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Bombardier navigating its way through turbulence
Posted on Thursday 26 August 2010 byUlster Business
Bombardier’s new demonstrator wing
The aviation market has been hit hard during the recession but following a sharp downturn in orders last year, Symon Ross reports that Bombardier Shorts is seeing some positive signs for the future
It has been a tough couple of years for Northern Ireland’s largest manufacturer.
Canadian-owned aviation giant Bombardier Aerospace has felt the knock- on effects of the recession on the profits of customers. As the number of people choosing to travel by air has declined sharply, many airlines that might have been clients have been left uncertain about their futures.
Factoring in order cancellations, particularly for business jets, Bombardier received a total of 11 net aircraft orders in the 2009/2010 year, compared to 367 the previous year – illustrating the extent of the global downturn. The higher number of business aircraft cancellations, as well as an overall lower level of new orders, resulted in a reduction in the order backlog by almost $7bn (£4.5bn).
Michael Ryan, Vice-President and General Manager of Bombardier Aerospace in Belfast, told Ulster Business it will take some time to turn this situation around.
“While analysts indicate signs of a global economic recovery, traditionally the aerospace industry lags behind any such recovery. We continue, therefore, to face challenges in the current year,” he said.
This year, Bombardier expects to deliver around 15% fewer business jets and 20% fewer commercial aircraft. Revenues, therefore, are expected to be lower at a time when the company knows it must continue to invest for the future.
However, there were positive signs at the Farnborough Air Show where Bombardier announced orders of some $1bn for business and regional aircraft. Belfast plays a role in all of the aircraft ordered.
The financial performance of the local operation in 2009/10 was one of its worst ever, but came at a time when the company was making its largest ever investment in Belfast. Despite just breaking even with a pre-tax profit of $0.2m, Bombardier invested a total of $164m in product development, R&D, training, and plant and facilities.
“We remain committed to investing in our long-term future in Belfast, in our capabilities and in our people. We are going ahead with our annual apprentice intake in September, and further investment is planned in developing new products and technologies, in particular the ongoing development of the CSeries wings and associated new factory,” explained Mr Ryan.
Of crucial importance to Bombardier’s Belfast operation is the development of the company’s CSeries aircraft, a new jet in the 100-149 seat category that will have its wings built at a purpose built factory on the firm’s existing Queen’s Island site.
“The CSeries aircraft programme is in very good shape both from a product development standpoint and from a sales point of view at this stage of its development. We are very confident about the 100-149 seat market potential, and there is a great deal of interest in the aircraft from airlines around the world because it offers customers much greater efficiency, operating costs, comfort and reduced environmental impact,” said Mr Ryan.
The aircraft is due to enter service in late 2013 and has already attracted 90 firm orders and 90 options. The company said sales discussions at the Farnborough Air Show in July “progressed well” and that a number of new discussions were started.
The composite wings for the CSeries will be assembled in Belfast at a new, 600,000 square feet factory. The first phase of the factory will be completed in the autumn with the first wing due to be delivered towards the end of 2011.
So far development of the wing is progressing to schedule, with a pre-production demonstrator wing developed in Belfast successfully passing a series of stringent tests.
“The £520m investment in the wing programme represents the largest ever single investment in Northern Ireland. It is of crucial importance to our operation’s future, and to the economy of Northern Ireland,” said Mr Ryan.
“In addition to over 400 construction personnel currently involved in the building project, some 360 Bombardier engineering and support staff are working on the wing development programme, and around 800 jobs will be generated during peak production years, with many more in the wider supply chain.”
A number of local companies have already been engaged in the research and development phase of the wing programme, including the production of the demonstrator wing. As well as the local contractors involved in the new wing factory, a number of local companies are providing equipment for the facility and will have an opportunity to win work packages on the wing production in the coming months.
The boost the programme is providing to local jobs is welcome after the downturn in orders forced Bombardier to axe close to 1,000 contractors and full time staff in early 2009.
In September, the company will enrol 40 new apprentices through its annual intake – though it noted that there were 800 applications for just 40 places, far higher than in previous years.
With 5,000 employees Bombardier’s health has a huge impact on the local economy. The company has invested more than £1.4bn in its Northern Ireland operations over the past 20 years, including almost £140m in training and development of its employees.
Mr Ryan has also joined the newly established Economic Advisory Group (EAG), which was set up by Enterprise Minister Arlene Foster following a recommendation in the Independent Review of Economic Policy. Its remit is to provide independent advice to the Minister which will challenge and develop public policy and strategic thinking on the economy – something that will be vital as Northern Ireland tries to bolster its private sector in the face of impending public spending cuts.
“We support the Government’s aims to encourage the advancement of industry capabilities in Northern Ireland through R&D and innovation, to help companies move up the value chain and compete more effectively. It is important that local companies have access to UK and EC R&D programmes and that R&D tax credits are retained,” said Mr Ryan.
“While it is vital that Northern Ireland continues to attract foreign direct investment, we believe it is important that existing industry is still supported. To drive productivity, and even to simply maintain current workforce levels, companies need to continue to make capital investment, for which support is often necessary.
“It is important that Government support schemes, which have been successful, are maintained so that existing high value jobs are retained.”
Though it faces ongoing pressures, it appears clear that Bombardier will remain a key player in Northern Ireland’s economy in future. Mr Ryan adds that the manufacturer remains cautiously optimistic about its long term prospects.
“While we still have many challenges, the market fundamentals are strong in the long term. Bombardier is cautiously optimistic and we expect a positive future for an aviation industry focused on long-term economic growth,” he said.