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REGIONAL REPORT – Quebec

REGIONAL REPORT – Quebec

BY PETER DIEKMEYER

HMCS St John’s enters Davie Shipyard

QUEBEC’S AEROSPACE &

DEFENCE INDUSTRY

 

DAVIE SET TO TAKE ON POLAR ICEBREAKER

 

Quebec defence stakeholders could be forgiven for being skeptical about lofty talk by politicians at a recent AIAC sponsored event. “Aerospace and space are critical to our nation’s economic recovery,” said Navdeep Bains, Canada’s Minister of Innovation, Science and Industry, echoing a talking point the Liberal Government has been repeating since it first assumed office in 2015.

However, actions on key programs that could have helped the industry navigate the effects of government lockdowns have been few and far between. The gaps can be seen most readily on the defence front, where the Trudeau Government has made little progress on Future Fighter, Future Air Crew Training, unmanned aerial vehicle procurement and other key projects listed in Strong Secure Engaged, the ambitious national strategy released more than three years ago.

Bains himself, whose optimism consistently inspires hope, appears unable to move a government dominated by other priorities. His key advice (pinned at the top of the Minister’s Twitter feed) calls for Canadians battling tough economic times to make “inclusivity and diversity” a fundamental “guiding principle.”

Navdeep Bains, says aerospace and space are critical to our nation’s economic recovery

QUEBEC COMPANIES HAMMERED BY LOCKDOWNS

 

But, COVID-19 related lockdown measures have hit Quebec’s aerospace sector particularly hard, says Suzanne Benoit, president of Aero Montreal, who took the pulse of industry leaders at the recent Quebec Symposium on the Defence and Security Market. “Many of our members have seen drops in production as high as 50%,” said Benoit. The hit stems in large part from the fact that much of Quebec’s aerospace industry’s work relates to commercial production and was labelled as non-essential services. “Many SMEs are short of cash, even those that got some payroll assistance. Worse, we never know if and when the government will allow plants to open or to reclose.”

The Quebec provincial government’s economic initiative, led by Pierre Fitzgibbon, Minister of Economy and Innovation, has been a big aerospace and defence industry supporter. However, aerospace officials have long pleaded in vain for Ottawa to make a clear commitment to support the sector, which they claim adds $27 billion to Canadian GDP.

“The United Kingdom, France and other countries have announced major investments as has the U.S.,” says Benoit. “We need to act too. Because if we don’t, the talent and skills could dry up and we might face a brain drain. Then it would be really hard to pick up the pieces.”

While only 22% of the Quebec aerospace sector’s output is defence related, Aero Montreal has taken the lead in terms of advocacy. The organization operates a portal that also provides information about the province’s defence-related land, sea and C4ISR capabilities. However, a primary focus remains the large federal air defence related procurements inching their way through the system. “RPAS, Future Fighter and Future Aircrew Training represent a once in a decade opportunity,” says Benoit, who notes the importance of not just the procurements themselves, but related intellectual property and offsets.

Benoit added, “We also need to diversify into ancillary areas such as the production of parts, systems and sub-assemblies and the supply of maintenance, repair and overhaul capabilities.”

CERT CENTER CANADA POISED TO EXPAND

A serendipitous benefit of the widespread government economic lockdowns is the degree to which they are forcing businesses to re-evaluate internal processes. The aerospace and defence industries, where executives are under increasing pressures to boost efficiencies to make up for lost production and revenues, is no exception.

One company that could benefit from a growing trend among Tier One contractors migrating to managing employees offsite in an emerging “Zoom” video-conferencing economy, is CertCenterCanada, an independent flight test, research, development and certification center that services the Canadian and global aerospace community.

“We have been decentralizing for the past decade and our clients have gotten used it,” said Phil Cole, the company’s vice-president of business development. He added, “Many are rethinking the way that they operate. That includes new ways of partnering with sub-contractors. That’s great for us, because it is just a short step from having employees work off-site, to outsourcing non-core activities to specialized providers.”

Cole isn’t kidding. Despite recent sluggishness by funders in the awarding of research mandates, CertCenterCanada has been performing steadily throughout the lockdown. Indeed, the company is even hiring people. This is in part due to the fact that aerospace certification and consultancy is for many public and private sector organizations a non-recurring or fluctuating requirement. Partnering with a subcontractor gets them access to highly specialized expertise on an “as needed” basis.

