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Canada ASD Industry

Canada’s ASD industry is expected to grow mainly due to strong Defense sector performance and free trade agreements with the EU

Canada ASD industry overview

 

2012-17 CAGR

The Canadian ASD industry grew by 4,9%/ year, reflecting an increase of 0,4 pp in % GDP (2012-17)

 

Canadian ASD revenues [€bn, 2012-17]

 

  • The Canadian ASD industry market growth is mainly due to the anticipated increase of aircraft orders and Defence manufacturing
  • The Space sector is starting to have a significativeweight in the total ASD market, with the government increasing its investments in order to follow the global communication systems demand
Satellite communication and navigation systems are the main drivers for continuing growth

 

Aeronautics

  • Canada is investing €700m to develop a regional ecosystem for commercial and civil UAV (1)due to its global market anticipated growth of 18,2% between 2017 and 2023
  • The projected increase of aircrafts by 2036 will lead to a 3k pilot shortage by 2025, with the government planning a €150 million investment in training

Space

  • Space sector is a government priority, investment of €11,5 million to develop a advanced satellite broadband network to improve global communication systems
  • Commercial market dominates, forecasted to reach €250 billion by 2023 (+40%) due to satellite communications and SatNavmarket revenues growth

Defense

  • Government is investing €41,2 billion in new funding over the next 20 years to the Defense budget in order to develop 88 new fighter jets and ground-base Defense solutions
  • National focus of reducing supply costs led to the 2017 Canada’s agreement decreasing up to 98% of trade tariffs between Canada and Europe

Note: (1) UAS –Unnamed Aerial Space
Sources: DIME, Aeró Montréal, GMIS, State of Canada, ForecastInternational, Bombardier, EY analysis

 

Canada has been mostly focused in the Aeronautics sector and in increasing its domestic sales to meet the national needs

Canadian ASD industry: revenues and workforce zoom-in

 

The Canadian industry is highly focused in the Aeronautics sector representing 86% of the total national revenues

 

Canadian ASD industry revenues by sector [% of total revenues, 2017]

 

  • The Canadian Defense sector represents only 12% of the total ASD industry due to (in part) strong competition from the US
  • The Space sector is the less representative of the ASD industry and composed of SMEs that create 45% of the total Space sector revenues
Domestic sales have been increasing and represent 48% the total industry revenues, raided mostly by the presence of an OEM

 

Canadian ASD market breakdown by revenues [% of €bn, 2016-17]

 

  • More than half the total Canadian employees represent a low-mid value-added but highly specialized workforce
  • On the other hand, 26% of the total Canadian employees are included in the STEAM category, representing an high value-added workforce responsible for R&D activities

Notes: (1) STEAM -Science, Technology, Engineering, and Mathematics; (2) Includes management, administration, marketing, and unspecified occupations
Sources: AIAC, State of Canada, EY analysis

Canadian aerospace industry faces increasing competition from the US, but shows strong internal manufacturing capabilities

Canada ASD industry: SWOT

Internal Factors

Strengths

  • World leader in civil flight simulator production, turboprop and helicopter engine production
  • Well developed business and regional civil aircraft production supply chains, built around an OEM
  • R&D investment in the aerospace industry seven times higher than local manufacturing average
  • Developed cluster structure with Aero Montreal having a central role in connecting industry stakeholders
  • World’s largest global Boeing suppliers base

Weaknesses

  • Lagging behind in advanced technology capabilities(e.g., production automation) and Industry 4.0 adoption
  • High dependency on exports, especially to the US and France
  • Totally dependent on imports for large passenger aircraft
  • Shortage of skilled workforce for industrial mechanicals, welders and manufacturing managers
External Factors

Opportunities

  • Acess to Pacific Northwest aerospace anddefense markets
  • Government-sponsored initiatives to increase Industry 4.0 adoption by SMEs (e.g., shared resource centres)
  • Special member of the European Space Agency
  • Provide components to OEMs expanding to emerging growth markets (e.g., Bomabardier-Comac partnership)
  • Government support to develop a regional ecosystem for commercial and civil UAS and a centre of excellence

Threats

  • Competitive pressure on market consolidation
  • Supply chain globalization has reduced the advantage Canadian players once by belonging to Bombardier supply chain
  • Civil aircraft MRO players pressured by OEMs wishing to retain share of a high-margin activity and low-cost MRO providers from emerging markets
  • Uncertain US-Canada trade relations and rising US protectionism

Sources: Government of Canada, Global Manufacturing and Industrialization Summit, EY analysis

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