top 30 firms representing 95 percent of production. Bombardier represents about 45 percent of the industry's sales. Smaller companies, part of the local and global supply chains, round out a significant domestic supply base.
The space sector is a key element of the aerospace industry. While contributing to the economic well-being of the country, Canada's space program supports key policy areas such as security and sovereignty, the environment and sustainable development. In most cases, it is both essential and strategic to have a domestic space sector capable of meeting our national needs. As a result, the market dynamics for space vary greatly from the commercial aerospace sector, as governments are often the main – and in some cases the sole – customers for space products and services. Canada's space companies have world-leading capabilities in niche areas such as communications and navigation, Earth observation sensors, ground stations, services and applications, space robotics and scientific instruments. Annual revenues have increased by more than two-thirds from $1.4 billion in 2000 to $2.4 billion in 2004. Satellite communications continues to be the largest revenue generator, accounting for three-quarters or $1.8 billion of total revenues. Other key segments include satellite navigation and space science. The industry's internationally competitive position is attested to by exports of $1.2 billion in 2004, representing half of the industry's total revenues, the highest proportion of any space-faring nation.
The Canadian defence industry had sales of approximately $4.5 billion in 2004, which represent approximately one-fifth of total aerospace and defence industry sales. Canada's defence-related research and development (R&D) is about $225 million. Market segments include light armoured vehicles, small arms, tracked vehicle components, voice and data communications systems, avionics and mission systems, simulation and training equipment, protective clothing and apparel, ships, control systems, information technology equipment, and maintenance, repair and overhaul (MRO) services. Key indicators such as exports, trade balance, value-added and employment are trending upward. Industry clusters are concentrated in Quebec and Ontario with key, smaller clusters in the western and Atlantic regions. Participation in international programs is an emerging trend in the defence industry, as it is in aerospace in general. The challenge in measuring defence industry outputs is that defence is made up of portions of many other sectors such as space, security, information technology, biotech and shipbuilding, to name a few. As such, the development of defence technology is important for the transfer for dual use technology (civilian/military) and as a generator of growth in high-value-added sectors such as those mentioned previously.
In space and defence, firms have built their success on domestic government programs that developed and manufactured systems for national needs. These eventually became the core capabilities for commercial and government markets. In addition, the defence and space sectors have benefited from a myriad of agreements between the United States and Canadian governments over more than 50 years that have led to a highly integrated North American technology and industrial base.
The Canadian MRO industry includes more than 1100 companies that service commercial and military customers from around the world. The industry had sales of more than $2.1 billion in 2004, and employed about 17 000 highly skilled workers. It is comprised of original equipment manufacturers (OEMs), independent MRO providers and aircraft operators. The industry has an extensive range of maintenance and overhaul capabilities for complete fixed-wing aircraft, helicopters, engines and accessories, avionics, and systems and components.
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