“We are seeing an explosion of interest in advanced air mobility programs such as Uber elevate,” says Cole. “Over time we expect that some could generate skill and technology transfers to military transport applications such as medical evacuation.” CertCenterCanada officials say that Quebec’s broad educational and research infrastructure, provides it with great resources and opportunities to draw on.

We have been decentralizing for the past decade and our clients have gotten used it, said Phil Cole, CCC’s vice-president of business development

MEGGITT MORPHS INTO INVERIS

InVeris Training Solutions Canada, which has been supporting Canadian Armed Forces live fire and virtual training operations with systems such as its Small Arms Trainer (SAT) and Indirect Fire Trainer (IFT) for more than two decades is another provider that has kept busy during the pandemic. The company, formerly known as Meggitt Training Systems Canada, is in the midst of a major rebranding following the acquisition of its U.S. parent company by Pine Island Capital. However, the focus of the Canadian team remains on operations.

“Simulations training is cheaper and better for the environment,” says John Scarlata, an InVeris spokesperson. “So, we are always on the lookout for new ways to facilitate that.”

Like most Quebec-based defence contractors, InVeris was initially forced to slow its weapons training operations in the wake of the threats posed by COVID-19. However, the Canadian Armed Forces quickly took measures to adjust. Traditional measures related to distancing and the use of masks were implemented. Fiberglass barriers were placed between the shooting lanes, tougher procedures were mandated including wiping down weapons after each use, and personnel were instructed to heighten vigilance in their daily activities.

InVeris also provides ballistics assemblies and other support for virtual and live-fire training undertaken by units such as JTF2 at a “SHOTT House,” located at the $319 million Canadian Special Operations Training Center at CFB Petawawa. The facility provides a tactical locale for critical skills training in urban environments. Users can practice actions ranging from forced entry, to room clearing, team tactics and judgmental shoot/don’t shoot engagements.

While live-fire target exercises provide excellent friend/foe situational training, they are far more costly and dangerous to implement. As such virtual solutions are in far greater demand. “Simulations enable users to effectively model realistic real world conflict resolution scenarios.” says Scarlata. “Using after-action reviews they can then watch their performances on screen, to assess their successes and mistakes and to adjust, as required.”

Another business opportunity stems from the InVeris software which is installed on 2,000 General Dynamics Land Systems-made vehicles in the U.S. The company continues to offer the GDLS embedded and desktop solutions that can be used to train soldiers in the use of weapons systems ranging from Mobile Guns, to the Javelin, the Dragoon, CROWS and the MCD30.

According to Scarlata, future opportunities for InVeris here in Canada include possible work on a Short-Range Air Defence System (SHORAD) that incorporates Stinger missiles and a system that trains soldiers how to take down drones using a laser fired alternative.

InVeris soldiers test their equipment

DAVIE OPERATES CANADA’S LARGEST SHIPYARD

Quebecers remained glued to television screens as we went to press, since the lockdowns began eight months ago, amidst a climate of continued uncertainty. The ever-changing standards of health officials regarding which of their kids they can send to school, what stores they can shop in, and most importantly when they can go back to work have fostered a sense of resigned frustration here. It’s hardly surprising that few are able to think much about how to rebuild the province’s economy.

But, COVID-19 uncertainties notwithstanding, a “Shovel Ready” Polar Icebreaker project could be key to asserting Canada’s sovereignty in the Arctic. Davie, which operates Canada’s largest shipyard in Levis, facing the Quebec City cliffs, announced in November of this year, its design and engineering partners for the Polar Icebreaker, that would replace the aging Louis S. St-Laurent. It is currently in its sixth decade of operation! According to Spencer Fraser, director of business development at Inocea Group of Companies (the parent company of Davie), this long delayed project offers a particularly important element – the company is ready to begin work immediately.

And that’s important because a project’s “shovel readiness” (time needed to get major infrastructure projects designed, staffed, and through regulatory hoops) is an attractive feature for public officials who need to get unemployed workers back on their feet fast. The Polar Icebreaker provides excellent options for a federal government that is looking for infrastructure projects that can create jobs in Quebec now, when they are really needed, not years down the road.

