But Conference Board Of Canada Says Inventory Of Used Airplanes Remains High

Demand for new aircraft appears to be on the rise, which will provide a boost to Canadian production over the next four years, according to The Conference Board of Canada's Industrial Outlook: Canada's Aerospace Industry-Spring 2013.

"Demand has been soft for years, due to the uncertainty in the world economy. But the new-order books are starting to look better, partially the result of rising orders for the CSeries, Bombardier's upcoming aircraft, and renewed strength in the demand for high-end business jets," said Maxim Armstrong, Senior Economist. "It will take years for the industry to fully benefit, but production is beginning to accelerate."

According to the report, the modest pace of global economic activity has limited demand for air cargo or passenger services. Furthermore, the inventory for used aircraft remains high, which weakens demand for new production. A few large orders last year and accumulating orders for Bombardier's CSeries have improved the Canadian industry's order book. However, most orders are spread over a long period of time, so the short-term impact is small.

High oil prices can help aerospace manufacturers promote new, more fuel-efficient aircraft. But low oil prices can reduce pressure on buyers to renew their fleets.

As of April, the industry's backlog of orders had reached $38.5 billion, surpassing its pre-recession peak. However, these orders will have a modest effect on overall production in the short term. Annual production is not expected to increase until next year, and the industry will not exceed its 2008 production levels before 2017.

Industry revenues can be very volatile depending on when aircraft are shipped and the industry's recent performance is no exception. Despite the improving order book, sales actually dropped 0.5 per cent in 2012 as shipments fell in the closing months of the year.

Sales declined again in the first few months of this year. As a result of the weak start to the year, 2013 will see a second consecutive year of declining revenues. However, sales will begin to improve in 2014, as the CSeries moves into production and deliveries of other aircraft accelerate.

(Artist's rendering of CSeries aircraft provided by Bombardier)

FMI: www.conferenceboard.ca