Title: Quebec’s aerospace and defense industry looks to the future

Sub-title: New procurements stemming from the Canada First Defence Strategy are expected to bring big spin-off benefits to La Belle Province.

 

When the Canadian government announces military purchase commitments, Quebec’s defence industry stakeholders tend to break out in smiles. True, they almost all believe that the country needs to take its armed forces’ equipment needs seriously. However the sub-contracts and in-service support work that spin off those procurements, which can be a major stimulant to the province’s economy, have made Quebec’s defence sector players especially optimistic in recent months.

 

A significant number of recent and coming DND procurement announcements such as those regarding next generation fighters, un-manned aerial vehicles, search and rescue aircraft, helicopters and transport aircraft have been in (or are expected to be) in the aerospace sector. With more than half of the Canada’s aerospace sector output coming from Quebec, companies there fully expect that big spin-off crumbs will fall in their plates.

 

L-3 MAS: a fleet management leader

“The decision to buy a variety of new air platforms stemming from the Canada First Defence Strategy is very exciting,” says Sylvain Bédard, president of L-3 MAS, one of the province’s largest defence sector players. “Canada’s offset policy almost guaranties that Quebec will benefit in some form.” Bédard has reason to be optimistic. L-3 MAS is among those Quebec companies that stand to profit most from aerospace sector procurements.

 

During the past year, L-3 MAS has made significant efforts to leverage its expertise to add commercial aircraft capabilities. However defence remains a prime focus for the company, which employs more than 1,000 professionals at bases across Canada and overseas. There they provide fleet management, engineering and maintenance and support services, notably for the Canadian Armed Forces’ and the Royal Australian Air Forces fleets of F-18 fighter aircraft.

 

L-3 MAS also provides in-service support for the new CH-148 Cyclone Maritime Helicopters, the CL-41 Tutors and boasts an excellent network of operating centers (including those in Cold Lake, Ottawa, Trenton, Mirabel, Bagotville and Shearwater). According to Bédard, these wide ranging capabilities position L-3 MAS well to do either prime or sub-contract in-service support work for a variety of upcoming DND procurements.

 

L-3 MAS offers numerous unique capabilities that have proven highly effective in prolonging aircraft service life, in particular robotics shot peening systems that limit the propagation of aircraft structure cracks. L-3 MAS has also been involved in international special mission aircraft programs, and has developed expertise in the integration of mission suites into both military and commercial aircraft.

 

L-3 MAPPS: marine and power systems

Of course Quebec’s defence industry is not only about aerospace. Nor for that matter is L-3 Communications, where another division has also been making waves: Montreal-based L-3 MAPPS. This 250 person unit, provides Integrated Platform Management Systems (IPMS) and marine electrical and electronic systems capabilities, to navies around the world.

 

Insiders say that L-3 MAPPS is regarded as an out-performer within the L-3 Communications family. One recent win grabbed significant attention: contracts to do upgrades to the Halifax class IPMS and Victoria-class Fire Detection Systems for Canada’s navy. According to its president Peter Dawson, during the past year, L-3 MAPPS added 20 new personnel, in part to help supply the growing interest for a variety of commercial off-the-shelf based solutions, including its recently introduced Interactive Incident-board Battle damage Management System (IIBMS).

 

“Given the breadth and expertise in the numerous aerospace & defence sector companies in Quebec, this province has an important role to play in the development of Canadian global initiatives in the field,” says Dawson. “Our track record and success with 18 navies worldwide using technology developed in Quebec speaks for itself.”

 

As a result of the tailwinds that L-3 MAPPS is riding, it is not altogether surprising that its president would be optimistic about its future. “We are particularly proud of the fact that despite the global economic crisis, L-3 MAPPS has managed to grow,” said Dawson. “The recent work given to us by the Canadian navy has helped quite a bit, so hopefully we can bring that momentum into the New Year.”

 

CAE: a new president with big new goals

Another major Quebec defence sector player and a global leader in flight simulation technology is CAE, which trains more than 75,000 aircrew members each year at 27 civil and military aviation centers around the world. CAE bases 3,000 of its 6,000 employees in Quebec, (a stunning half of which are high value added engineering positions) and spins off significant work to a network of more than 600 suppliers.

