Heroux-Devtek not yet willing to accept death of Canadian F-35 order

MONTREAL – A supplier on the F-35 stealth jet fighter isn’t yet willing to accept the death of a Canadian order for the costly airplane despite the election promises of the federal Liberals.

Heroux-Devtek CEO Gilles Labbe said Monday he’s still hoping for a favourable decision given the age of the existing CF-18 fighters.

“We’ll see what the government wants to do exactly,” he said during a conference call about the landing gear maker’s second-quarter results. “They have to buy jet fighters. It’s clear our CF-18s are not in good shape and they cannot last forever.”

During the election campaign, Justin Trudeau’s party said it would not purchase the fighter and instead launch “an open and transparent competition” to replace the existing aircraft with lower-price options the Liberals said better match Canada’s defence needs.

Labbe said Canada’s aerospace industry has profited from its association with the F-35, receiving more work than has been invested so far by Canada.

A 2013 report projected that businesses in this country could land as much as $9.9 billion in contracts to construct and sustain parts for the Lockheed Martin-built stealth fighter.

“I believe that for the Canadian industry, it’s a very important program,” Labbe told analysts, adding he still expects more than 3,000 planes will be sold around the world over the next 20 years.

The former Conservative government announced plans in 2010 to buy 65 radar-evading jets for $16 billion over 20 years. After the auditor general and parliamentary budget officer said the figure did not include operations and sustainable costs, it ordered independent evaluations. At least one estimated the full 42-year cost of ownership would be $44.6 billion.

Meanwhile, Heroux-Devtek (TSX:HRX) beat analyst expectations as its net income almost doubled to $6 million in the quarter on a 12 per cent increase in revenues.

Heroux-Devtek earned 17 cents per share during the three months ended Sept. 30, compared with nine cents or $3.27 million a year ago. Excluding one-time items, last year’s adjusted earnings were $3.8 million or 11 cents per share.

Sales were $94.5 million, up from $84.09 million a year ago.

The company was expected to earn 12 cents per share on $92.57 million of revenues, according to analysts surveyed by Thomson Reuters.

Labbe attributed the improved results to its increased reach in the commercial aerospace market, particularly for large aircraft, and the ramp up of business jet programs. It expects deliveries of increased landing gear content on the Boeing 777 and 777X will begin in early 2017.

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