Invest in Canada


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  • The bulk of this presentation is aerospace specific. The last few slides contain some generic messaging
    “Aerospace” is divided into “aircraft manufacturing and MRO” and space. There are also three slides specific to MRO.
    Slides 2-15 are “manufacturing and MRO”
    Slides 16-19 are MRO-specific
    Slides 20-23 are space
    Slides 24-27 are generic messaging
    This presentation is limited to civil aviation but in a few cases there are references to defence capability. There are also gray areas between “pure” civil and defence, mainly in areas such as security, border surveillance etc.
    It is public knowledge that the Jenkins report on Canadian innovation policies and practices has been submitted and that a major review of government aerospace support policy is underway. This may cause questions or hesitation. At this time (March 2012) the results of the review are expected by year end. The government did incorporate some of the Jenkins recommendations, at least partially, in the 2012 budget .
  • This introduces the section that addresses aircraft manufacturing and MRO.
    The intent is to emphasize four themes:
    Canada is a global player and has many of the international MNEs
    Canada’s industry-specific education and training system is sophisticated
    Canada’s R&D/innovation system is sophisticated. It links suppliers with higher tier customers, and includes student research and teaching within programs
    Canada is low risk. This is based on the belief that many companies are more risk averse due to various problems with their global value chains
    The photos are from top left clockwise:
    Bombardier CSeries
    P&WC engine
    CAE flight simulator
    Bombardier Global Express 6000
    Diamond Aircraft DA42
    Bell Helicopter 429
    Viking Air de Havilland Twin Otter 400 (now being delivered new)
  • The data are from Aerospace Industries Association of Canada (AIAC) and for FY2010
    The “diversity” message is an attempt to distinguish Canada’s clusters from other centres that are highly focussed on one or two market sectors. E.g. Seattle, Toulouse, Wichita. With such market volatility this is a risk mitigation factor for many investors. This is arguably why the industry held up quite well since 2008 and is growing again
    The emphasis on predominant civil output is based on the reductions in defence spending worldwide. However, it is also true that Canada’s defence industry has privileged access to US markets (including MRO that will grow as aircraft stay in service longer). The recent budget makes it difficult to say too much about Canadian defence opportunities, although again there is significant ongoing MRO business. For recent new acquisitions.
    ICAO:International Civil Aviation Organization
    IATA:International Air Transport Association
    National associations:AIAC, CADSI
    Regional associations:Pretty much all the provinces have an association. The two largest are AQA in Quebec and OAC in Ontario. In Quebec Aero Montreal is managing the overall cluster and there might be some future related changes concerning AQA.
  • This is a summary. Education and training and innovation/R&D are described later.
    The bilateral airworthiness agreement with the US is very important because many “approvals” are given automatically on a reciprocal basis and the implementation mechanisms are well-proven.
    One arguable weakness in R&D is the limited government funding for “high Technology Readiness Level” activity that takes place immediately before commercialization. This is an increasingly important requirement for risk mitigation because of all the problems the industry is experiencing introducing new technologies. Changes announced in the 2012 budget may include some additional funding in this respect, but details remain to be determined.
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    Quebec, and the Montreal cluster, has the largest aerospace concentration in Canada . However, it is important to note that there is significant capability elsewhere.
    In Eastern Canada, which we call the Maritimes, the focus is defence industry because of military bases there, both naval and naval aviation
    The province of Ontario is the second largest concentration after Quebec. It has Tier 1 companies in landing gear and aircraft systems and a strong manufacturing base. It also has a substantial automobile industry including Toyota and factories. Some automobile suppliers are attempting to supply to the aerospace industry. The Bombardier factory is responsible for the Dash 8 turboprop airliner family and for final assembly of the Global Express. MHI has a factory that supports its Global Express wing assembly work.
    The province of Manitoba has a composites materials focus. One of the companies is Boeing. It is also the home of Standard Aero, one of the largest independent engine MRO companies in the world.
    In the provinces of Alberta and British Columbia, the focus is on Maintenance, Repair and Overhaul for military and civil markets and there is also aerostructures capability. Alberta emphasizes UAS
  • There are many other capabilities in all the regions but this tries to give some idea of the balance.
