Canadian Aerospace Sector Sees 2009 Profit

Canada's aerospace industry is forecast to post a profit of CAD$620 million (USD$539 million) in 2009, cushioned from the recession by a big backlog of orders, the Conference Board of Canada said in a report Friday.

Despite a sharp drop in demand for business jets, the order backlog for aerospace companies such as Bombardier and CAE is equal to nearly two years of production work, the report said.

In the face of falling demand and tight credit markets, airlines are grounding planes, cutting capacity, and delaying or canceling orders.

Aerospace industry profits, which fell to CAD$592 million in 2008, are seen as relatively stable over the next two years and then growing an average of 3.3 percent annually from 2011 to 2013, the Conference Board report said.

Profit margins, which dropped to 2.7 percent in 2008, are expected to remain slim, averaging 3 percent annually over the next five years.

Production is forecast to slow in the next two years, but output will still outpace the rest of the manufacturing sector, the organization said. After an increase of more than 10 percent in 2008, production growth should slow to 1.7 percent in 2009 and decline slightly in 2010.

The value of unfilled orders dipped slightly to CAD$38 billion in March 2009 from CAD$39 billion in November 2008, the report said, citing Statistics Canada data.

"The industry can afford some cancelations and still weather the storm for many more months even without new orders," the report said. But companies will need to control costs to navigate difficult conditions.