Canada's diminishing defence spending has forced fundamental changes on to its aviation industry. Many companies, subsidiaries of US primes established to provide industrial offsets for Canada's past military purchases, have had to find a new raison d'etre.
The results have been mixed, with some emerging as world-class suppliers and others still struggling to adapt. But the rapid growth in commercial sales and exports suggests that much of the industry has made the transition.
AlliedSignal Aerospace Canada (ASACa) has succeeded. The company started out licence-building air-data computers for the CF-104. Today it holds world product mandates within AlliedSignal for aircraft power management and generation systems (PMGS), electronic temperature controllers and electro-optical (EO) sensors.
ASACa, which has sites in Toronto, Montreal and Prince Edward Island, expected 1998 revenues of almost C$380 million. Sales are 75% commercial and 75% export, says vice-president, business development, David O'Blenis. The PMGS business alone was expected to account for C$115 million in sales, more than double the 1996 level.
O'Blenis says the PMGS line, environmental control systems, EO sensors, missile control actuators and ice protection/detection products are ASACa's "engines of growth". The company is providing the complete electric power system for Bombardier's Dash 8Q-400 as a risk-sharing partner: "Our first systems integration win," he says.
ASACa has supplied elements of the electric power and actuation system for the Lockheed Martin X-33 reusable launch vehicle technology demonstrator as part of an AlliedSignal team providing the integrated system. O'Blenis says much of the technology demonstrated will be applicable to the Joint Strike Fighter.
In the missile actuation sector, ASACa is developing the fin and thrust-vector control system for the IRIS-T short-range air-to-air missile through Canada's participation in the six-nation, German-led programme. The company is also the Canadian industry partner in the 10-nation, US-led, Evolved Sea Sparrow missile programme, supplying the all-electric control actuation system.
Ice protection and detection is a new line of business for ASACa, and is based on two new Canadian-developed products: the electro-thermal ice-protection system (ETIPS) and contaminant/fluid-integrity measuring system (C/FIMS). The electrically heated ETIPS is used on the DC-9 and MD-80/90 to remove overwing ice, while the C/FIMS is being developed to detect ice and measure de/anti-icing fluid integrity. Target applications include the Bombardier Canadair Regional Jet.
ASACa received C$4.4 million in Technolo-gy Partnerships Canada investment to support ETIPS and C/FIMS development, and another $12.7 million towards work on the Dash 8Q-400 PMGS and a variable speed, constant frequency generator for large commercial aircraft. In late 1998 it received C$6.6 million from the TPC to help develop an advanced electronic system controller and and integrated power conversion and distribution system.
Leading in landing gear
Canadian Government support, and Bombardier's success, has helped develop Messier-Dowty (M-DI) into one of the world's leading landing gear suppliers. The company, part of France's Snecma Group, has plants in Toronto and Montreal. Sales were expected to reach C$100 million last year, having almost doubled over three years, and are projected to reach C$135 million by 2002.
M-DI supplies landing gear for several Bombardier types, the Airbus A330/A340, and the Boeing F/A-18 and Bell Boeing V-22. "Today, about 60% of our business is with Bombardier. Five years from now that could be 40%," says Allen Harvey, vice-president, business development. "We are on the Dash 8, but not the -400; the Challenger 604; the CRJ, but not the -700; and the Global Express."
The company is supplying the complete landing gear system for the Global Express as a risk-sharing partner. "This is our first integrated gear," says Harvey, adding: "We learned a lot of lessons from the Global Express. Integrating systems is not easy."
The experience helped win M-DI win risk-sharing contracts to supply the integrated gear systems for the Bell Agusta 609 civil tiltrotor and Raytheon Hawker Horizon business jet. The TPC invested C$3.5 million in the Horizon programme, which Harvey says "is bigger than the Global Express".
Messier-Dowty lost the CRJ-700 and Dash 8Q-400 gear programmes to Canadian rival Menasco, prompting the company to look further afield for business. "We have become a world leader in integrated systems, and not a supplier of landing gear only," Harvey says. "We cannot allow Bombardier to drive our business." The company sees its remit as supply integrated gear systems for aircraft up to 100 seats in size.
Boeing's presence in Canada has its origins in the military helicopter support operation in Arnprior, Ontario. Today, maintenance of the Canadian Forces' CH-46s accounts for only a small portion of Boeing's in-country business - the bulk is made up of aerostructures work for Boeing's Commercial Airplanes group and Douglas Products division.