    In reality, the Eastern provinces are mainly defence with the exception of the MRO cluster at Slemon Park in PEI
  • There are many other capabilities in all the regions but this tries to give some idea of the balance.
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    This is an attempt to show that Canada really is a global centre with many of the leading MNEs
    Emphasizes that it has strong presence f4rom both US and Europe and that Japanese companies are coming here (this is relatively new phenomenon)
    Note that the Canadian activities of some of these companies are predominantly defence.
  • Liebherr:CSeries landing gear assembly, Quebec
    UTC/P&WThe PurePower assembly site and all P&W flight test activity at Mirabel, Quebec
    LATecis:Electrical systems engineering initially to support the CSeries
    GE Canada and DAE:DAE is Dubai Aerospace Enterprises which owns StandardAero. This is a new testing facility in Winnipeg, MB
    DEMAAn Italian company. The current presence is quite small (engineering for CSeries) but might grow
    GLACIER Major facility in Thompson, Manitoba. MDS Aero Support is a Canadian specialist in engine testing
    SafranExpansion of Messier-Bugatti-Dowty landing gear manufacturing in Quebec. R&D is with researcher in Ecole Polytechnqiue. This is an MNE investing in R&D here.
    MHIExpansion of Ontario facility (wings for Global and Challenger 300)
    SPPNew investor. It specializes in hydraulic actuation systems. Ontario
    Thales CanadaExpansion of operations in Quebec
    GE AviationSubstantial expansion of plant in Granby, Quebec
    Ultra ElectronicsUK company. This investment is in Montreal Quebec. Ultra also owns a facility in Nova Scotia
  • This attempts to summarize the key elements of government support with emphasis on education and training, innovation/R&D and the business tax environment.
  • Data from AIAC
    CCAA is the former Canadian Aviation Maintenance Council (CCAA). Its funding sources include HRSDC.
    There is an extreme shortage of experienced people globally and Canada is no exception. CCAA’s survey that was commissioned by DFAIT indicated that although overall vacancy rates are low in the companies, there are unfilled needs in engineering. This is pure supply and demand, but we should not claim to have all the answers; it is a global challenge. What we do have is a large industry-specific education and training system that is producing a lot of people (next slide). They then must acquire experience in industry.
    Of course implementation of education and training is essentially in the provincial jurisdiction.
    There is not much specific on youth outreach. However Aéro Montréal has launched ÈThe sky is the limit” science presentations that aim to demystify aerospace and promote careers in the sector among Grade 5 and 6 students. 
  • Data from CCAA study and survey performed for DFAIT, March 2012
    The important university engineering numbers were not split out because they are concentrated in Quebec and Ontario. The leading universities with aerospace programs and focus include:
    Quebec: École Polytechnique, ÉTS, McGill, Concordia, Sherbrooke, Laval
    Ontario:Carleton, University of Toronto, (UTIAS), Ryerson, Western Ontario
    At undergraduate level, some of these universities provide mechanical engineering with aero option in 4th year. Some provide “aerospace engineering” undergraduate programs include École Polytechnique, McGill, UTIAS and Carleton.
    Other universities specialize in technical areas very pertinent to aerospace, mainly mechanical/structures
  • SADI
    In the 2012 budget SR&ED has been somewhat diluted in favour of direct support to industry. The details of the latter are TBD. This responds to some degree with recommendations in Jenkins report
    In the 2012 budget IRAP funding was increased.
    CRN is recent and does not have a Website, but it is based in University of British Columbia. It is multisectoral (as is CIC) but there is strong aerospace content in both organizations.
    CCMRD is aerospace-specific and Boeing is a member. It includes members from across Canada.
  • MRO is very diverse. It is thus not possible to identify specific messaging at this very high level. Thus the information is general in nature and describes the Canadian industry. There would then need to be customized information, depending on the interests of the potential investor.
    At the time of writing (March 2012) the closure of Aveos is obviously creating negative publicity. It is complex to say the least but probably does indicate that Canada must focus on developing the higher value added areas in which it is strong in FDI rather than airframe maintenance which is very labour intensive.
