Boeing Awards Offset Contract in Canada

by: Matthew Potter
November 11, 2011

Category: Boeing, Business Line, Canada, commercial aviation, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, Events, General Dynamics, logistics, Military Aviation, production program, Services, U.S. Marine Corps, U.S. Navy, United States | RSS 2.0

Boeing (BA) recently announced a contract award to Messier-Dowty Inc, part of the Safran Group (SAF:P), located in Toronto to continue to make lander gear assemblies for the F/A-18 and EF-18 aircraft. The contract has a value of about $200 million.

Messier-Dowty has made such assemblies for Boeing for the F/A-18 and V-22 Osprey aircraft for several years. They also make brakes and landing gear parts for the 737 and 787 commercial aircraft. This is not a surprising contract as aerospace manufacturers rely on parts providers across the globe as they search for the best price and most efficient delivery but this contract is special to Boeing as it counts as an offset for an order the Canadian government placed for C-17 strategic transports and CH-47 heavy lift helicopters.

Canada has an aggressive offset policy that requires companies from outside the country receiving government deals to invest an amount equal to almost 50% of the contract. This is fairly easy for companies like Boeing or General Dynamics (GD) as they rely on Canadian companies for components and support. Other companies have found it easier to buy spare parts or logistics support to make up their offset amount.

The F/A-18 is due to be replaced by the F-35 Joint Strike Fighter in both U.S. and Canadian service. Due to delays in that system entering large scale production and service the U.S. Navy in 2010 ordered another 120 odd F/A-18 fighters to bridge the gap while maintaining a relatively young and capable aircraft fleet. The U.S. Air Force and some foreign customers are looking at their F-16 and F-15 aircraft getting old as they wait for the JSF to arrive.

These delays increase the amount of support costs paid by the services to keep the older aircraft flying which puts pressure on the budget and may lead to cuts to the number of F-35 aircraft being bought which will cause even further delays.

The Boeing contracts are good for the Canadian economy as well as the U.S. as it keeps the F/A-18 line going providing production jobs.

Canada over the last few years has invested heavily in new aircraft and helicopters and plans major upgrades to its Navy and Army as well. Much of this has been sold as a way to keep the economy going during the global economic strife. Due to their reliance on U.S. contractors it is also good for the U.S. economy and defense spending as well.

Photo from fanavaiation Flickr photostream.

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