The Canadian province of Ontario is mounting a concerted bid to get in on the European aerospace act. It is looking for acquisition targets in the UK and new international partners to allow companies in Ontario to take a slice of the action in the European aerospace industry’s consolidation drive.
It is a surprising statistic, but Ontario has the world’s sixth largest aerospace industry and the largest share of Canada’s aerospace industry, itself ranked fifth in the world.
The country’s aerospace sector had 1997 sales of C$13.4bn (£5.1bn). This year the figure will be ‘close to C$15bn’, one analyst predicts, while sales have doubled in the past 10 years. Exports account for 80% of output 10% up on five years ago and 80% of that goes to the US.
In the future, though, more export revenue may be earned from the other side of the Atlantic. Europe’s belated effort at consolidation has been problematic, with British Aerospace and Germany’s Dasa struggling to persuade France to compromise over its desire to maintain state influence over a future European aerospace and defence company. In the light of this, some European firms may find it beneficial to link up with less contentious partners and regions such as Ontario.
Within Canada, Ontario’s aerospace industry does not suffer the difficult cross-border relations sometimes experienced in Europe. Nor is it regarded as a potentially unwieldly giant on the scale of recently formed US groups such as Lockheed Martin, Boeing (following its merger with McDonnell Douglas) and Raytheon. This, and its impressive capabilities (see box), is the essence of its pitch to Europe.
The ambition is there, but Ontario’s aerospace firms believe they are being hampered by a lack of state funding. Their European counterparts can call on government funding to back new projects. Canadian companies have had to finance new technology themselves.
‘Other countries have a lot more mechanisms for backing their industry,’ claims Rod Jones, executive director of the Ontario Aerospace Council (OAC), which represents the province’s industry.
Ontario’s good second-tier aerospace suppliers share the experience of being required by their customers ‘to take responsibility for the design, development, manufacture and support of larger, more complex integrated systems,’ says a report on Canadian aerospace published in July by consultant Sarion Management. The report said that in boosting international business, ‘partnering will be a key for subcontract and build-print firms’ in Canada.
In Ontario, a scheme to promote such partnerships was launched this week with the initialling of a Memorandum of Understanding to link the OAC with Britain’s Lancashire Aerospace Consortium, which represents second-tier UK suppliers.
‘This aims to enable firms which would not normally get in touch with each other to share experiences and opportunities,’ Jones says.
The sharing of market intelligence is a key objective, he adds. ‘I hope this will help link up companies that are comparable in size, level of technology and market interest.’
Joint ventures could be planned between Lancashire and Ontario firms as a result.
Several second-tier Ontario firms are keen to establish joint ventures or partnerships or even take over similarly-sized aerospace companies in Britain and elsewhere in Europe.
Magellan Aerospace president Richard Neill is explicit about his company’s ambitions. ‘The little players acquire little companies we want to acquire a big company,’ he says.
Fleet Industries, a Magellan subsidiary in Fort Erie, is equally open about its hope for closer British links. Fleet is best known for its expertise in metal fabrication, metal-to-metal bonding and composite bonding technologies.
Brian Oakley, new business development manager at the company, says 30% of staff in the tooling department comes from the UK. ‘There seems to be a groundswell move towards forging links with Britain,’ he says.
Magellan recorded revenues last year of around C$500m and makes the combustion chamber for the Rolls-Royce RB211 turbofan. In 1997, Rolls sold Bristol Aerospace maker of the CRV7 air-to-ground rocket to Magellan, demonstrating that the company is no stranger to the UK acquisition trail.
Another Ontario supplier which suggests it might be keen on UK and European partnerships is space and satellite communications firm Cal Corporation.
Terry Woods, vice-president of the firm’s space systems group, says Cal has not yet ‘fully flushed out the business implications and opportunities’ of stronger links. But he adds that it knows there is a big opportunity to bid for work with Matra Marconi Space on the UK’s Skynet 5 military communications satellite programme.
Some Ontario aerospace companies do not need to take over small European firms to strengthen their links on this side of the Atlantic. Pratt & Whitney Canada, the independent subsidiary of the US engine giant, is already closely linked with Europe as a supplier to Fairchild Dornier’s small airliner programmes, as well as to other European aircraft builders.
Bombardier Aerospace, meanwhile, is the parent company of Short Brothers in Belfast. Shorts builds the fuselage of the Lear 45 business jet, 25% of the Global Express business jet and parts for the Dash 8-400 turboprop airliner.
Shorts has a good chance of becoming a big supplier for Bombardier’s next big project, the BRJ-X regional jet airliner. Plans for this plane were unveiled at the Farnborough air show in September but a final decision will not be announced until later next year.
Just as large Ontario firms are looking for partners, some smaller companies are anxious to build other European links.
Hil-Tech produces LEDline, a clear linear extrusion of light emitting diodes in solid plastic. Hil-Tech International director Nick Hutchins says the company is now seeking European distributors for this product, which provides highly visible night time guidance systems for airports and roads.
The Sarion Management report on Canadian aerospace says that the best opportunities for continued growth of the country’s aerospace industry lie in the greater exploitation of second-tier clusters of capabilities aimed at international business development in global aerospace and defence markets.
In other words, a company’s capabilities, not its size, are the key. Britain could see some interesting aerospace tie-ups in the months and years to come.