The RCAF in the Face of the Likely COVID-19 Canadian Budget Crunch

(Caption for photo at top of the post: “A portion of Canada’s CF-18 fleet is set to receive a major upgrade as the government plans to enter the final phase of negotiations with bidders for the Future Fighter Capability project. Credit: Erica Seymour/Royal Canadian Air Force”.)

Steve Trimble (tweets here) of Aviation Week and Space Technology outlines all the procurement programs in play–Mesdames et messieurs, faites vos jeux as to where cuts will hit (figures in story in US $):

Can Trudeau’s Defense Plan Survive Canada’s Next Fiscal Crisis?

Defenders of an ambitious defense spending uptick in Canada must face the fiscal effects of a soaring national budget deficit just as several major acquisition programs hit key milestones in 2021.

*Final negotiations on fighter contract set to begin

*Soaring national deficit puts pressure on defense

Prime Minister Justin Trudeau’s $388 billion (C$497 billion) defense investment plan, rolled out in 2017 to guide spending over the next two decades, entered 2020 mostly unscathed. However, the government’s response to the COVID-19 pandemic generated an estimated deficit of $302 billion—exceeding the total budget in 2019 by about 8%.

The specific effects on the Canadian defense budget have not yet been itemized, but the industry is bracing for more than a pinch.

David Perry, vice president and senior analyst at the Canadian Global Affairs Institute, has estimated that Trudeau’s “Strong, Secure, Engaged” investment plan translates to roughly $13.7 billion in budget requirements for 2021 on capital equipment and procurement spending by the Department of National Defense (DND). 

Any cuts would come at a critical time for several major defense acquisitions. Over the next 12 months, Canada is scheduled to enter the final phase of negotiations for a permanent McDonnell Douglas CF-18 replacement, open competitions for a BAE Systems Hawk trainer replacement and new unmanned aircraft systems (UAS), and start analyzing options for replacing the Lockheed CP-140 Aurora and Airbus CC-150 Polaris fleets.

A long-delayed modernization of the North Warning System (NWS) also is competing for the DND’s limited investment budget. The prevailing picket line of ground-based radars above the Arctic Circle was designed to be retired in 2025. These existing radars may be unable to detect Kh-101 and nuclear-armed Kh-102 cruise missiles now fielded on Russian bombers, according to a 2019 study by the University of Manitoba. Hypersonic glide vehicles such as Russia’s nuclear-tipped Avangard also pose a new threat to the nearly 30-year-old radars jointly operated at the NWS sites with U.S. Northern Command [see this post, note “Comments”: So Will the Canadian Government Put Some Big Bucks into Modernizing NORAD’s North Warning System?“].

The DND is also under pressure to complete several ongoing modernization projects in the aviation sector. The Royal Australian Air Force has delivered six Boeing F/A-18C/Ds to Canada as part of an interim replacement program, but 12 more are due to be delivered by the end of 2021. A subset of Australian and remaining F/A-18C/Ds also are scheduled to receive major upgrades, including Raytheon APG-79(V)4 active, electronically scanned array radars.

Meanwhile, three Beechcraft King Air 350ER aircraft will be assembled and modified to serve as manned airborne intelligence, surveillance and reconnaissance aircraft in 2021. Deliveries will be completed in the following year. Finally, the DND is funding service-life extension programs for the fleets of AgustaWestland CH-149 Cormorants to 2042 and Bell CH-146 Griffons to at least 2031.

As budgets tighten, however, the focus will be on the CF-18 replacement contract. Public Services and Procurement Canada (PSPC), the agency managing the competition, received bids in midsummer for the Boeing F/A-18E/F Block III, Lockheed Martin F-35A and Saab F-39E/F.

The presence of the F-35A already has created awkward moments in the competition. The DND agreed to relax stealth requirements that previously had ruled out other fighters. At the same time, the DND was forced to loosen its Industrial Technological Benefits (ITB) policy to allow the F-35A to remain in the competition since, as a charter member of the fighter’s international development partnership, Canada is unable to demand guaranteed work share for local companies in exchange for the contract award.