Arnprior comes under Winnipeg-based Boeing Canada Technology, a "strategic manufacturing centre" which reports directly to Seattle. The operation is a major source of business for Canadian suppliers. Of the C$260 million in business handled by BoeingCanada Technology last year, C$170 was placed with outside suppliers, says president James Sawyer. Magellan Aerospace has been a major beneficiary, particularly its Winnipeg-based Bristol Aerospace division.
Boeing Canada produces aerostructures ranging from the 747 wing-to-body fairing to electronics trays for all models. The Winnipeg plant specialises in composites manufacturing, while the former McDonnell Douglas plant in Toronto makes wings for the 717, but may be closed when the work shifts to South Korea.
Boeing has failed to sell any aircraft in Canada for some time, civil or military, but Sawyer plays down the possibility that the company could withdraw work in retaliation. "Canadian suppliers are very reliable, high quality and provide on-time delivery. That's why Boeing continues to use them," he says.
Sawyer sees some weaknesses in the Canadian industry. "The biggest thing I see the need for in Canada is to bring back speciality processes like hydroforming, stretch forming and metal bonding," he says. The supplier base is also "one dimensional", Sawyer believes, making parts but not assembling or designing them. "The customer only wants to do value-added work. He wants to take the part and snap it on to the aircraft," he says.
The Canadian operation has to bid for work within Boeing, Sawyer says, but is then free to decide whether to build or buy the product. The company also has the expertise to participate in design-build teams at Boeing, he says.
While Canada spends most of its depleted defence budget on maintaining and upgrading its existing equipment, long-term support contractors are looking increasingly to commercial work for their survival and growth.
Spar pins its hopes for survival on growth in the maintenance and modification business. It plans to sell its Space Robotics division and restructure around its Aviation Services unit. "Spar is not exclusively an aviation services company," says president ColinWatson. The Aviation Services division more than doubled its revenues last year, to C$123 million, through internal growth and acquiring CAE Aviation.
Strategic vision
Renamed Spar Aviation, the Edmonton-based unit is a Lockheed Martin C-130 service centre, and is responsible for the Canadian ForcesCC-130 avionics upgrade programme. Spar Aviation Services (SAvS) also has sites at Calgary , CFB Trenton and Montreal, and is a 20% partner in IAMCO in Germany, which maintains NATO's Boeing E-3s.
"Spar's strategic vision is to be a worldwide services providers, not limited to the Canadian market and not concentrated on military business," says Spar Aviation's director of engineering, Gene Manzie. The company recently signed a deal to overhaul Canadian Airlines Boeing 737s, and has previously performed maintenance and upgrade work for airlines ranging from Aloha to WestJet.
The biggest programme under way at Edmonton is the avionics upgrade for 30 Canadian Forces' CC-130s. Production deliveries began last year and will continue to mid-2000. Based on this work, SAvS won a contract to upgrade five Royal Jordanian Air Force C-130s, and the company is currently bidding for similar work around the world. "We are looking forward to applying our experience to other military programmes," says Manzie.
SAvS also plans to apply the experience to civil upgrade programmes. "Our growth plan is to get away from a reliance on defence work. We are doing that," says Manzie. "We have been reasonably successful with airline heavy maintenance, but we are relative newcomers. We have to make ourselves better known."
Spar, meanwhile, is fighting off the attentions of IMP Group, which is interested in talking over the company. Halifax-based IMP Aerospace is the Canadian depot-level support contractor for the Lockheed Martin P-3 - matching Spar's role on the C-130 - and sees the company as a good strategic fit.
Smaller than either IMP or Spar, British Columbia-based Kelowna Flightcraft is carving a niche in the maintenance and modification market. Best known for its stretched, turboprop version of the Convair 580 - the 5800 - privately owned Flightcraft actually gets 60% of its business from operating Boeing 727s, Convair 580s and a Douglas DC-3 for Canadian package carrier Purolator.
Recently, it has stepped up its maintenance and modification work, converting Boeing 727s to freighters or installing the Dugan Air Quiet Wing Stage 3 kit. Military work includes an overhaul and avionics upgrade for the Canadian Forces' Lockheed T-33s. Based on this, the company won a Bolivian air force contract to upgrade 18 T-33s.
Michael Sizeland, engineering director, says Flightcraft is marketing the low-cost avionics upgrade worldwide. The same commercially based architecture is also being offered to upgrade other aircraft, beginning with the C-130. "We are always looking for markets others are not interested in," says Sizeland. "We offer a cost-effective upgrade."
