Bombardier recently secured an order for $1.9 billion worth of business jets at the Paris Air Show. (Photo: Bombardier)
TORonTO – A recent report from BMO Capital Markets examining the North American aerospace industry suggests the sector should look to emerging markets like China and the United Arab Emirates (UAE) to secure new business.
While growth is expected to stay moderate in North America, the new markets represent a valuable opportunity for growth.
Aerospace exports to developing economies have grown significantly over the past two decades, said Aaron Goertzen, Economist, BMO Capital Markets.
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U.S. producers have a slightly stronger foothold in developing markets than their Canadian counterparts, but Canadian firms are also benefitting from the export of U.S.-assembled aircraft containing Canadian-made components.
The growth in the Chinese market, and focused efforts by the UAE to become an air travel hub, represent the opportunity, but emerging-market producers could challenge Canada and the U.S. for that business.
The U.S. and Canada are beginning to see more aggressive competition from emerging-market producers, who are becoming more effective at challenging advanced-economy producers on their home turf, said Goertzen.
Worldwide though Canadian and American producers hold a large portion of global aerospace revenue.
Canada is ranked the fifth-largest global aerospace producer while the North American industry accounts for $200 billion in annual revenue.
Air travel and freight is expected to grow in 2013 as are orders for corporate aircraft. In fact, Bombardier recently secured an order for $1.9 billion worth of business jets at the Paris Air Show.
Corporate aviation is highly cyclical, and were starting to see some real momentum, said Joe DiLallo, Vice President & Director, Corporate Aircraft Finance, BMO Harris Bank.
Deliveries and orders of corporate jets have increased significantly this year, and we anticipate growth will be in the 5 per cent range for the industry through 2016.”
Other challenges lie ahead for the industry though, such as reduced spending by governments and the eventual rise in interest rates, which could temper growth.