As the competition moves into the final phase of negotiations next year, the fiscal crisis imposed by the country’s COVID-19 response could drive the PSPC to value the ITB elements of each bid. The Canadian Association of Defense and Security Industries released recommendations this fall calling for the government to “aggressively apply” the ITB policy on defense contracts.

Previous administrations in Ottawa have proposed large budget increases for the DND, including Trudeau’s predecessor, Stephen Harper, with his Canada First plan. But higher spending levels for defense rarely survive fiscal crises in Ottawa. In 2021, the question will be if the Strong, Secure, Engaged plan can remain intact

Very relevant earlier post, note my analysis at the latter part:

COVID-19 Facing the Canadian Government and Military with Major Decisions on Force Structures, Employment and Equipment–how Radical a Re-Shape?

Mark Collins

Twitter: @Mark3ds

3 thoughts on “The RCAF in the Face of the Likely COVID-19 Canadian Budget Crunch”

  1. Saab plays Quebec card:

    ‘Saab offers two aerospace centres in Gripen E proposal for Canada’s Future Fighter

    Saab is offering to open two new aerospace centres as part of its Gripen E proposal for Canada’s Future Fighter Capability Project.

    The aerospace facilities, the Gripen Centre and the Aerospace Research & Development Centre, would be based in the greater Montreal region, the company announced at Aero Montreal’s International Aerospace Innovation Forum 2020 on 14 December.

    Mission system software and hardware development, as well as integration, for the proposed Royal Canadian Air Force (RCAF) Gripen E would be done at the Gripen Centre.

    The Aerospace Research & Development Centre would focus on a variety of aerospace technologies, including automation, artificial intelligence and “greening” technologies. That work may or may not be directly related to the Gripen E. Rather, the research and development would focus on next-generation aerospace technologies more generally.

    Saab is also in talks with undisclosed local universities about partnerships related to the aerospace centres, it says.

    Saab has only about 50 people working in Canada currently, across various businesses such as maritime traffic management and army training and simulation work. However, between the two aerospace centres, the company anticipates at least 3,000 people being directly employed.

    The RCAF is looking to buy 88 advanced fighters to replace its fleet of Boeing CF-18 Hornets. Canada’s Department of National Defence estimates acquisition of the aircraft, related equipment and entry into service will cost C$15-19 billion ($11.8-14.9 billion).

    A contract is scheduled to be awarded in 2022 after evaluation by the RCAF. The air force wants the first jets received as soon as 2025. The new fleet is expected to fly beyond 2060.

    In addition to Saab, the RCAF received bids in July from Boeing, which is offering its F/A-18E/F Super Hornet, and Lockheed Martin, which is offering F-35 Lightning II stealth fighters.

    … Saab has proposed that Canada’s IMP Aerospace & Defence would handle in-country production of the Gripen E, and provide support over the lifetime of the fleet. The company says initial aircraft would be produced in Sweden to meet Ottawa’s goal of first fighter delivery in 2025. It is still evaluating how many aircraft could be made in Canada, but says it aims to “maximise” the number.

    The rest of the Saab Gripen for Canada team would include CAE, which is to provide training and mission systems; Peraton Canada, which is to supply avionic and test equipment, as well as component maintenance, repair and overhaul, and material management; and GE Aviation, which is set to provide and sustain the fighters’ turbine engines.’

    Mark Collins


  2. An excellent and comprehensive post by a well-informed Finnish blogger on three of the bids for Finland’s new fighter (F-35A, Super Hornet/Growler, Gripen E with Saab GlobalEye AEWC plane), plus Finns’ plans for long-range strike cruise missiles (a capability RCAF has no plans for, all three fighters are also in RCAF competition) and Swedish suggestion–not a formal proposal–for very close air force cooperation:

    “Fighters, Missiles, and Forces”

    Mark Collins


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