The company has also working with Kazan Helicopters to upgrade the Mi-17 with Western commercial avionics. An aircraft has been upgraded and flight tested, but the project is stalled awaiting Russian funding.
At Abbotsford, British Columbia, is another company that is also making the transition from aircraft operator to maintainer and modifier. Conair Aviation is best known for its large fleet of specially modified firefighting aircraft, but in the last few years it has diversified into airliner maintenance, corporate aircraft refurbishment and engineering services. A major customer is Calgary-based low-cost carrier Westjet.
"Growth opportunities in firefighting are limited," says president Barry Marsden. "We had to focus on our strengths, which are high quality and on-time delivery. We were comfortable with maintenance and support so we moved into the third-party repair of turboprop aircraft, and from there into 737 maintenance," he says. Firefighting is now less than 40% of Conair's business. Much of the company's maintenance work is on Dash 7 and Dash 8 regional aircraft, for operators such as Horizon Air and for Bombardier, through its used aircraft trading unit. Conair refurbished six Dash 8s resold to Argentina's Southern Winds.
Bombardier's trading unit is the largest customer for Field Aviation, which has sites in Calgary and Toronto. In additional to maintaining and refurbishing Dash 8's, the company continues to support the out-of-production DHC-4 Caribou and DHC-5 Buffalo transports, and is gearing up to offer heavy maintenance on the CRJ. The Toronto site, meanwhile, specialises in avionics upgrades and special mission installations.
One of the most successful maintenance operations in Canada is Winnipeg-based Standard Aero. Specialising in the overhaul of small turbine engines, Standard expected to exceed revenues of C$360 million last year, sales having almost doubled in six years - half by acquisition and half by organic growth. The company operates worldwide.
Engines fuel standard
The company is an authorised service centre for a wide range of engines, including Rolls-Royce Allison 250 turboshafts, T56 and AE2100 turboprops and AE3007 turbofans and Pratt & Whitney Canada PT6 and PW100 turboprops. Standard also performs "unauthorised" work on Allied-Signal TPE331 turboprops and TFE731 turbofans at Alliance Engines in Tennessee, acquired in 1997.
Standard says it is the world leader in Allison 250 and T56/AE2100 maintenance, and number three in PT6 and PW100 support. The turbofan business is relatively new. Standard also has its eye on the General Electric CF34 powering the CRJ. Getting authorised by GE will be difficult, Walker says, "but we believe the market will prevail."
Elsewhere there are changes afoot in the Canadian aerospace industry. From the creation of a piston-engine manufacturing plant to the emergence of a new repair and overhaul provider, it appears to be a time of opportunity for many in the industry.
Vector Aerospace has been formed by the spinning off of Canadian Helicopters' maintenance operations into a publicly traded company. Vector includes Prince Edward Island-based Atlantic Turbines and British Columbia-based ACRO Aerospace, as well as Sigma Aerospace in the UK. The company has just completed its first acquisition, of US-based Helipro Group. Vector specialises in aircraft and helicopter engine and dynamic system support.
In London, Ontario, Diamond Aircraft is cranking out DA20 Katana all-composite light aircraft. Over C$100 million has been invested in the plant since 1994, and Diamond expected to produce over 200 aircraft last year. The DA20 is intended mainly for flying schools. A four-seater, the DA40, is under development in Europe and could enter production in Canada in 2000, says president Michael Slingluff. "We are not a flash in the pan," he says.
New products and new capabilities are beginning to emerge among the Canadian industry. In Montreal, wing forming specialist NMF has embarked on a strategy to become a complete wing supplier. The company forms wing skins for most of Bombardier's products, even producing those for the Global Express under subcontract to wing supplier Mitsubishi.
NMF is investing heavily in new equipment so that it can take on a larger role in wing production. It is already taking on assembly work, delivering fully joined skins with fittings and seals installed, and plans to acquire equipment for high-speed machining. "Our final goal is to be a wing manufacturer," says general manager Jeremy Artus. "We want to do the wing box as well and deliver a fully stuffed wing. A complete wing may be some years away, but the only limit is the speed as which we can move."
NMF exemplifies what industry leaders and Government officials want to see happening in Canada - a resolve to move up the capability ladder to meet the primes' demands and so keep more work in country. In the end, what counts is not only the total sales, but the percentage of Canadian content.
Gilles Roy, president of Montreal-based tube manufacturer Aerotech, sums it up: "Bell and Bombardier do not have a responsibility to the industry. It is we who must compete with quality, knowledge, pricing, efficiency and with an ability to understand the global business."
Source: Flight International
