AIAC identifies federal supports needed to save aerospace sector

As the COVID-19 pandemic wreaks havoc on the global airline industry, Canada’s aerospace companies want the federal government to use its powers of procurement and other policy tools to help save a $25-billion domestic sector that employed nearly 215,000 people before the pandemic hit.

“The impact of COVID-19 on Canada’s aerospace industry has been unprecedented. The consequences of aircraft being grounded cascade down to our industry – to original equipment manufacturers (OEMs), maintenance, repair and overhaul workers (MRO) and ongoing work relating to Canada’s assets in space. With longer lead times in supply chain slowdowns, the devastating economic effects of this crisis are going to reverberate across our industry for years to come,” Mike Mueller, senior VP of the Aerospace Industries Association of Canada (AIAC) said in a June 2 release.

A recent survey found that nearly all AIAC member companies (95%) are operating at partial capacity or have shut down. More than half (60%) have laid off workers and 76% anticipate more to be let go in the next six months. Overall, the Canadian industry is anticipating a 40% decrease in revenue this year as a result of the coronavirus pandemic.

The aerospace sector is also one of Canada’s biggest R&D spenders, contributing nearly $1.8 billion or 35% of the country’s total manufacturing R&D investment in 2018, according to AIAC’s 2018 report on the State of the Aerospace Industry.

In a six-page letter to Prime Minister Justice Trudeau and Innovation, Science and Industry Minister Navdeep Bains, the AIAC urges immediate action on six recommendations, including its repeated call for the federal government to recognize aerospace as a strategic sector in urgent need of a long-term sectoral strategy – a recommendation echoed in a recent study by the Institut du Québec.

“Protecting our position, and our industry’s $25 billion annual GDP contribution, requires the same political leadership and corporate foresight of the postwar years when Canada first started to build its aerospace capabilities. The commitment we made as a nation then to be a leader is needed again today,” AIAC president Jim Quick wrote.

The recommendations are:

1. Develop a pragmatic and proportional plan to allow people to begin flying again. The AIAC wants to work with the federal government to establish a task force of stakeholder associations “on how to reinstate safe, socially responsible travel that includes the adoption of new technology”.
2. Adapt Canada’s job retention program and liquidity measures to support employees in industries that will take longer to recover. Tapping into Canada’s Emergency Wage Subsidy (CEWS) is a big ask for the industry, which warns of even greater losses for its sector over the coming months due to long lead times for MRO activities and manufacturing supply chains. Multi-year wage subsidies programs have already been adopted in competitor countries such as Germany and France.
3. Rapidly expand government support for green technologies to enable the decarbonization of key sectors, particularly transportation and aviation. This would represent a continuation of efforts to develop technologies in areas such as robotics, simulation, artificial intelligence and advanced materials that reduce fuel consumption. In June 2019, Minister Bains announced $49 million from the Strategic Innovation Fund for a new Aerospace Innovation and Research Network and while nothing publicly has been said about the initiative since that announcement, Mike Mueller recently told Research Money that work continues with ISED on the terms and conditions for the new network.
4. Establish a new long-term investment bank to support and foster essential manufacturing supply chains through the market transformation ahead. AIAC envisions investments to develop next-generation technologies, grow future-facing markets, strengthen supply chains and develop a critical mass of innovative companies.
5. Advance public procurement projects, particularly in defence and space projects, to help stimulate and sustain high-tech supply chains through the difficult months ahead. Specifically, the AIAC is looking for predictable and stable defence funding to ensure companies have a more reliable cash flow to keep operations running.
6. Establish a Canadian sector strategy for aerospace that includes civil, defence and space. In its Vision 2025 report, the AIAC identified several key strengths that Canada can build on, including green technology, MRO, accelerated digital transformation and workforce development. “Our association has a plan and industry members are currently working on policy options. We need the partnership of the Government of Canada to make that plan a reality,” Quick noted in his letter.

The AIAC also reiterated the need to focus on the six priorities set out in its Vision 2025 document:

1. Increase support for the world’s most skilled workforce
2. Ensure small and medium-sized aerospace businesses thrive and grow
3. Use innovation to capture new opportunities, including carbon-neutral flight and unmanned vehicles
4. Invest to maintain Transport Canada’s internationally recognized status for aircraft certification and regulation
5. Maximize Canada’s leadership at the forefront of space
6. Maximize defence procurement and government partnerships to drive new industrial growth

“We have heard much in the way of general government support for the Vision 2025 document, but little in the way of solid long-term thinking to achieve our mutual goals. We need to move from agreement into action,” Quick added.

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