Vancouver-based Avcorp Industries, a once-struggling Canadian aerostructures company, has bounced back with growing profits and a backlog expected to hit the C$1 billion ($860 million) mark this year. With annual revenues forecast to reach C$200 million in three years, Avcorp is looking to place some work abroad to maintain profitably.
President Paul Kalil says the move is driven by the "recognition that Canada is no longer a low-cost country", and that with rising wages, employee shortages and a strong currency, the time has come to put work offshore. "We expect to move certain types of work into Asia or Mexico."
The company expects to decide where to place the work this year, with the transfer taking place in 2008. "We're doing the necessary dance with the local jurisdictions to see what they're putting on the table in terms of land and manpower," Kalil says. Moving work offshore "goes against the grain", he says, but "a lot of countries are laying out the red carpet to get aerospace work."
Avcorp has built up its business since the dark post-9/11 days with work on commercial and business jet programmes such as the Boeing 737, Cessna Citation CJ3 and Sovereign, and Bombardier Challenger and CRJ. Its latest contracts are to supply wing skins for the Citation Mustang and wing assemblies for the HondaJet.
"Being on programmes like the 737 makes a huge difference," says Kalil. "If you guess wrong, you're saddled with marginal programmes. We were very satisfied with the CRJ200, but less so with the CRJ700/900 as the volumes are not what we'd like and they are dual -sourced."
After battling through to profitability in 2006, the company broke into the military market last year, signing a letter of intent with BAE Systems to produce outboard wings for the Lockheed Martin F-35 carrier variant. Representing a 40% increase in backlog, the deal is "a huge step for us", says Kalil and, although yet to be finalised, has allowed Avcorp to begin shaping its offshore strategy.
"Ultimately there's just so far you can go with putting work out, and we don't see a reduction in labour here," he says. "It is the nature of the work that will change, with more military work, which has to be done here in Canada. At the same time, we have to make sure we have capacity to handle growth." The workforce has grown from less than 400 three years ago to around 650, and is forecast to reach around 1,000, not including jobs created overseas.
Looking ahead, Avcorp is developing capabilities in advanced materials by forging a relationship with the British Columbia Institute of Technology (BCIT). It is providing $100,000 over five years to sponsor a structures laboratory at BCIT's new Aerospace Technology Campus at Vancouver International Airport, which will provide graduates to meet Avcorp's growing needs.
Beyond this, BCIT and Avcorp have signed a memorandum of understanding to establish a composites research, development and testing facility on the new campus. "We realise that five to 10 years from now, there will be a lot of aircraft we can be building composite parts for. We're starting at the foundations by training the people and doing the research," says Kalil.
Source: Flight International