    That said, Canada has substantial airframe maintenance capability and some trends are encouraging such work to be done closer to the operator/customer. The main driver is the increased cost of fuel for ferry flights, but other factors are the cost of managing remote suppliers and the recent history of poor schedule performance by service providers in many parts of the world.
  • Many higher tier Canadian MRO companies rely heavily on US customers. The reality is that the domestic market is quite limited. Overall, it is fair to say that Canadian quality is well-respected in the United States.
    The helicopter fleet is very large and Canadian operators are well known worldwide.
    The business jet fleet is significant, (around 350 aircraft) but the presence of Bombardier Aerospace is also a major draw.
  • GLACIER is in Thompson, Manitoba
    The aircraft is a Bombardier CRJ. These aircraft are used in both regional airline and corporate configurations (some converted) and there is a lot of related Canadian capability.
    The US regional airline industry is hurting very badly and contracting and this is a negative factor for Canadian companies in that business sector.
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  • Photos from top left clockwise:
    The MOST satellite. A very low cost and effective smallsat used for measuring oscillations in energy from the sun. It is a form of space telescope. It is in operation.
    Canadarm (on ISS) with Dextre in the top right corner
    Radarsat II (in operation)
    This is NASA’s Far Ultra-Violet Spectroscopic Explorer (FUSE) satellite. The Canadian Space Agency provided two fine error sensors (FES).
  • From an FDI perspective space is a challenge. This is because in many areas programs remain “national” and thus investment opportunities are limited.
    The areas where there might be some interest are mainly the value-added services in relatively “commercial” areas such as telecoms, geomatics and to some degree remote sensing.
  • NASA:National Aeronautics and Space Administration
    ESA:European Space Agency
    JAXA:Japan Aerospace Exploration Agency
    ISRO:Indian Space Research Organization
    Note that Honeywell acquired EMS Systems (headquarters in USA) in late 2011 and this included their Ottawa area satcom buisness.
    See the space backgrounder document for a listing of some of the other (very capable) companies.
  • Some larger companies might see opportunity to establish operations in Canada to directly access some of the “applications” available here. However, this is a complex environment with massive investments.
    SAR: Synthetic Aperture Radar.
    EO:Earth Observation
  • These slides are a list of the primary generic messages.
    The supporting statements are from Think Canada, February 2012
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  • Invest in Canada

    1. 1. Click to edit Master title style Civil aerospace investment case Presented by: …. ………………….
    2. 2. The Canadian civil aviation industry landscape
    3. 3. Canada’s aerospace industry is a recognized global leader • • • 5th largest in the world: $22 B in annual revenues, over 80,000 employees Exports 80% of output Civil revenues 90% of total • Complete tier coverage in regional and business aircraft, helicopters, gas turbine engines and landing gear • Critical mass of diverse suppliers located in regional clusters – Regional clusters serve multiple market subsectors, reducing market risk in volatile times • Resilient through the fiscal and economic crisis •Network of national and regional industry associations • Headquarters of ICAO, IATA and Airports Council International
    4. 4. Canada’s industry is a recognized global leader • Structured approach to industry-specific education and training • Regular consultations on industry needs and adjustments to delivery infrastructure – Contemporary collaborative R&D structures: – Supplier-customer linkage – University and government researchers and resources – – – – Student research includes industry experience Strong environmental focus Substantial industry investments Strategic subjects such as composite materials and health management • Longstanding industrial and regulatory integration with United States • Civil aviation focus: strong long-term growth forecasts • E.g. Boeing forecasts delivery of more than 33,000 new air transport aircraft in next 20 years