A Polar Icebreaker, which would complement the three medium ice-breakers that Davie is upgrading at its newly established National Icebreaker Center, would also fill a major strategic requirement. “Ensuring a continuous presence of cutting-edge Polar icebreakers in the Arctic would benefit future generations in numerous ways,” says Fraser. “It would provide relief to Northern communities, facilitate ice-choked trade and protect the Polar environment.”

Spencer Fraser of Inocea Group of Companies, says the Polar Icebreaker is key to asserting Arctic sovereignty

POLAR ICEBREAKER NOW

Such a vessel would also help address one of Canada’s main military challenge during the coming decades: asserting sovereignty over its Arctic regions, which much of the international community – including our American allies – regard as an open freeway, similar to the waterways between the Caribbean islands. If Canada is to have any chance of protecting northern waterways which forecasters say melting ice will gradually open up, the country will need to show that it is serious. A fleet of modern, capable ice breakers, to complement the Navy’s AOPS ships, is one way to accomplish that.

Davie has a history of producing cost effective solutions for the Canadian Armed Forces. As a report by the Parliamentary Budget Officer noted, “… a recent Government of Canada contract awarded to Davie to convert a commercial vessel, the MV Asterix, to military support ship specifications to maintain the Navy’s at-sea replenishment capability … was delivered on-time and on-budget.”

By the way, The Asterix has been operational since 2018 and is currently under contract for a five-year stint ending in the 2022-2023 fiscal year. If the Canadian government accepts Davie’s offer to contract a second vessel, (tentatively named the “Obelix”), it could save nearly $3 billion, relative to the cost of its current plans to build two new Joint Support Ships. The PBO report, however, did not address the capability differences between the two projects.

Montreal-based CAE, for its part, appears to be weathering the COVID-19 pandemic better than most. The integrated training solutions provider reported revenues of $704.7 million during the quarter ended September 30th, 2020. That represented a small decrease compared to the second quarter last year but CAE actually managed to turn a small profit.

The past twelve months have in many ways been a baptism of fire for France Hébert, who took on the VP Defence & Security role in November of last year with a mandate to strategically position CAE to leverage procurement opportunities, oversee existing military training and in-service support mandates and to liaise with the federal government and other organizations.

France Hébert, is now VP Aerospace & Defence at CAE

CAE TARGETS FACT PROGRAM

It’s a big job. CAE’s existing contracts include contractor roles related to NATO Flying Training in Canada (NFTC), Royal Canadian Air Force (RCAF) aircrew training, maintenance and sustainment services for the CF-188 Hornet Operational Flight program and as a training systems provider for the Fixed-Wing Search and Rescue (FWSAR) program.

However, CAE did not become a Canadian defence and aerospace industry leader by patting its belly, after feeding on existing business. The company, which is hoping to offer training solutions and operational support capabilities for the Future Fighter Capability Program (FFCP), Future Aircrew Training (FAcT), RPAS (Remotely Piloted Aircraft System) and Cormorant Mid-Life Upgrade programs, stands to be one of the prime beneficiaries should the federal government decide to go ahead and fast-track one or more of these.

Quebec’s aerospace and defence sector suffers many of the same challenges that those in other Canadian provinces do when it comes to demonstrating how it can contribute to the economy. This became apparent in the federal government’s 237-page Fall Economic Statement which announced massive spending increases and a staggering deficit of nearly $400 billion to counter the effects of lockdowns. By the way, that’s more than what the country spent on its entire Armed Forces over the past 20 years. However, defence was only mentioned as a footnote late in the document and aerospace wasn’t mentioned at all.

In short, despite his seemingly good intentions, Industry Minister Bains (who’s office did not respond to our request for comment) is far from the only politician twiddling his thumbs. During the half decade that Bains has been the country’s point man on Canadian industry, boatloads of elected officials and thousands of Ottawa bureaucrats have been unable to enunciate a coherent national aerospace strategy, to counter the massive subsidies that the United States and the European Union lavish on their respective defence industries.

In short, Canada needs to find a way to counter those efforts. That process starts with convincing Canadians that its aerospace industry – with a major chunk of it based in Quebec – can play a major role in rebuilding the economy post COVID-19.

 

Peter Diekmeyer is CDR’s Quebec Bureau Chief

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