Boeing validates economic impact in Canada

If there were lingering doubts about Boeing’s contribution to the Canadian economy, company executives attempted to lay them to rest as the Chicago-based aircraft manufacturer prepares to submit its proposal for Canada’s future fighter jet next month.

Boeing directly invested $2.3 billion in Canada in 2019, primarily through its aerospace composite manufacturing operation in Winnipeg, and generated about 11,000 jobs, according to an economic impact assessment conducted by Ottawa-based consulting firm Doyletech Corporation. Those figures climbed to around $5.3 billion and 20,000 jobs once indirect spending was factored in.

“That is an extremely good result,” Rick Clayton, a partner with Doyletech, told a media briefing on June 25. A more than two-for-one return on every dollar spent is “one of the best [results] we have had.”

Moreover, 95 per cent of what Boeing generates is exported. “That’s about as high as we have ever seen,” he said.

The assessment also captured Boeing’s investments in Canadian supplier and technology development, making the company what he called an “agile producer” able to capitalize on both Canadian resources and “smarts.” Technology developed by many suppliers often involves systems integration, an added value over aircraft components.

Investments and direct participation in industry-university networks, centres of excellences, and even a learning factory incorporating big data, machine learning and artificial intelligence — “sort of like a teaching hospital, only for manufacturing,” according to Clayton — are influencing the next cadre of advanced manufacturing workers.

Boeing and its two competitors, Lockheed Martin and Saab, have until July 31 to submit their bids for 88 advanced fighters to replace the Royal Canadian Air Force (RCAF) fleet of CF-188 Hornets.

The bids will be evaluated on technical merit, cost and economic benefit to Canada. They will also be assessed on the “bidders’ impact on Canada’s economic interests.”

That provision, dubbed by media as the Boeing clause, was inserted into the procurement process after the U.S. government, following a complaint by Boeing, issued almost 300 per cent duties on the sale of Bombardier C-Series aircraft to U.S. customers. The federal government retaliated by cancelling a $6 billion interim plan to buy 18 F/A-18E/F Super Hornets to fill a capability gap and said it would assess “economic behaviour” in evaluating any future bids.

In addition to its sizeable economic footprint at 13 sites across Canada and through around 500 suppliers, Boeing also emphasized its commitment to the government’s Industrial and Technological Benefits (ITB) policy.

The company has delivered on $11 billion in ITB obligations over the past 25 years as part of the sale of the CF-188 and upgrade programs, CH-147F Chinook helicopters, CC-177 Globemaster III strategic lift aircraft, ScanEagle unmanned aircraft and satellites.

For the future fighter project, the three bidders will have the option to sign a binding ITB agreement and commit to investing in Canadian content up to 100 per cent of the contract value, or agree to a nonbinding economic benefit agreement.

“Boeing will firmly commit to a 100 per cent ITB obligation,” said Jennifer Seidman, the recently appointed lead for international strategic partnerships in Canada.

That value proposition will include further investment across what the government has identified as key industrial capabilities in the defence sector and new efforts to build diversity in the aerospace and defence workforce, “starting with STEM related efforts targeting Canadian youth and continuing through to the support of professionals in businesses of all sizes across all regions of the country,” she said.

Boeing will propose the F/A-18 Block III Super Hornet to replace the RCAF’s legacy Hornets. The first of two in the new Block III configuration were delivered to the U.S. Navy in mid-June for flight testing and carrier suitability and integration testing of all mission system components.

The USN intends to acquire 78 of the advanced aircraft under a multi-year procurement contract and has begun a service life modification program that will upgrade about 450 Block II Super Hornets with Block III systems.

The Block III integrates enhanced displays, processing and data link technology “to provide an open architecture mission system with advanced networking that continue to evolve at a pace that exceeds the current plans of our competitors,” said Jim Barnes, director of fighter programs for Canada.

The Block III program has extended the aircraft’s airframe to 10,000-flight-hours for Navy operations, and introduced upgrades, including conformal fuel tanks, a centreline drop tank with a networked infrared search and track (IRST) sensor and satellite communications (SATCOM) system.

The USN expects to take delivery of the first aircraft by 2021 and have a squadron per carrier wing by 2024, a year before the RCAF will receive the first of its new fighters, he noted.

At a time when the Canadian government is facing a ballooning deficit, Barnes reminded media that operational costs far exceed the acquisition price, and the Super Hornet has the lowest operational flight costs among U.S.-built fighters, according to the U.S. government, at about $18,500 per flight hour. A Super Hornet fleet would also allow the RCAF to “leverage existing physical and intellectual infrastructure, significantly reducing aircrew and maintenance training requirements,” he added.

Canada would not be a lone operator either. Barnes noted that the USN does not have a planned retirement date for the Super Hornet fleet, despite the gradual integration of Lockheed Martin F-35C fighters onto carrier decks. Boeing is also competing the Super Hornet in Finland and Switzerland. And in April, the German Armed Forces indicated an interest in the procurement of 93 new Eurofighter Typhoons and 45 F/A-18E/F Super Hornets to bridge between its Tornado fleet, set to retire by 2030, and the next-generation Future Combat Air System likely to enter service around 2040.