Canadian and Quebec governments pour $685 million into three aerospace companies

Governments in Ottawa and Quebec City have committed hundreds of millions of dollars in support for aerospace companies after the pandemic decimated the sector.

Total funding comes to $685 million, with $245.5 million coming from the Government of Quebec's Economic Development Fund through Investissement Québec and $439.8 million coming from the Government of Canada's Strategic Innovation Fund (SIF).

The funding will support projects at three aerospace companies: Pratt & Whitney Canada, Bell Textron Canada and CAE Canada. Canadian Prime Minister Justin Trudeau also announced the launch of the Aerospace Regional Recovery Initiative, a $250-million federal investment over three years that was first outlined in Budget 2021 in April.

"This financing will allow Bell Textron Canada, CAE and Pratt & Whitney Canada to continue to innovate and discover new markets,” Trudeau said at a press conference on July 15.

"This investment will also secure the industry's long-term future in Canada by developing green aviation projects and more clean technologies. Some of these technologies will take decades to develop, so there is absolutely no time to waste.”

Of the companies that received support, only CAE has headquarters in Canada.

The funding will support projects that represent $2 billion in investments in Canada, including close to $1.6 billion in Quebec, according to a statement from the federal government. Trudeau said the investments would create or support more than 12,000 jobs along with more than 6,200 student co-op placements.

Funding will support projects by three aerospace companies

The aerospace industry is highly R&D-intensive. The sector contributes close to a quarter of total manufacturing R&D in Canada, according to a 2019 ISED report. The investments in Pratt & Whitney Canada, Bell Textron Canada and CAE Canada will each support R&D-related projects.

Pratt & Whitney Canada, based in Longueuil, Que., is the local branch of U.S.-based Pratt & Whitney, which is itself a division of Raytheon Technologies Corp.

It will be receiving up to $49 million from the Government of Canada and $20.5 million in loans from the Government of Quebec to support a $163-million project to develop the first hybrid-electric propulsion demonstrator plane within four years.

Bell Textron Canada, a subsidiary of U.S.-based Textron Inc., manufactures helicopters in Mirabel, Que. It will be receiving up to $200 million in federal funding and $75 million in loans from Quebec to support the company's $825-million Viridis project to develop and commercialize environmentally-friendly aviation technology.

CAE, for its part, says that $340 million from the Canadian and Quebec governments will support Project Resilience, an R&D project to develop data ecosystems and artificial intelligence in civil aviation, defence & security and healthcare.

The Montreal-based company announced in September 2020 that it would become the first Canadian aerospace company to reach carbon neutrality. CAE said that Project Resilience, which totals $1 billion in investments, will include retrofitting light trainer aircraft to reduce their carbon footprint.

The companies saw significant downturns during the pandemic. Pratt & Whitney laid off around 300 workers in October 2020, while CAE laid off 2,600 of its 10,500 employees and placed another 900 employees on a reduced work week at the start of the pandemic in April 2020.

SIF funding often goes to foreign-owned companies

Research Money previously reported that the 2021 federal budget’s single largest investment is in the SIF, which will receive $7.2 billion over seven years starting this fiscal year.

The funding comes despite criticism from some experts that there is little accountability for spending and that funding is awarded based on inputs — such as jobs and R&D spending — rather than outputs such as sector productivity or the number of patents.

Research Money also found that $1.36 billion, or 40 percent, of all SIF funding has gone to companies and joint ventures in Canada whose parent company is based in a foreign country.

SIF, however, has said that foreign links can be beneficial. "When firms and economies are connected to global supply chains, this increases economic growth, technology transfer and partnerships, and helps improve productivity and wages," they told Research Money in April.

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