    5. 5. Distinctive regional clusters Eastern provinces Québec Ontario Western provinces MDA – earth observation Avcorp – aerostructures Atlantic Turbines – gas turbine MRO Magellan Aerospace – airframe, space systems Standard Aero – engine MRO Asco Aerospace – aerostructures EADS Vector Aerospace– helicopter R&O Cascade Aerospace– airframe MRO Slemon Park - MRO cluster Boeing Canada – composites P&WC engines P&WC - engines P&WC - engines General Dynamics Canada – defence electronics Messier Bugatti Dowty, Goodrich – landing gears Magellan Aerospace – engine parts & R&O CAE, Mechtronix - training and simulation COM DEV – satellite payload subsystems Northstar Aerospace – gears and gear assemblies IMP – MRO Turbomeca Canada – Engine R&O Honeywell Canada – ECS, electrical power Thales – avionics Bell Helicopter – civil helicopters Bombardier – regional and business aircraft Héroux-Devtek – Landing gear CMC Electronics – Avionics Roll-Royce Canadaengine MRO GE Canada - Engine components
    6. 6. The four regional clusters have world class capabilities • Eastern Canada New Brunswick, Newfoundland & Labrador, Nova Scotia, Prince Edward Island – – – – Defence systems in-service support Composite aerostructures Engine components Civil MRO cluster • Quebec – – – – – – – – Aircraft, helicopter and engine OEMs Flight simulation Modelling and simulation Avionics systems Large supplier base with many specializations Aircraft modifications and MRO Satellites and satellite subsystems Hub of international collaborative R&D
    7. 7. The four regional clusters have world class capabilities • Ontario – Aircraft OEMs – – – – Landing gear and electrical integrators Aircraft and engine components: metal and composite Hub of Canadian space industry: robotics, applications Aircraft modifications and MRO • Western Canada Alberta, British Colombia, Manitoba, Saskatchewan – Composites materials and manufacturing – Manufacturing, inspection, repair – – – – Aerostructures integration and manufacture Unmanned Aircraft Systems (UAS) Space applications Remote sensing, geomatics – Helicopter MRO
    8. 8. Globally connected industry Several of the foreign-owned MNEs have world product mandates Canada Japan United States Europe
    9. 9. Recent high-value investments • • • • • • • • • • • • • Liebherr Group Landing gear UTC/Pratt & Whitney (P&W) Engine flight test and assembly Latécoère/LATecis Electrical systems GE Canada & DAE Engine testing Dornier Seaplane Company Amphibious flying boat DEMA Aeronautics Engineering, structural subassemblies Rolls-Royce & P&W Icing testing (GLACIER with NRC and Safran GroupLanding gear manufacture, composites R&D Mitsubishi Heavy Industries Aircraft structural subassemblies Sumitomo Precision Products Aircraft systems Thales Canada Aircraft digital control systems GE Aviation Engine manufacturing, robotics centre Ultra Electronics Development of new tactical radio systems MDS)
    10. 10. Government support and collaboration with industry
    11. 11. Structured approach to meeting industry’s manpower needs • Regular national and regional industry consultations – Includes all employment categories: – Production, technician, technologist, – engineer, scientist. • Canadian Council for Aviation and Aerospace (CCAA) is a dedicated national organization – Covers both manufacturing and MRO – Labour market information – Development and management of occupational standards – Training program curricula and accreditation • Supported by regional organizations with local focus – E.g. CAMAQ (Quebec), Ontario Aerospace Council (OAC) • Graduate and post graduate research and work experience embedded in collaborative R&D programs • Regionally-tailored youth outreach programs
    12. 12. Large number of industry-specific education and training establishments • Distributed across the country: responding to regional needs – Around 200 graduates each year from aerospace engineering programs and around 2,000 students enrolled in 2010 and 2011 • Ten universities with aerospace focus – Aerospace engineering and mechanical engineering with aerospace specialization – Formal linkages between teaching, research and industry internships • Graduates from technical college aerospace programs in 2011: West 485 Ontario 440 Quebec 475 East 100 Total 1500 • Complemented by non industry-specific technical programs followed by industry training – Electronics, NDT, machining, sheet metal, metallurgy, engineering • Industry-specific business and management courses • Skills upgrading and continuous education programs
