KPMG Overview of the Canadian Aerospace Sector

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  • So where does the Canadian aerospace industry fit? Canada ‘s aerospace sector ranks 5th in OECD countries in terms of revenues and in contribution to GDP. Canada’s 700 aerospace firms generate direct annual revenue of $22 billion and a total of $42 billion across multiple supply chains in Canada. Employment includes 130,000 direct and indirect jobs and over 170,00 total FTEs (according to a joint Report on the State of the Canadian Aerospace Industry – released by the AIAC and the Canadian government through Industry Canada) 80% of what is produced in Canada is exported with 35% going to the US and 45% going primarily to Europe and Asiae Canadian Aerospace industry currently fit.
  • Aerospace is a somewhat regionalized sector – on the manufacturing side. 60% is in Quebec primarily in the Aero Montreal cluster which includes over 230 companies including 4 major OEMs: Bombardier, Pratt and Whitney, CAE and Bell Helicopter. But just under 30% of our aerospace manufacturing in the Ontario particularly in the Toronto or Downsview cluster again including Bombardier (Global Express and Q400 turbo prop), as well as UTC, Messier-Bugatti-Dowty, Honeywell and Magellan. The remainder of the manufacturing sector is in our Eastern (Atlantic) and Western provinces – so the rest of Canada.MRO (maintenance, repair and overhaul) for aerospace is somewhat difference with 50% of the activity taking place in Western Canada, while Ontario and Quebec are at around 20% each and the remaining 105 of activity taking place in Atlantic Canada.I should also mention that in Canada the Defence sector plays an important role in the aerospace industry. The federal government has been addressing some major procurement challenges including the replacement of our aging maritime helicopters, reconsidering our National fighter jet procurement, and preparing for fixed wing search and rescue aircraft, just to name a few. The recent focus, and again the work of a review panel (Jenkins), has been on addressing areas in which Canadian companies have key industrial capabilities. The federal government is still reviewing this Jenkins report, but it is expected that it will lead to opportunities for those companies who demonstrate the requisite competencies.
  • The PUBLIC POLICY ENVIRONMENT - Aerospace is viewed as a priority or strategic sector but there are also challenges, as global trends are dramatically changing the competitive landscape. Success depends on developing the technologies of tomorrow and securing sales in a highly competitive global arena – aka aerospace companies need to be ‘innovative’. This competition includes the globalization of the aerospace supply chain, with OEMs shopping the world for systems and components, and potentially reducing the number of suppliers along the way. While private sector aerospace companies will ultimately drive competitive leadership in the new global economy it should be noted that public policies and programs can play a critical role in facilitating this success. The federal government recognized this and announced in 2011 that a major sector review would be undertaken, which was completed at the end of 2012 and is known as the Emerson Report. The Report made a number of key recommendations designed to help strengthen various areas of the aerospace and space sectors including innovation, supply chains, market development, skills development, procurement, and capacity.The strength of the Canadian ECONOMY enables us to enjoy some of these targeted programs in an era where budget cuts are the norm. Canada‘s economic performance stands out among advanced economies. Amongst the G7, Canada enjoyed the top GDP growth over the past 10 years, the fastest employment growth in last 2 years, and lowest net debt to GDP ratio. The forecast is that our budget is on track to be balanced by 2015-16. On the financial sector side, no Cdn banks failed during the 2008 crisis. Based on KPMG’s Competitive Alternatives study, Canada’s overall costs of doing business are third lowest in the G7 (after UK and Netherlands, although currency devaluation played a role). In the specific Aerospace subsector review, our report found that the overall cost of doing business in Canada was 2nd only to the Netherlands.(Need a transition statement here – something around how our report backs up the concept of the importance of innovation for Canadian manufacturers)
  • The Canadian Manufacturing Outlook 2013 is a Canadian publication based on research conducted by KPMG in Canada. It discusses the key challenges faced by manufacturing executives, makes comparisons to their global counterparts, and offers valuable suggestions for effective competition on an increasingly global manufacturing stage.
  • What Canadian aerospace manufacturers are doing to drive innovation and growth:Innovation drives growth both in Canada and globallyCompanies need to move from single-sourced to multi-sourced supply to better manage supply chain risksThe need for a skilled labour force to drive growth and manage the supply chainDevelopment of/in an industry-government partnershipBe ready for future developments both locally and globally
  • KPMG Overview of the Canadian Aerospace Sector

    1. 1. Overview of Canadian Aerospace Sector NBAA 2013 October 22, 2013 Grant McDonald
    2. 2. Introduction Grant McDonald Partner Aerospace & Defence Industry, Sector Leader gmcdonald@kpmg.ca 613 212 3613 © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. 1
    3. 3. Overview • Canadian Aerospace Industry – 5th largest in OECD • Key capabilities – Manufacturing, MRO, Other • Clustered by Regions of Canada: • Ontario/Quebec/Other • Fiscal environment: • Strong Economy/Banking/Tax/Incentive programs • Public Policy environment: • Helps foster innovation © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. 2
    4. 4. The Canadian Aerospace Industry
    5. 5. The Canadian Aerospace Industry Manufacturing MRO Quebec Quebec Ontario Ontario Rest of Canada © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. Western Canada Atlantic Canada 4
    6. 6. The Canadian Aerospace Industry Factors influencing the industry in Canada • Public policy environment • Canadian Economy © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. 5
    7. 7. Canadian Manufacturing Outlook 2013 © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. 6
    8. 8. Canada’s Aerospace Sector: Driving Growth Through Innovation 1. Innovation drives growth both in Canada and globally 2. Companies moving from single-sourced to multi-sourced supply 3. Skilled labour force © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG CONFIDENTIAL. 7
    9. 9. Thank you KPMG CONFIDENTIAL The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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