 

During the past year, Marc Parent, its new president and CEO, has been focused on helping steer CAE through the global recession. The downturn (which was beginning to show signs of receding as the current issue of CDR went to press) hit capital equipment demand hard, but Parent was quick to react, notably overseeing a significant reorganization within the company, which included realigning its structure around strong regional poles.

 

When Parent stepped up to the CEO role, Martin Gagne, a long-time defence sector veteran, took over CAEs defence sub-group. Gagné, who has 22 years of air force experience, appears to be the right man for the job at the right time.  CAE is currently under contract with the Canadian government to do Operational Training Systems Provider (OTSP) ISS work on the C-130J and CH-47 initiatives, both of which will include substantial mission rehearsal work, an area that Gagné regards as having high growth potential.

 

Gagné also hopes to expand CAE’s defence presence in the low, medium and high altitude UAV sectors (the company has trained Predator pilots for many years) and in the land and naval sectors. For example CAE is bidding on delivering driver and gunner training solutions for India’s T-90 and T-72 tanks “Land has good potential for us because of the added value that simulation systems bring to modern militaries,” says Gagné. “In the old days the training used to be done on the vehicles themselves. But these days, many countries have a significant portion of their fleets deployed in combat, so simulations offer an excellent alternative.”

 

Bombardier: a global civil aerospace leader

One Quebec aerospace company that literally dwarfs all of the others is Bombardier, which though it bills close to $20 billion a year in sales, is mostly active on the civil side. However the company also has a long history of producing multi-mission aircraft that can be used for military operations such as fire fighting (water bombers) search and rescue and marine patrol. 

 

According to Derek Gilmore, its vice-president (sales and administrative) the company has produced 340 such aircraft over the years, and regards it as a growth sector. Bombardier in particular is looking to more right here in Canada, where it hopes to play a role in the government’s upcoming purchases of new Fixed Wing Search and Rescue Aircraft. At an aerospace sector industry day this summer, the federal government formally sought input from industry about what direction the project should take. “We have the products to supply their needs, so naturally we are interested and will be responding,” said Gilmore.

 

Bombardier’s enormous Quebec presence and status as a major exporter gives the company substantial political clout, so it must be regarded as a front runner on any bid that it cares to submit. Other areas where the company could likely add significant value are in the possible replacement of the Aurora marine patrol aircraft which are reaching the end of their useful lives as well as in the supply of aircraft for transport and surveillance in the country’s north.

 

Observ Technologies: IED detection

Like any new military conflict Canada’s deployment in Afghanistan has generated numerous “lessons learned” for tackling modern as-symmetrical warfare. For example one Quebec niche player has been quick to react to the need to detect the Improvised Explosive Devices (IEDs) which are planted by insurgents to hamper the CF’s and other UN Forces’ patrol and base supply efforts.

 

IEDs attacks are deadly not just because of the operational damage they do, but also of the considerable propaganda fodder they supply the Taliban which videotapes them and supplies copies to news organizations. One of Observ’s key range gazing active imaging solutions focuses on detecting these hidden observers – not the IEDs themselves. Due to security considerations, Observ’s president Deni Bonnier is somewhat cagey regarding details of its developments in this area. However he did say that Observ had responded to the Request for Information for the LAV Reconnaissance and Surveillance System Life Extension program (LRSS LE) hoping to add its surveillance technology into the package.

One challenge that Observ faces that other defence sector players in the province don’t have to worry about is its locale in the provincial capital. “Quebec City is not participating to the level it can in the industry. Montreal is quite strong in this area, which may be due to a perception that defence sector players need to be located there.” says Bonnier. “Sometimes it is more difficult to get recognized at home.” That said, Observ is having no trouble at all getting recognized in the Middle East, where is has generated considerable success in the coastal surveillance market, which it hopes to build on in coming years.