    13. 13. Coordinated support for innovation: infrastructure and strategies • Government laboratories and researchers with broad coverage – National Research Council (NRC) Institute for Aerospace Research – Aerodynamics, flight research, Structures and materials, propulsion, aerospace manufacturing – NRC Industrial Materials Institute (IMI) – Includes materials processing, non-destructive testing • Technology insertion roadmaps – Industry Canada/NRC and industry – E. g. Composites, coatings, cabin interiors, health management • Future Major Platforms Initiative – Industry-government joint activity to identify key capabilities and technologies required for future aircraft platforms • Networks of Centres of Excellence – Linking university researchers with private, government and not-for-profit sectors • MITACS, a federally funded not-for-profit research organization – Domestic and international research internship programs
    14. 14. Comprehensive support for innovation: support programs • Comprehensive set of support programs for all segments of the industry Program Strategic Aerospace and Defence Initiative (SADI) Industrial Research Assistance Program (IRAP) Managed by Industry Canada National Research Council Scientific Research and Canada Revenue Agency Experimental Development (SR&ED) Natural Sciences and Engineering Industry Canada Research Council (NSERC) Foreign Affairs and International Export marketing support Trade Canada (DFAIT) Export Development Canada (EDC) Canadian Commercial Corporation (CCC) • Crown Corporation reporting through DFAIT Crown Corporation reporting through DFAIT Purpose Repayable contributions to Canadian aerospace and defence companies Innovation assistance for SMEs. Includes advisory services, funding for innovation, networking and youth employment Income tax credits and refunds for expenditures on eligible R&D activity in Canada Funding for university researchers A range of advisory services and programs for industry Export credit agency. Financial services and small business solutions to Canadian companies. Support to Canadian direct investment abroad and investment into Canada. International contracting and procurement agency Complemented by Provincial support programs customized to regional needs
    15. 15. Collaborative R&D initiatives • Focus on: – Civil aviation; economics and environment – More efficient processes for high value activities – International collaboration • Green Aircraft Research and Development Network (GARDN) – Business-led network of centres of excellence – Collaborative R&D projects focussed on environment – Recent MOU with Air Transport Advisory Group (ATAG) • CRIAQ – Based in Quebec, includes researchers from across Canada – Collaborative R&D, embedded training and supply chain matching – International collaborations • Composites Innovation Centre (CIC) – Based in Manitoba, collaborative R&D – Manages Canadian Composites Manufacturing R&D (CCMRD) • • Composites Research Network: Based in British Columbia CANNAPE: Increase engagement between Canadian and EU aeronautics R&D communities
    16. 16. Maintenance, Repair and Overhaul (MRO) Maintenance, Repair and Overhaul (MRO))
    17. 17. Canada’s industry is large and diverse • $5.5 B revenues: 20% of total Canadian industry (civil and military) • Key strengths include: – Gas turbine engine MRO (all types and thrust ranges) – Business and regional aircraft MRO and modifications – Interior refurbishments and reconfigurations – Special mission modifications – Helicopter MRO and modifications – Landing gear MRO • Privileged access to U.S. market – Longstanding industrial relationship – High level of harmonisation in bilateral aviation safety agreement • Internationally respected safety and quality regime • Large fleets of helicopters and business aircraft – Second largest helicopter fleet in the “Western world” after USA
    18. 18. MRO capability is distributed across the country • East: Civil cluster: airframe, engines and engine components • Quebec: Airframe, business aircraft MRO and modifications, landing gear, engines • Ontario:Airframe, landing gear, special mission modifications, components • West: Gas turbine engine, narrowbody airframe, helicopter GLACIER engine testing facility in Manitoba. RollsRoyce, P&W, NRC and MDS Canada specializes in regional and business aircraft MRO and modification
