Canadian aerospace industry earned highest profits last year since 2001: report

MONTREAL – Canada’s aerospace manufacturers had their highest pre-tax profits since 2001 last year as the lower Canadian dollar helped the export-oriented sector overcome a “disappointing global economy,” according to the Conference Board of Canada.

The Ottawa-based economic think tank said in a report released Tuesday that Canada’s aerospace industry earned $1.56 billion in pre-tax profits in 2015 on $21.8 billion of revenues — up from $952 million on revenue of $19.9 billion in 2014.

Meanwhile, the Conference Board forecasts sector profits will surpass $2.13 billion in 2020 as the weak business jet market improves and Bombardier Aerospace delivers CSeries aircraft and its new Global business jets, currently under development.

“There’s a bit of a ramp-up in production that we see going forward just based on some orders from some of the major players in the industry,” study author Carlos Murillo said in an interview.

The aerospace division of the Montreal-based plane and train maker (TSX:BBD.B) had a net loss of US$5.1 billion last year. But the company, which reports in U.S. dollars, said the division earned US$242 million in pre-tax operating income, excluding hefty special charges.

Besides Bombardier, Canada’s top aerospace companies include Boeing Canada, CAE, Magellan Aerospace, Thales Canada, Heroux-Devtek and Avcorp Industries.

The Conference Board says industry profitability last year was bolstered by increased prices and a reduction in labour costs following a 20 per cent reduction in the number of employees.

It expects the industry’s workforce will grow about four per cent a year to keep up with rising production.

Going forward, aircraft deliveries are expected to be the main driver of revenue growth.

The Conference Board said improving global economic conditions and another year of record airline profits, in part due to low fuel costs, will propel new aircraft orders and support the industry’s financial situation.

“Over the medium term, improving financial conditions for the global airline industry and better macroeconomic conditions will support manufacturers of commercial and business aircraft,” the report said.