Canada's aerospace industry is expected to post record profits in 2005 after three years of decline, says the Conference Board of Canada. The future looks bright due to the expected increase in international air traffic this year and next.
"Once global confidence in the civil aviation industry is fully restored, the Canadian industry should benefit from increasing revenues and a streamlined cost structure," says Louis Theriault, an associate director of the economic research board.
But the forecast could change if Air Canada does not follow through on its order for 45 regional aircraft from Bombardier. Some other key assumptions in the board's forecast include global economic growth of 3.2% this year and an increase in Canada's gross domestic product at between 6.5% and 8.8% from 2005 to 2007. It also assumes international air traffic will grow 7% this year and next.
Another assumption is that the Canadian dollar will be worth between 71¢ and 74¢, once interest rates start to rise later this year. The Canadian dollar is now trading at around 74¢.
Profits in the domestic aerospace industry are expected to total C$2.2 billion ($1.61 billion)next year, surpassing the record of C$2.1 billion set in 2001. Profits fell to C$1.1 billion in 2002 and C$890 million in 2003.
Revenue is projected to increase 2.9% year over year due to stronger activity in the engine manufacturing sector. Despite the increase in sales, prices will face downward pressure, says the Conference Board.
Revenue in the aerospace industry is expected to reach C$16 billion this year and C$18.3 billion in 2005, a gain of 13.7%. The Conference Board does not expect employment to surpass the record of 62,000 set during the second quarter of 2001. Currently, sector employment is 46,800 and could reach 57,300 by the end of 2007.
BRIAN DUNN / MONTREAL
Source: Flight International