    19. 19. A selection of Canadian MRO companies Area Business and regional aircraft airframe maintenance Narrowbody airliner airframe maintenance Selection of companies Premier Aviation, Jazz Aviation, Innotech Aviation, Discovery Air, Avmax, Skyservice Premier Aviation, Cascade Aerospace, Kelowna Flightcraft, Air Canada, Westjet Gas turbine engine MRO P&WC, Rolls-Royce Canada, Safran-Turbomeca, Standard Aero, EADS-Vector Aerospace, MTU Maintenance Canada, Magella-Orenda, CHC-Helipro, MDS Aero Support Landing gear MRO Business and regional aircraft interiors and special mission modifications Helicopter MRO and modification Component MRO Goodrich, Héroux-Devtek, Safran/Messier-Bugatti-Dowty Field Aviation, Innotech Aviation, Flying Colours, Tronos, Goderich Aerospace EADS-Vector Aerospace, CHC-Helipro, Bell Helicopter Textron Canada, Discovery Air Honeywell, L-3 CMRO, Avianor, Avcorp-Comtek, Navhouse Canada, Goodrich, Precision Heliparts Technical training CAE, Mechtronix, NGRAIN, Appendix/Eduplus, Simgraph IT-based Infrastructure AV&R Vision & Robotics, Creaform, Mxi Technologies, Boeing/Aeroinfo, AMS/Flygt, Star Navigation, Appendix/Sonovision This list is representative only
    20. 20. Canada’s space industry
    21. 21. Canada has several globally-competitive capabilities • Robotics and vision systems – Canadarm/ISS – Planetary exploration • Satellites and their subsystems – Telecommunications payloads – “Smallsats” • Radar-based earth observation – Radarsat family • Value-added downstream services – Earth observation – Geomatics – Telecom services
    22. 22. A selection of Canadian space organizations • Canadian Space Agency (CSA): – Manages national space priorities with other departments – Supports industrial development and competitiveness – Manages international relationships e.g. NASA, ESA, JAXA, ISRO • • • • • • • • MDA: Earth observation, satellites, antennas, robotics Telesat: Owner and operator of communications satellites ComDev: Satellite subsystems and components Neptec: Vision systems Magellan Aerospace: smallsats, solid propulsion, sounding rockets L-3 MAPPS: Modelling and simulation of space systems Honeywell –EMS: aircraft satcom systems Large number of world class SMEs in niche areas
    23. 23. Canada is application rich • • • • • • • 2nd largest landmass in world Longest coastline in world Large Arctic territory and impact of global warming Low population density and remote communities Increasing demand for support to natural resources industry Defence needs: domestic and international joint operations Canada was early adopter of space-based applications – Mature applications environment – 3rd nation in space with Alouette 1 comms satellite – 1st domestic satcomm system (Anik, 1972) and direct to home satellites (Hermes, 1976) – Radarsat-1 was 1st fully operational SAR radar EO satellite
    24. 24. Canada as an investment destination
    25. 25. Canada is an ideal platform for an advanced aerospace industry • Ranked “Best Country for Business” of 134 countries in 2011 by Forbes Publishing • Excellent foundational education and training system – Canada has the highest % of individuals Aged 25-64 having attained PostSecondary Education in top 10 OECD Countries • Resilient and diversified economy – Canada ranks 1st in G7 in likelihood of economic prosperity in 2020 (Potential Prosperity Index) • World’s soundest banking system – Ranked first amongst 142 countries by World Economic Forum • Cost-competitive location: Leads the G-7 • Favourable business tax environment – Second lowest statutory corporate tax rate in the G-7 – Tax credits and accelerated deductions for R&D
    26. 26. Canada is an ideal platform for an advanced aerospace industry • High quality of life and standard of living – Inclusiveness, diversity, safety, cost base – Canada ranks highest in the G-7 and second among the 34 OECD countries in overall living conditions and quality of life. – Highest public reputation ranking among 50 developed countries by Reputation Institute – Trust, Esteem, Admiration, Good feelings • Globally connected – – – – World class transportation and ICT infrastructure Multicultural population with extensive international linkages Strategic location for aerospace MNEs Suitable as hub for aerospace global value chains
    27. 27. Canada is an ideal platform for an advanced aerospace industry • Duty free manufacturing tariff regime – Tariffs on all manufacturing inputs removed by 2015 • Accelerated (50%/straight line) depreciation schedule for manufacturing inputs • Access to NAFTA market – United States, Mexico Canada • Canada ranked 3rd in the G-7 and 14th in a 110-country study measuring innovation by Boston Consulting Group • Canada ranks first in the G-7 in terms of the availability of qualified engineers in its labour market. – IMD World Competitiveness Yearbook
    28. 28. Canada is an innovative, internationally connected, export oriented, low risk choice for high value-added aeronautics and space industries