Rheinmetall: eyes on the “Four Pack”

The big news at Rheinmetall Canada this year has been the company’s increasing cooperation with its head office in Germany. According to Duncan Hills, the company’s director (government relations), when Rheinmetall bought out the St-Jean-sur-Richelieu based operations of Oerlikon Contraves in the year 2000, it initially structured them as a stand-alone unit. Oerlikon’s first mandate had been to manufacture and provide support for the ADATS low-level air defence missile system, a contract that was quickly cancelled after the Cold War ended.

 

However since then Rheinmetall Canada has made significant headway and has increasingly positioned itself as a potential long term in-service support partner to various non-Canada companies that are looking to supply solutions to the Canadian Forces. For example Rheinmetall recently won a $20 to $30 million contract to provide (multi-ammunition softkill) countermeasures technology to the Canadian navy’s Halifax-class frigates.

 

Rheinmetall has also made significant advances in the area of remote control weapons systems. The company sold the Department of National Defence 34 packages that enable the installation of remote controlled machine guns on top of Light Armored Vehicles, which are operated by a soldier inside the vehicle. As a result, the soldier’s head and body are not exposed when he operates the weapon. These packages, which are now operating in Afghanistan, have gone a long way to increasing soldier safety there.

 

In fact according to Hill, Rheinmetall Canada has the potential to either partner with other providers or to supply elements to all of the four major initiatives in DND’s famous $5.2 billion “Four Pack” of land fleet renewals that were announced earlier this summer: the LAV III Upgrade (LAVUP) project, the proposed acquisition of at least 118 Close Combat Vehicles, and the purchase of both Tactical Armored Patrol Vehicles (TACVs) and 13 Armored Engineering Vehicles (AEVs).

 

CMC Esterline: a greater focus on niche products

The big news at CMC Esterline also consists of a change at the top. Gregory Yeldon, who was formerly the company’s vice-president (finance) took on the number one spot in August. He then quickly embarked on a tour of the aviation and GPS electronics products provider’s three main facilities in St-Laurent, Kanata and Sugar Grove (Chicago) and of its many key customers.

 

According to Jean-Michel Comtois, CMC Esterline’s vice-president (military affairs), the company plans to react to recent tough times stemming from the current economic slowdown by increasing its product focus. Main targets will be in niche areas such as electronic flight bags, GPS technology, Satcom antenna. CMC Esterline will also continue to position itself as a full aviation cockpit integrator. “We see significant opportunities to blend our civilian and military products,” adds Comtois. “We hope to take advantage of the considerable commonality between the two.”

 

According to Comtois, Quebec (which hosts the vast majority of CMC Esterline’s 800 employees) continues to benefit strongly from that province’s significant efforts to help boost the local aerospace and defence industries. “Montreal’s success stems in large part from the Quebec government’s role,” says Comtois. “The province has a host of initiatives, ranging from programs, to its hosting of trade missions and its participation in international aerospace events that really bolster local companies. They are far in front of other provinces.”

 

Future procurements could speed growth

Yet despite Quebec’s considerable defence sector footprint, its future may be even brighter than its immediate past. That’s particularly true in the aerospace sector where those behemoth upcoming procurements are working their way through the federal defense, public works and political bureaucracies.

 

For example specifications for the Joint Unmanned Surveillance Target Acquisition System (JUSTAS) program are expected to be defined by early 2010. In addition, in August Boeing announced that it would hand off significant in-service support work stemming from its sale of 15 CH-147 medium to heavy lift helicopters to the Canadian Armed Forces (though the nature of that work has yet to be defined and RFPs have yet to be issued). Quebec companies also look like early favorites to land work from a variety of other initiatives ranging from fixed wing search and rescue (FWSAR), next generation fighter, and C-130 transport procurements.

 

Just how much work ends up in Quebec though remains an open question. The unofficial tacit, though unspoken deal among politicians has long been that Ontario is favored for new initiatives that take place in the auto sector, and Quebec is compensated through initiatives on the aerospace side.

 

During coming months will get a better feel of whether that understanding continues to hold true.

 

Peter Diekmeyer (peter@peterdiekmeyer.com) is Canadian Defence Review’s Quebec bureau chief.

 

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