MONTREAL — Canada’s aerospace industry is expected to post $620 million in profits in 2009 despite declining business jet demand, the Conference Board of Canada said Friday.
The board’s spring industrial outlook said that although the aerospace sector is being affected by the recession, it is faring better than many other industries.
But customers are rethinking or cancelling orders because of a drop in air travel and difficulties in raising credit to pay for new jets, economist Valerie Poulin said in a report.
“The next 12 months will shape the industry’s longer-term well-being.”
Despite cancellations, the nearly two-year backlog of orders is only slightly below an industry record.
Production is expected to slow in the next two years, but will outperform the rest of the manufacturing sector.
Several industry leaders have laid off workers in the face of dwindling market demand.
Bombardier Aerospace (TSX:BBD.B) announced the layoff of 4,360 employees in February and April as it planned to ratchet down business jet production because of an estimated 25 per cent drop in deliveries.
Flight simulator and training company CAE Inc. (TSX:CAE) cut 10 per cent of its workforce, or 700 positions and imposed cost-cutting measures on remaining workers because of an anticipated order dropoff.
Pratt & Whitney shed 1,000 workers around the world, including 500 in Longueuil, Que., and 45 in Halifax.
The Conference Board said production growth will slow to 1.7 per cent this year and decline slightly in 2010, after increasing more than 10 per cent in 2008.
Profits fell to $592 million in 2008 and should remain relatively stable over the next two years. They should then grow steadily beginning in 2011, the economic think-tank said.
However, profit margins, which fell to a low of 2.7 per cent in 2008, are only expected to average three per cent annually for five years.
The outlook is sponsored by the Aerospace Industries Association of Canada, the trade group representing Canada’s aerospace manufacturing and services sector.
Filed Under: Aerospace + defense